Streamlining Operations In Your Restaurant With Matthew Patrick (Ep 249)

streamlining-operations-your-restaurant-matthew-patrick

Your restaurant finances and taxes will always be your restaurant's most complicated and overwhelming aspects. Streamlining operations is the way to go if you want these to become much more manageable. Jaime Oikle sits down with returning guest Matthew Patrick to take a deep dive into the financial aspects of the restaurant industry. Together, they share valuable tips on menu engineering, tax compliance, cash flow monitoring, and tip management. Matthew also discusses how AI and the plethora of automated tools right now reshape how restaurants are run and managed - and why you cannot afford to ignore them.

Find out more at https://patrickaccounting.com/

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Streamlining Operations In Your Restaurant With Matthew Patrick

Coming up on this episode of Running Restaurants, I've got returner Matthew Patrick of Patrick Accounting and Whirks. I promise it's not going to be a dry tax talk as we get into the efficiencies of labor and menu costs, plus using tech to streamline savings and profits for your restaurant. There are some tax tips sprinkled in, so look for that. Plus, we also touch on other life and business advice. Stay tuned.

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Matthew, we've had you on before, so I know you're going to have lots of good tips for these guys. I'm happy to revisit with you. I'm open to going wherever it goes. Let’s see where it goes, but tell us a little bit about what you guys do in the hospitality sector, and we will go from there.

First of all, I am happy to be back on. I’m glad to see you again. We are in the outsourced accounting space, so we do anything from paying your bills to running payroll, running outsourced HR, monthly accounting work, taxes, and everything to do with the outside back office when it comes to your accounting and people functions.

There's so much that goes wrong with restaurants. You guys see the dirty side.

We see all the things that go wrong with restaurants, at least the money part.

It's going to be fun. What are some hot buttons or things that are on your radar that are not working out well for restaurants, or things that you need to think about?

Margins continue to get pushed down to nothing. There's a lot of competition, new restaurants, and new concepts. Every day, there's another restaurant coming to town. You've got people problems. You've got food cost problems. It's all the same things I think everybody else sees. We see it firsthand every day. We're retraining employees, helping them on the piece that we interact with, but we know that they are struggling to find people, keep up with pricing, and all the different things. I'm assuming that's similar to what you're seeing.

Common Mistakes And Tips On Restaurant Cash Flow

It is a lot of those challenges. Let's talk about maybe cashflow. I was reading something that used the phrase everyone loves, “Cash is king,” and it is. How do restaurants need to think about cashflow? What are some tips in that regard?

The mistakes that we often see start a little bit before that. Our restaurants have a tendency not to look at their numbers. It surprises me. They're busy every day in the restaurant. It's easy to get distracted by the cook not showing up, a disgruntled guest, or something not happening well in the restaurant. What we find is that the most successful owners are taking a very proactive look at their numbers.

From a cashflow standpoint, what I always say is that we are big believers in trying to keep things simple. We recommend which bank accounts we should be setting up. How do we set the systems up so that you don't have to worry and stress over the cash part? We follow the profit-first system. We recommend our clients do the same, segmenting cash into smaller buckets, so they know exactly and have a purpose for the money. It could be anywhere from a profit-first account for putting the tax money aside, sales tax, and income tax, depending on what they've got going on. It is also making sure they're planning for the rainy day and driving a profit. The profit-first system has helped our clients align their goals with profit around their cash, which has been huge.

You said restaurants don't look at numbers enough, and it's true because I've heard that. You said successful restaurants are on top of it. What is a good guideline aside from waking up every morning and looking at a dashboard?

Every day, 24/7, look at your numbers.

What should they be doing? What numbers should they be looking at? What are those key numbers you want to see on a daily or weekly basis?

Staying first is on top of their point of sale. Understand what's selling and make sure of their labor costs. We're looking at certain things like scheduled hours versus actual hours and staffing per revenue volume. Those are the simple ones. “The point of sales today is so good.” There is an ability for them to see that data in real time. You have a schedule. If you're not using scheduling software, I'd recommend looking at that so you can have a good handle on what's supposed to happen. It is about staying on top of labor. That's the daily activity that they could always do.

From a money standpoint, have a system in place so that you do not have to worry about the cash. In Tennessee, we're a 10% sales tax state. I am putting that money aside every day without having to think about it, so I know that the money is there. When it's due next month, I already have it set aside. It's not sitting in the same commingled account.

Our logic is processes first, technology is second, and then the people are third. If I can get the systems and processes in place to simplify this stuff, the technology can drive that efficiency, then the people can oversee and make things work in the right way. That's where we start with cashflow management. It's like, “Let's set the systems and processes up daily, so I don't have to worry about these things.” On our monitoring and oversight, we want to go to the point of sale first.

Set processes first before implementing technology and hiring the right people.

Tech Tips In Streamlining Dollars

I want to go right back to technology because you hinted at it from the beginning, and it has changed dramatically since I'm sure you started in the restaurant business, to where it is today. Cloud-based technology and all this stuff are very affordable for every level of operation, no matter if you're a big chain or a small mom-and-pop, you can get good technology. What are some of the tech tips you're seeing restaurants do to help streamline dollars? Is it inventory stuff? Is it that invoicing stuff?

Our number one choice is twofold. It's a good scheduling software to make it easy for your employees to trade shifts and make it easy for you to know projected hours, and point of sale. We have a preferred point of sale that we highly recommend. On the inventory side, it's about having an inventory system. There are a bunch of them out there, like MarginEdge, xtraCHEF, and Restaurant365. There's a ton of them out there. We work with all of them. The reality of it is that the restaurants that do it the best have one of those three things in place.

We're looking at theoretical food costs versus actual food costs. We're looking at what is selling and how I should best structure my menu. All those things are important. If you don't have a modern cloud-based point of sale, you should have one. That's number one. There's still a lot of good on-premises stuff out there. It's hard to connect all the things you need to connect to it. Some of them have good scheduling technology. Some of them don't. We talk about a best of breed a lot in the restaurant space. My firm is a Restaurant365 partner. It's a great technology, but it's not the best fit for everybody.

A lot of restaurants with multiple units have a little overkill in the cost versus the benefit. You can get a lot of other things in place with best of breed in the little pieces, and it can be affordable. You usually have some HR technology being your payroll provider. You've got your point of sale, your inventory system, your scheduling software, and your tip management system. All those things have to be talking together to drive the efficiencies you want to see.

We talk through that when we bring on a new client. We say, “What is the tech stack that you're using? Where do you want to go with this?” We also run into the challenge of how good their team is at using it, implementing it, and running it every day. If they're having turnover problems, that's going to be hard. We try to set those systems and processes up and how to get them out of that process, so it's easy for them to maintain, regardless of who they're plugging into it.

How To Improve Your Menu

You already mentioned the word I was going to say, tech stack. You have all these things, and they have to work together. You guys do advisory as well as tax and accounting. Something you said made me think about that piece of it. It was when you talked about the menu. Talk about the conversation you have with operators about their menu, for instance, saying, “That seafood dish is not delivering any profits. You're losing a couple of bucks every time you sell that. You got to get that off the menu,” and things like stars, dogs, and cash cows. How do you talk about menu development with folks?

We try to stay in our lane, first of all. I'll preface that with we're an accounting firm, so we try to stay in that accounting lane as much as possible. We see so many different things. We do talk about menu engineering. It is one of those things where you go, “It's a great dish. It tastes wonderful. You're making $0.45 on that. That's great. Can we figure out a way not to make $0.45 on that dish? Do you have a quantity problem? Are you putting too much on the plate? That's good, but could we pair it with something else or make sure that we are upselling it with something else to make sure that it becomes a profitable item? It's great that you're running a special for it. That's fantastic. If it's not making any money, what's the point?”

A lot of the restaurants we see get in the habit of having the same things all the time. They haven't adjusted prices as much as they should. We've had that happen. You're talking about the whole egg crisis that happened a few months ago now. It's like, “Guys, you do realize that you're losing money every time you serve an omelet. You put a three-egg omelet on there. You're charging $10. It costs you $9 for the eggs. It is probably not making a lot of sense.”

We want to make sure that we're looking at what is selling and what our true profit margin is on that item or that menu item that we're selling. The inventory systems do that. MarginEdge does that well. Restaurant365 does that well. Both those tools handle that stuff exceptionally well, so you know what's working, what's selling, and what you're making on it. It allows you to have the ability to change price.

I liked COVID for a lot of things, but I hated that I had to always use a QR code when I went to a restaurant. I'm an old guy, and I like my paper. At the same time, I know from a restaurant owner's standpoint, QR codes made the ability to change your menus quickly and easily. QR codes made that a lot easier, and allowed them to update their pricing to align with the true cost of delivering that food item. We did talk a lot about how often they are evaluating prices, as our inflation went through the roof.

Prices have been wild over the last stretch. It used to be the case where you'd go to a place for years, and you'd feel the same prices or small changes. That's not where we are now.

You can't go to McDonald's and get a burger for under $10.

My go-to lunch would be a Subway or a sandwich shop. You're like, “why is it now like $14 or $15?"

I remember the $5 footlong. Those days are gone.

I'd like that back. Let's go to something in the menu area, cash cows, specifically. Often when I do a webinars with Roger from Restaurant Rockstars, we talk about his garlic knots story. He was selling pizzas, and there was that extra piece that they'd cut off. They'd use that dough. They'd turn it into garlic knots. They'd sell it for $10. It cost $0.10, literally. It was pure scrap with a couple of little trinkets on it. There is an excellent 90%+ margin on that.

The bigger thing about that is it's an item that goes ahead of your main dish, so you're getting your average ticket price up. You're keeping the customer happy because, in theory, you're keeping them occupied in that stretch of time. You're getting an appetizer sold a lot faster. Those are simple things.

You have to have those ones on your menu to balance off some of the things that are going to be a little bit flatter. You still want to sell that popular one. That's mom's famous recipe, but it's no longer kicking a lot of cash. I'll go back to Roger's story. These Glacier Bowls, $20 drinks, cost you hardly anything to put together but have a big perceived value. You've got to dice those into your menu effectively. I'm sure you've helped folks with similar strategies.

When it comes to pricing, we also think a lot about menu simplification. We have clients who are over-ordering. They sell one or two of every item. That menu is too broad. It's the same as our business. I'm assuming a lot of business owners are saying yes to too many things. There's a reason why Chick-fil-A sells chicken. They keep it simple. Everything in your kitchen has to have a purpose. The simpler your menu is, the easier it is to order, and the easier it is to repeat what you do. In order to do it well, you have to keep things a little simpler.

Everything in your kitchen must have a purpose. Every meal and the menu must be made simpler.

How Restaurants Should Handle Their Taxes

That could be Tip 101 if you're struggling. Simplify a little bit, get things a little bit simpler, and build back from there. Let's go to the exciting world of taxes. What are some tax tips? What are some things that people need to know about, things to avoid, etc.?

First of all, I've got a lot going on. The House bill was to pass any day. No tax on tips. That's going to be interesting. I'm curious to see if that makes it all the way through. It was a big campaign promise that happened. No tax on tips and no tax on overtime pay. That could change a lot. That could create some efficiencies for the owners to not be afraid to maybe change the dynamic of the restaurants a little bit. I'm curious to see what that does from a strategy standpoint for the restaurant owners.

Tax-wise, I always say the basics. I start with, “Let's make sure that we're not spending money that we don't know where it's going.” We've seen that happen a lot over the years. Our first tip is always, “Let's make sure we're capturing everywhere you're spending money.” We've had people buy vehicles for the work that they don't run through their business's corporate checking account. We never knew that they did it. They don't communicate well with their accountant or don't keep up with all the stuff that they're doing.

We still have a number of issues when it comes to taking advantage of the available credits that are out there. We see a lot of restaurant owners who are missing the tip credit on their tax returns. We see people not taking advantage of the recovery tax credits. Both of those are free money that the government's giving us in this space. They're not looking at it. They didn't know that that was something they could do. We probably run into that four or five times a year, where we find new clients that didn't know they could get a tip credit, and they're in the restaurant business. I don't even understand how that's possible. Those are the big ones.

The last thing is preparing for taxes. Making money is the goal of every business. If you're making money, having a plan for the money is the part that we start with. Do you know how you're going to cashflow the taxes that you owe? What are you doing with the tax plan to minimize that legally? It is making sure you're taking advantage of all the things you're allowed to do so that you pay not a penny more than you're supposed to.

Thanks for running through that. It's the nitty gritty that not a lot of us love to dive into.

All those things are the basics. Every day, we probably work with 130 restaurants, and it's the simple things like, “You spent that money. Did you tell anybody you bought a new truck? That sounds silly,” or you bought this new piece of equipment, but you leased it. You're paying with a credit card that your account doesn't even have access to. That happens all the time.

You mentioned the folks that you work with. Are you guys geographically constrained?

No. We work with people all over the country. We have a core base here in Memphis. We are a hybrid team. We have 30-ish people here in Memphis. We've got fifteen people remotely all across the country. We work with franchise groups and locally owned restaurants all over. We also work with non-restaurants. About 1/3 of our business is restaurants and bars. Another 1/3 is white-collar services of some kind, and then 1/3 of everything else. I was a little bit of everything in the accounting space. On the payroll side, we work with all 50 states.

You mentioned payroll, another thing that is great when it happens perfectly in the background. It works out.

You get paid every time without any problems.

What are some quick overviews there?

We do follow the same logic there. It starts with a process. What's your system and structure around making sure that you're bringing your people on easily from electronic onboarding to make sure your application process is digital? If you're offering benefits, or if you need a handbook signed off, all your training and all that stuff should be very systematized when you bring out an employee. Unfortunately, in the restaurant business or any business, the turnover of employees is something that's going to happen. You want to make sure that the process is easy to follow, so you can find the best people you can.

From a payroll standpoint, we want to make sure that we're integrating and getting your payroll information, your payroll data, into the payroll system as efficiently as possible. Connecting your point of sale or your scheduling software to your payroll software is super critical. We want to give power to the employees to make the changes they need to make. Very simple things like changing their address, updating their W-4, and changing the direct deposit are all things that employees should be able to do in today’s world, making sure that everything is easy to handle as much as possible from a process standpoint.

For technology, we're an isolved firm, but there's a lot of good technology out there. It's not about the technology in the payroll space anymore. All the big payroll companies have the same technology. It comes down to whether they can guide you on the process. Can they guide you and support you when you have a problem?

I don't know if it's the case, but some HR and payroll stuff get involved in that onboarding piece, even setting up the initial trainings and stuff like that. Are you guys in that space at all?

We do all the employee onboarding. We have all sorts of HR options in our space. That could be anything from making sure you have your handbook set up to having a direct hotline when something happens, like an employee or employer issue. On the employee benefit administration standpoint, we're an insurance agency, so we offer benefits. We also tie that into actual full benefit administration from open enrollment to get your employees signed up. When they have a question on benefits, they can reach out to us directly. We're an alternative to a PEO.

Even more than I realized there. I interviewed somebody who was in a space where they were taking tips and digitally giving to people on the same day. Is that happening?

That same-day tip is a big push in the industry. There are a number of tools out there. We have an article on our website about this. The push for daily pay is a big thing. We've had clients come to us saying, “We can't find people. We're losing people because the place they're going to across the street is doing this.” We talk to them about, “Is it the best thing to do for your employees? Are you a steward of your business in the best way if you're offering that?” We have tools that we plugged into. We're a TipHaus partner, which is a tip management and reporting software.

We have Kickfin, which is another one of those providers out there that do that. We work with those people who have that service turned on already, which means they can take their cash out tips. They can take the credit card tips every day, which is a nice thing. Most of our clients are getting all their money in tips on a credit card. Either the restaurant's having to go get cash to pay that out, or they're having to put it on their paycheck. This gives them an alternative that gets that money into their hands. We integrate with all that on the payroll side to make it as simple as possible.

The nice thing about all those tools is that they usually integrate well with your point of sale and with the payroll providers. It is about getting all those things connected. It's all about process. How do you make it where it’s not a burden on the employer, on the restaurant owners, and restaurant groups, but at the same time, the employees still have a good experience? They don't have to worry about paying a bunch of fees and getting that money out that's already theirs. It allows them to report tips better. In theory, the better you're reporting tips, the employees are not going to have an issue with tax time. The employers themselves are taking advantage of the tip credit. It's something we want to make sure that those processes and systems are all on our line to make it as easy as possible for them to go through that.

I know people do like to get the money faster. I'm probably in that category that pays mostly digitally. I will pay with cash every once in a while. I interviewed someone. They threw out a number. They thought it was about 90% credit card versus cash.

I would imagine most restaurants are over 90% today. I know that if I have cash in my wallet, it's a rarity. I'm paying almost exclusively at a restaurant with them. I want to document the charge that I had. It makes it easy. I don't ever have cash. I'm assuming for restaurants that are having to pay out cash tips every day, having a system to do that digitally would be a lot easier for them.

Sticking To Your Values

Let's go to some personal stuff as we start to head towards the end. You've been running a business for years now, growing up. We talked a little bit before the call about your sports background. What would you say is some good advice you've received over time? It could be personal, business, or life. What do you think?

I'm big on culture. That sounds silly, but I love the saying, “Culture beats strategy every time.” We've been fortunate around here to grow a fun team. We bleed our values, and we hire off them. We talk about them a lot with both us and our clients internally. Everything we do is based on a set of firm values, from hiring to the clients we serve, to how we want to serve them. I love that saying because we hire people for who they are, and we'll teach them what they need to know.

Hire people for who they are and teach them what they need to know.

Is there another quote, a saying, or a mantra that you like to use in life?

“Iron sharpens iron.” I like competition. I like trying to improve things. I love beating up processes. I am probably not as dedicated to working outside to get “iron sharpens iron,” but the rest of me, I'm all about playing little games in the office and creating a scoreboard where winning and losing matter.

Have you started playing pickleball yet?

I'm playing a pickleball tournament. As a firm, every Thursday night, we have two courts reserved for our whole office. We have 10 to 12 people play every Thursday. We're sponsoring a charity tournament here. I'm playing men's doubles on Saturday and mixed doubles on Sunday. We're in Tennessee, though, so we don't have to worry about that good Florida competition.

We've seen it down where I am. It's so active. People are getting so good.

It's super fun. I'll tell you why I like it. Honestly, for someone my age, I'm in my 50s. I can do it and not feel terribly bad the next day. I'm not hurting. It only takes about an hour to have a good day, and it's fun. You go out there and meet some new people. I love competition. I feel like I'm young again.

You get a quick dose of competition. You're in and out. You hit all the high points. You can do it.

Are you playing pickleball, too?

Yes.

We played, and I'm a little sore. I was like, “I got guaranteed five matches, so I'm going to be sore.” I'll be fine. It's a lot of fun, though.

The social aspect of it has been good.

My wife and I went to Mexico on vacation in 2024 and ended up playing pickleball every day. It's like, “I'm not sure this is what I was planning to do on my vacation,” but we did play a lot.

Matthew’s Book Recommendation

Let's go to a book you're reading or have read, or something you love to recommend to folks. What do you think?

The book I would recommend is the same one. It's The Ideal Team Player by Patrick Lencioni. I'm a huge Patrick Lencioni fan. If you haven't read all his stuff, there are The Five Dysfunctions of a Team, The Ideal Team Player, and The Advantage. They're all good, but The Ideal Team Player is everything that guides us in hiring. All of our culture is built around that. The idea of that book is that it's important to hire people based on three skills. Every business would say that they agree with these. They have to be hungry, humble, and people-smart. If you can have those three things in your people, you're going to have a great team. I highly recommend it. It takes you about three hours to read it cover to cover. It's one of the best books I've ever read.

If you can find individuals who are hungry to learn, humble, and people-smart, you will have a great team.

Thanks for that one. I haven't heard it, so I wrote it down. I'll try to pick that one up. I tell people on the show I read for sometimes just 5 or 10 minutes a day. Did I read a little bit today? When I don't, there's no excuse for not reading for five minutes.

How many books would you say you read on average per year? Are you a paper book version?

I'll read a little bit from these three books every day. By the course of doing a little bit every day, I'll get through 5 to 10 books a year. Nothing crazy. That's not insane.

I'm an Audible guy. I'm an obsessive reader. Leaders should be readers. It's a little bit of that hunger value, in my opinion. It's the idea that you want to always keep getting better. Reading is a huge piece of that.

If people are overwhelmed with it, and are like, “I can't find time to read,” I read a chapter from this book, and these chapters are tiny. It is Hug Your Customers by Jack Mitchell. Get the book no matter what. Reading that one chapter is three minutes. I read some other stuff, too. The thing about reading that one chapter for three minutes is that I got a good business tip from that one chapter. I could take that and implement it in my business. You could as well, so don't feel like you have to dig in, sit down on your sofa, take a whole weekend, and read a book. Read something new that's outside your comfort zone a little bit each day.

I'm pulling a billion different directions like every other owner. I feel like it helps me slow down a little bit. It frees my mind up to think about what's the next thing we should work on or whatever. I'm a big believer in that. It helps me manage my stress. If I don't read, I get a little flustered.

How AI Influences The Restaurant Industry

Last thing I'll ask you. What are the trends that you might have seen or are coming up in the industry? Tech is probably one of them. Where's the restaurant space going to be 2 or 3 years down the road, as it relates to what you guys do? What do you think?

There's more tech. You hit it spot-on. It's all about the technology. Restaurants are trying to drive efficiencies. The accounting industry is the same. Everything is rolling around tech and how AI is influencing our spaces. It's scary, but also one of the things we have to embrace as an accounting firm. If you're not taking advantage of the efficiency of the tools that are available to you, you're going to get left in the dust.

If you think about it, every one of the major restaurant chains in the US has implemented technology. Think about how easy it is to go through a drive-thru or go to a curbside parking spot versus what it was 5 or 10 years ago. It's only going to get better. The restaurants are doing that well and implementing that in a way that it's not customer-intrusive. It's important to take a look at your whole tech stack. For me, it always works for your point of sale.

I want to layer on there for a second. We do a lot of curbside. A lot of times, it's the same few of us ordering. A lot of times, we're ordering the same thing. If your app or whatever says what you ordered last time, you can quickly check out and pick up curbside.

If you figure out your most recent order, what space you're in, and whether to pay with Apple Pay, you're pretty much done with your ordering process. It makes it super easy. It should make the customer experience great. It helps you turn your tables faster, even if you're dining. My parents are 75 years old. I went to breakfast with them, and they paid with their phone. The Toast app was right there. They were like, “That was easy. That's so much better than it used to be.” Don't be afraid of it based on age at this point. We are going to get used to it.

You see that everybody does it, even if you are walking into a kiosk. This story was funny. I walked into a place that had five kiosks. I wanted to talk to somebody. Looking around, I didn't feel that comfortable. A seventy-year-old couple comes in, they order, and they sit down. I'm still looking around for someone to talk to.

It's everywhere. It’s what it is. It is either get on board or don't go out.

Get In Touch With Matthew

We hit on a ton. Give them your socials, your website, and your closing parting thoughts.

It's PatrickAccounting.com and Whirks.com. My podcast is the One Step Better Podcast. We talk about all things about how to be a better business owner.

It's Matthew Patrick from Patrick Accounting and Whirks. For more great restaurant marketing, service, people, and tech tips, stay tuned to us here at RunningRestaurants.com. In the meantime, if you can do us a huge favor. I will appreciate it. Wherever you're tuning in, give it a quick like, review, or share. All that stuff is super helpful, and we appreciate it. Thank you so much. We'll see you next time. Thanks, Matthew.

Thank you for having me.