Inside an Open-Book Accounting Huddle
“What is your spirit vegetable?” This isn’t a question that kicks off many financial meetings. But at Miss Kim’s, the newest addition to the Zingerman’s family of restaurants in Ann Arbor, examining the P&L is no dull or secret affair.
Paul Saginaw and Ari Weinzweig are best known for Zingerman’s Delicatessen, the cult favorite deli in Ann Arbor, Michigan. But beyond the iconic deli, they have created small foodservice empire of candy, coffee and a handful of restaurants, including Miss Kim’s.
Saginaw and Weinzweig focus close on keeping employees engaged with their businesses via profit sharing and relatively high wages. Trendy ways to keep employees to be sure, but after reading "The Great Game of Business" by Jack Stack, the team moved to open-book management. In short, it opens up the P&L to the entire restaurant team.
“I will tell you that there is no more powerful engine that has driven us toward more long-term profitability than going to open-book where everybody is invited in to help run this business,” said Saginaw during a breakfast keynote address at the 2016 Restaurant Finance and Development Conference.
After a tricky period of transformation in 2002, the model clicked. He said he realized it had clicked when he overhead a kitchen conversation.
“I was walking through the kitchen and the 16-year-old dishwasher who went to the high school next door went over to the recycle bin and pulled out the Hellman’s can of mayonnaise and walked over to the prep cook and said, ‘You didn’t use your spatula to get all the mayonnaise out of that can, that’s my gain sharing check in there,’” said Saginaw. “I said, ‘Oh my God, I got a 16-year-old kid that has just connected all the dots.’ Sure enough, profitability just started ramping up. We were making more money and sharing more money with our employees.”
During a trip to Ann Arbor when Miss Kim’s was just opening, Saginaw invited The Monitor to see the P&L “huddle” in person.
In the middle of the back dining room sat an oversized P&L table, which was filled in throughout the weekly open-book meeting. Nick, who said his spirit vegetable was a potato, was the “owner” of the total sales line of the P&L.
“Last week we forecasted $23,500, we came up just short at $20,000,” said Nick. He looked to spring break at the nearby University of Michigan as part of the shortfall and projected $21,900 for the following week.
Ian, who looks to celery as his spirit vegetable, was the owner of cost of goods and said food costs were down to 22%, adding that head chef Ji Hye Kim expected costs to stay in that area.
Another line owner walked through labor costs, and co-owners of the food sales line—Jack and Terrence—said they missed expectations by just over $1,000.
“We forecasted $17,400, came in at $16,342. Desserts were 3% of sales,” said Jack. “For next week, I’m forecasting $16,500.”
That’s when Saginaw chimed in.
“Piggy backing on that, Jack is reporting that we were $1,000 under in sales. So if you’re looking at the end of the year, we want to have a discussion on how we can get that up. How we’re going to get that revenue up,” said Saginaw. “We have about 500 covers, desserts are about $9, so If we could sell dessert to 100 people, we could have hit sales forecast.”
He advised the new accountants to break down the line into goals that employees can focus on during future shifts.
“Put it into manageable small goals,” said Saginaw. “I’d like you to start thinking about it in those terms as we go.”
He said that’s his role as one of the highly experienced founders. And it all goes back to his mantra around the open-book model: Know, teach the rules, keep score and share the winnings.
His idea got a lot of nods from the staff. A few took notes about how to break down their own lines of the P&L and how to push them further. That’s the key part of the model and the huddle. The average restaurateur would do just about anything for buy-in like that from a group of 20-somethings.
Kim said it works better than a big initiative or a surprise focus on pushing dessert for a night. It allows them to see all the little things that go into success.
“I try to show them that it’s not big sweeping moves, it’s really many small little decisions that cumulatively get you we're you need to go,” said Kim.
And by giving them a stake, Saginaw and Kim said they haven’t had any turnover in the first few months of operation at Miss Kim’s and incredibly low turnover across the Zingerman’s brands. Saginaw said the open-book practice delivers what every employee wants: a little control of their work life.
“People want to be able to have some control their work environment. They wanted to know what's expected, they want to be able to contribute,” said Saginaw.