I was talking to one of the original franchise owners of Waffle House. He grew the franchise in the Southeast to 58 stores before eventually selling out. Before buying the franchise for a single southern state, he knew nothing about the restaurant business. But he did understand the analytics of the individual stores over time. One measurement in his daily reporting didn’t make sense though.
He told me, “At one of my stores, the average price of a breakfast was going down, but the store’s sales were going up. For the life of me, I couldn’t figure it out.
“I called Joe Rogers, one of the founders of Waffle House. I explained the situation to him hoping he could point me in the right direction.
“Joe Rogers immediately knew the issue. He said, ‘The cook is buying his own breakfast groceries.’
“What does that mean? Buying his own groceries?
“Joe explained that a way to rig the system was for the cooks to buy their own groceries. This way they could bypass inventory, ring up the breakfast, and pocket the money. It would ring up as a breakfast with a zero sales price. That’s how the average price of breakfast went down, but the number of sales were up.”
“I asked Joe, ‘What do I tell the cook? How do I confront him on this? I’m not sure what to say.’
“Joe said, ‘I’ll meet you at the store. When we walk in, that cook will take one look at me. He’ll take his apron off and slip out the back door.’
“Sure enough. That’s exactly what happened. We walked in, and the guy was out the back door in a flash.”
I asked him, “Did this happen in your other stores?”
“No,” he said. “This particular store was in a poor location. The employees had a lot of time on their hands.”
“What does that have to do with it?” I asked.
“Idle hands are the devil’s workshop,” he responded.
A business owner needs to know his business. That’s how you make money.