Financial mismanagement will quickly cause a restaurant to fail. Cutting corners is not the answer. Following are
a few concepts that every restaurant needs to know from the beginning.
Taking Average Profits
You’d be surprised to know that on average a restaurant
makes 5 cents on every dollar spent. So if it made sales of $50 in an hour, it
means the profit is just $2.50, now that doesn’t sound much does it? And if you
add the daily minute mishaps to these calculations, the profits would
drastically decrease. A broken salt shaker or pouring out the wrong drink or
the most common glass breakage might seem insignificant, but let’s see it from
a different perspective. To make up for the loss of a salt shaker worth $5, the
restaurant needs to make sales worth $100. Isn’t so insignificant after all is
it?
The Tale of Expenses, Sales and Profit
In the simplest terms, profit is what you make when you
minus the expenses from the sales. And if for whatever reasons, the expenses
are more than sales, there is only so long that a restaurant can stay in
business.
Fixed and Variable Expenses
Insurance and rent are fixed expenses whereas the labor and
raw materials are the variable expenses. So the sales a restaurant makes after
investing in variables need to pay for the fixed costs before profits are
extracted.
Your Inventory
Liquor and food stock is like cash too, a restaurant only
need so much in hand. Ideally there should be a week’s supply of food and a
couple of weeks of liquor in store. Any more than that and the restaurant owner
is simply overstocking.
Concentrate on Boosting Sales rather than Cutting Costs
Cost cutting is very important to help make more profits,
but boosting sales is far more profitable. Many restaurant owners spend so much
time concentrating on cutting down costs that they don’t think much about
growth.
Cents Make Dollars
Regardless of how you do your math, there will only remain
100 cents in a dollar. Take 100 coins and let the staff divide them for wages,
rent and other expenses. You’d be surprised on how they make the assessments.
Staff Expenses
Staff is most commonly the biggest expense in restaurants and
so it is important that they are productive enough to make it worth the
investment. Any rise in wages should be matched with productivity.
Additional Costs of Staff
Uniforms, training, meals, leaves need so be added in to total
staff costs. They also need to be adjusted into the accounts.
Profits Pay For Equipment
Any investments made in equipment cannot be adjusted in the
restaurant’s expenses and need to be paid for from the profits, so owner’s need
to make sure that they are well worth the money. A good idea to judge if the
equipment is worth the investment is by seeing if it will have a fast return on
investment by either cutting down on overall costs like ingredients or labor or
by boosting sales.
The Costs of Small Things
By working out the exact costs of small things restaurateurs
can better evaluate the profits and sales. They need to know how much each
napkin, glass or even a tomato, cucumber or scoop of red chilies costs, then
check how much of it is wasted every week and how much it truly costs.
