Restaurant Costs are a Daily Affair

23 Jul

Remember the restaurant business of the 1980s? Everyone got together to do an inventory bright and early on the 1st (unless it was January 1st – then it was just early, barely). Steve and Joe did the kitchen, Jim and Marty counted the bar. Everybody was done by the time lunch began and the sheets were sent by facsimile machine to California. By the late afternoon, a fax would come back with the P+L for that month. The reaction would go like this:          The pour cost slipped up to 21.3% from 19.67% the month before. Time for a bartenders’ meeting! We need to raise awareness on not overpowering, and certainly repeat the grounds for termination language for giving away drinks or taking six-packs home with you. The same dance would go on in the kitchen. Everyone sits down and tries to figure out how to keep costs low. Usually the next month saw a modest drop-off in costs, but gradually they’d be historically higher in most cases.Chalk it up to “inflation”.          As “inflation” grew, savvy restaurant operators started looking at their P+L’s and inventories in a different light. Once a month was simply too long to find out you were letting the horse out of the barn. On a high-volume store like the one I managed, 1% of $350,000 in monthly sales meant that $3,500 in income had been LOST. 5% meant that $17,500 was LOST since the last P+L. Oops! Sorry, boss? No, they determined weekly P+Ls were needed tracking food and liquor purchases. Many pros went to weekly liquor and food inventories. Many even got creative and started tracking all those portions of liquor and food to make sure everything they bought was sold.          Several times a week, I’ll sit down with my P+L and enter the data. I can see in advance where my costs are trending as the totals are auto-divided into my projected food, liquor, beer, and wine sales. I use my weekly liquor inventory to order the bar items, keeping my inventory at an absolute minimum. The result is that the in-house inventory average of alcohol is $4,700 lower than it was when I took over ($12,000 to $7,300).          The parable of the frog in the boiling water pot is an apposite picture of the restaurant industry. It’s very easy to become complacent and think that “costs are rising” and “we’re not doing that bad”. Then one day a consultant comes in and shows you’re hundreds of thousands of dollars off the mark of the average 21st Century restaurant performance. The more consulting I do the more I see a shocking amount of money disappearing into the ether. If your business is trundling along with 1980s’ accounting methods and your costs exceed the following list, just do the math. And call a consultant like Destination Restaurant Consulting.
Typical costs after implementing up-to-date accounting and management methods. Food – 25% Liquor/Beer/Wine – 20% Labor Kitchen, food labor to food sales – 15% Dining Room – 7% (at a standard 67/33 food/bar ratio)


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