Restaurant Owners–What Are Your Numbers Really Telling You?

Successful restaurant owners are focused on providing high quality food at reasonable prices and with very good service.  This is obviously a very important focus for restaurant owners.  Successful restaurant owners also know that there is a numbers side to the business—how profitable is the restaurant?

It is helpful for restaurant owners to know how their financial numbers look compared to their competition.  When restaurant owners compare their numbers to industry norms, interesting questions tend to arise.  They begin to take closer looks at certain aspects of their restaurants to make sure they are operating the restaurants as profitably as possible.

Our firm has access to real-time databases and we were able to gather information on privately held restaurants in Michigan with sales of $1 million and under.

We found the following information (percentages of sales):

Average Cost of Food    42.57%

Average Gross Profit      57.43%

Payroll                              22.22%

Rent                                  5.92%

Advertising                       4.16%

Example: JoJo’s Restaurant has the following Profit & Loss Statement:

Sales                      $1,000,000

Cost of Food               600,000  (60%)

Payroll                        280,000  (28%)

Rent                           100,000  (10%)

Advertising                   50,000  (5%)

There are some things to note:

JoJo’s cost of food is slightly higher than the average.

This can be caused by:

• Underpricing the competition
• Paying higher food costs than the competition
• Buying higher qualify food than the competition
• Inventory walking out the back door
• High inventory waste or spoilage
• Over-portioning
• Inventory being eaten by the owners/employees and it’s still being counted as food cost expense

JoJo’s cost of labor is higher than the competition

This can be caused by:

• Scheduling too many employees during shifts
• Paying employees a higher wage/salary
• Employees are moving slowly
• Having too few employees and paying some employees overtime
• Employees clock in early and clock out late

Going through the numbers on a regular basis may not be the most interesting thing to do, but it will reveal things about your restaurant that could surprise you.

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