Originally posted by HRumbut
Well, I am partners w/ my sister who has been through a "corporate" training for a major chain and she uses what she learned there to guage expenses. Like what percent of your income should be food costs, payroll, and so forth. We are obviously starting out in the hole. Don't really see us turning an actual profit for a couple of years. We have start costs to recoup. Right now we are still trying to build our customer base and keep quality good. It was a rough start, but seems to be getting a little better. Generally, what times of the year are the busiest for restaurants? We had a slow summer, but seems to be picking back up as school starts. I am finding there is no real rhyhme or reason to when it will be busy.
Yup, usually slower in summer ... busier in colder months.
As far as your sister's experience ... you both need to re-consider whether just the methods she learned at the franchise operation are sufficient for your independent operation.
(purchasing, inventory, storage, production etc...) including standard operating procedures and policies from her franchise experience may be some of the most useful things to copy.
On the other hand, their CVP (cost/volume/profit) calculations and other financial analysis may or may not be sufficient for your independant restaurant needs.>> Like what percent of your income should be food costs, payroll, and so forth
In and of themselves your Prime Cost numbers can NOT tell you what percent of your income they “should” be! Prime Cost numbers are merely one part of further analysis, the most
important of which is a determination of your Break-Even and prospects for profitability.
As noted in the post which I included a *link* to above, there are some other uses for prime cost numbers such as comparing period over period ... one
potential way to determine menu pricing, etc ... but in and of themselves (that is, without regard to their place in further analysis) prime costs at best hopefully point you in the direction of understanding what Controls (SOP’s) are contributing to those Prime Costs. Noting the uncertainty expressed in your posts
, I would say the two of you need to make a separate, objective re-evaluation of at least your financial controls.
Are you doing the specific calculation known as Breakeven Analysis? How many times have you done them ... and how often?
Are you splitting your fixed and variable costs for your calculations? ... Even after you cover your fixed expenses, for each additional dollar of sales you make your variable expenses continue to change ... this fact prominently affects your calculations and corrective options.
Specifically you should see that she is determining things like your total Variable Cost in order to figure your Variable Rate. Does your sister (or you) understand what a Contribution Margin is and use to determine and plan for profitability?
of Breakeven analysis are indications to make corrections which will change your breakeven point ... corrections to menu pricing, to your menu mix, to variable costs, to your volume (and working back from that your advertising, specials ...) etc etc.
There is a whole rasher of things in your control system whose correction or modification is derived BACKWARDS from your Breakeven Analysis.
Knowing these numbers flat out
is what lets you sleep well at night ... breath easier.
It's not worth waiting until you have a real "oh, shoot" moment later on.>> I am finding there is no real rhyme or reason to when it will be busy.
If you are not finding the "rhyme or reason" for why business is slow or busy, you need to work to figure that out.
Not only can you not “plug up” your slack periods effectively in terms of volume without understanding this, but it also makes setting an Advertising Budget impossible and makes things like ordering and scheduling a bear (and everything that goes with it like waste etc).
Widely varying volume can also be a symptom of other things like unsatisfied customers ... unpopular offerings etc. Nail it down.
Meticulously track your volume of business and correlate it as the result of other things ... specific advertising ... publicity ... things going on in the vicinity of your restaurant ... internal problems etc.