Sixty-five restaurants: some hard truths

65 + Restaurants across the world some hard truths.

Yes it’s satisfying to run / own a restaurant but those who own it realise it’s a labour of love and sometimes an expensive hobby.

It helps if one of the promoters has first hand experience/ first level related skills - Restaurant Management Experience | Culinary | service maitre d’ or mixology |

Business Model Setup

Your PRIME COSTS < 55-60% of sales
prime costs = COGS (Food Cost + Beverage Cost) + Labour Costs.

Rent or lease should be between 7-10% of Sales

REVPASH compare yours with all types of restaurants

Revenue per available SEAT per HOUR ( 50 cover restaurant open for 12 hours = 600 and generated 12000 of revenue then REVPASH = 20 this allows you to compare different kinds of food establishments

COSTPASH | GOPPASH

Break Even Revenue
let’s say your fixed costs are 30000 per month and your Variable Costs are 30% then Ccintribution Margin would be ( selling price - variable costs so 100% - 30%= 70%)

then 30000/70%=42,857.143

that would be your break even revenue at the same variable cost structure

You could add debt commitments to 30000 let’s say 15000 or so and then divide 45000/70%=64,285.714

that would be the revenue threshold to make if you needed to pay an additional 15000 in some kind of debt service or owner priority return etc

Lastly you must bear in mind the labour component productivity is of importance as people standing around will erode profitability so we have to get that right.

remember the work flow and plan the manning around it 8 burners = 2 people at a time look at lead cook | line cook and reinvent the whole Sous-jr sous-Cdp-dcdp-Commis 1 - 2 or 3

Remember working chefs / service folks is always better = you can delegate tasks but you can’t delegate responsibility.

There is a lot more next few posts will talk about the Capex deployment and how a lot of people over spec for example more refrigeration than really needed it causes multiple issues = dead end non productive capex deployment increasing risk | too much ordering to fill the fridge - or stale food if prepared either way it effects inventory which is a problem with Current Asset Ratio or The Quick Ratio. spillage effects COGS - figure out the liters of refrigeration required properly - scientifically and use analytics like linear programming or forecasting (regression analysis) to ensure you have some idea of how much of what you need to keep.

A simple rule when you deploy Capex is to remember How much each equipment or area costs example Combi Oven Costs and what all dishes come out of it and who operates it all of a sudden you have a mini investment rationale

-12000 for the oven
10000 sales per month for items prepared here
-5000 for labour of oven pros
- 3000 for COGS of the dishes

leaving 2000 per month to pay off the oven in 6 months
If you micro analyse each line or battery like a duck oven or a pizza oven you will have a target of how many dishes to sell

More Tomorrow !