Payroll and Food Costs

I have a restaurant and a catering business. The restaurant is a full service restaurant and our food cost is around 32%. Our labor is around 33%. We do around $25,000/wk. To compare apples to apples. Is your personal labor included in the 20% (remember your time has to be worth something)?

Mark

My personal time is not figured into the 20%. I guess that would bring it up some. Seems I need to work on my food costs. I have been doing some recalculating and it may not be quite 40%.

Mark - How do you feel about your costs? Are they where they should be? Do you keep a tight reign on this?

Thanks!

Anyone else?

I have a small BBQ restaurant & catering business that I started 4 months ago,so I have been really watching the books, now my food cost run 34-38 % sometimes this is a timeing thing,gear up in ordering for the start of the next month. I do not keep a inventory in the computor, so i do not ajust per sale per day. labor that seems to be one that can get away from you if do not watch, labor runs around 18-22%,hope this helps. I would like to here more of the restaurant owners opions on food cost labor cost, it might help my bottom line. step in anytime guys and gals. Thanks Dave
HogWild BBQ & Grill

I have a small BBQ restaurant & catering business that I started 4 months ago,so I have been really watching the books, now my food cost run 34-38 % sometimes this is a timeing thing,gear up in ordering for the start of the next month. I do not keep a inventory in the computor, so i do not ajust per sale per day. labor that seems to be one that can get away from you if do not watch, labor runs around 18-22%,hope this helps. I would like to here more of the restaurant owners opions on food cost labor cost, it might help my bottom line. step in anytime guys and gals. Thanks Dave
HogWild BBQ & Grill

My restaurant is full service-3 meals-5&1/2 days wk
Labor runs around 30%-(All Labor)
Food costs including paper products(trays-cups etc) runs around 35%
Hope this helps

Herman

Poolie,.

I just finished going over my most recent books. Jan-July. My food costs have crept up to 34%. Each point takes about $6,000 off of my bottom line. I am NOT happy at all! Food costs (Chicken and Dairy in particular) have risen drastically this year but that still doesn't account for all of the approximately $12k extra that I have spent. I have had a lot of turnover this year and believe that this accounts for a lot of it. There is definitely something to be said about retaining cook staff or doing it yourself.

Herman brought up an interesting point. Food cost will fluctuate a lot depending on what you term "food". He includes paper goods in his cost while my paper goods are "Supplies". If you run strictly with paper goods and include them as "food costs" that would make a BIG difference. It is difficult to compare performance without being able to study the entire P&L sheet.

Cook17 talks about labor costs getting out of control and I could not agree more. The more people you have punching the clock, the worse it can be. With our new employees we teach them the job and also tell them how long it should take them to finish it. That way we don't end up with too many clock riders and dead weight.

I love to talk shop. Honestly it is about the only thing that I know how to talk about anymore. Please keep this thread going!

This has been an enlightening thread. I'm trying to absorb it all. We are still waiting on equipment. And please do keep it going.
Thanks
Peggy
2 Greyhounds....SMOKIN!!!!

My father in-law is a successful business man. He has always told me that the biggest problem that small businesses face is that the owners fail to consider what their own time is worth. I once had a restaurant owner tell me that he netted 23% profit. I couldn't believe that so I started asking him about his P&L. Turns out that approx. 20% of his profit was his own labor and only 3% was actual profit. Theoretically he would have been better to get a job working for someone else and investing his money. Less Stress, Less Risk. He also said that most prospective business owners believe they will have less stress and less risk working for themselves. I was one of those prospective business owners. Now sometimes I think just punching a time clock wouldn't be half bad. Just an observation. Of course the other side of the coin is Nothing Ventured Nothing Gained they say.

P.S. It's 11pm just got back from the restaurant. Fry Cook put his arm into the hot fryer while cleaning it. Wasn't as bad as it sounds but I will probably still run a $750 hospital bill. The joys of Owning your own business.

Mark

Mark,
I hope your fry cook is ok. We don't want to use fryers because they are so much trouble to clean.
And with a mobile business just starting, I think we don't need that extra problem.
Right now it is just Jack and I as employees with nothing to do but plan. What do you suggest as a way of reckoning your own pay? I work full time as a mammographer and have a fair income, but have no food service experience. Jack has lots of food service experience. I plan to keep my full time job as long as it takes to get our business going well, but no longer than three years. So, Jack will be the main employee. What does he need to be paid?

I know this all sounds stupid, but I was intrigued by your response that your father-in-law said we fail to consider our time as worth something. I think he is right.

How did their business weather Hurricane Charley?

Peggy
2 Greyhounds....SMOKIN!!!!

the time not spent listening to convicts whine will be pay enough!!!!!
plow my pay back into growth of business.
but if you feel that you must pay me then how does 10 bucks a week and beer sound??
heck you can even forget the 10 bucks if ya wanna
Seriously, I full well expect to forego a wage. but that being said i think the best way to do it is to put that money back as this would allow the bottom line to increase much faster and would allow a safety net. if this was done for 3 years then paying cash for a shutdown 7-11 is a very real possibilty.
As far as food costs go i always freaked out if mine exceeded 27% and at the convention center was able to hit 25% fairly consistantly. this was food only.
jack

25 is an awesome number for food! i have worked in a wide variety of food establishments, and never found one with food that low. most of the big boys (chains) can run lower than mom and pop cause they have their own commisary. even then, they usually target 28-30 with about 5 percent for paper. i run an average 40 percent, including paper and free food for the wife and myself....
there are many ways to bring down your cost. first, you must know each item's "out the door cost". this will give you a real good idea why your food is so high. perhaps you are selling too much of the highest food cost item on your menu. its not a bad thing, it just means you have to work harder to sell drinks and other lower cost items to bring down your food cost. thats why the famous line."would you like fryes with that?" cuase frys are the lowest food cost item on their menu.....
bbq related.........a quick and easy way to save yourself some dough on bbq plates.........if someone orders a rib plate, always offer a combo! THIS WILL BRING DOWN YOU FOOD COST. makes sense? on the other hand, dont offer a combo if they are already ordering the lowest food item on your menu. of course, always be polite, and cautious...

at the time i was hitting the 25-27% we had two really good suppliers in jacksonville which were beaver street foods and us foods. of course we also had sysco but we won't go there. the main reason we could hit that number was really twofold. the suppliers of course were number 2 but the number one reason and i think most people overlook it is we had very little waste. veggie scraps became stock, tough outer cabbage leaves became cole slaw,i did the breakdown on beef which allowed us to make a lot of money by buying a subprimal and then with only a little work turning out the more expensive cuts (still do the same thing with spareribs. one knife cut turns them into st louis and we all know the price difference there) from the trim came burger meat and what was left became beef stock. i was really lucky the exec still did a lot of things the old way and he was really lucky i came from a background of engineering and estimating and could spot when an invoice was wrong. also the poeple who worked with us were honest so there was no inventory shrinkage from the food "walking out" the back door.
and coffeebluff makes a lot of good sense when he tells you to upsell!!!!!!! that is a quick and ez way to really bring overall costs down.
jack

we Belong to a food co-op that has 28 restaurants in it, it give us a little bit of help 10-20 % discount, I buy all of our meat from local butcher, his price is better them off of the truck, it all helps.I think it helps to keep talking with your reps. So what is a range for profit what percent?? trying to set goals for first year.

cook17,
man that is a tough one.
here is where i would start though
food costs about 35% including paper and supplies.
labor( mark hit right where i would at about) 33%.
now add in the miscelleaneous stuff which would be
utilities
taxes both sales and permits as they are a form of tax
inventory taxes
rent
advertising costs or marketing costs if any.
cost of catering (ez way is straight irs mileage)
and after that is your profit.
myself if we hit the break even mark the 1st year it would shock me since the delays are killing me but it was something i had factored in thanks to my old german chef friend.
honestly if in the 1st 3 years we could match my wife's current income including fringe benefits and mine under the same scenario and make 5-10% profit i would be in hog heaven. but don't forget our business plan shows us doing this with no loans of any type
hope this helps
jack
2 Greyhounds....SMOKIN!!!!

I look for net profit of anywhere between 5% on the low end to 8% on the high end. Haven't hit that in the last 1 1/2 years now with the economy being down and I have had 35 new restaurants open up within a 5 mile radius in the last three years. All chain restaurants with much deeper pockets than me. My catering company tends to earn a much higher percent but there are not nearly the sales there as in the restaurant. I believe that catering definitely has more potential as long as you can stay booked (that's the rub {pun intended}).
Mark

I believe that it is difficult to compare margins. There are several reasons for this and the following are some examples of the problems you face.

In rural areas labor is generally cheaper. So the rural owner might have a lower labor cost percentage than the urban owner. But the urban owner often has the ability to charge higher prices. Food costs for both might be comparable, but the urban percentage looks much better because his selling prices are higher.

Everyone uses different measures of what constitutes food cost. Do you include paper? Say that I use disposable plates and silver and I include them in my food cost. Another guy serves on dishes and doesn't include dishes in his food cost. My food cost looks worse but his labor may look worse because he pays a dishwasher and busboy.

There are no easy answers, just a lot of questions.

so what it looks like is one of my main goals is always have good quality food and service, but keep my thumb on every area of the restaurant.

Cook17
Quality food and service are the goal. Theoretically if you accomplish that people should beat a path to your door. I am finding that an aggressive niche marketing plan really helps. Keeping a thumb on every area of the restaurant is the best way to be successful, but for your long term sanity I recommend looking for a few (depends on the size of your operation) key staff people and hold on to them for dear life.

Please tell me more about your coop I was approached years ago but did not think that it was a good idea at the time.
Mark

What is a coop? Is that a bunch of small businesses that order from the same supplier?
Peggy

2greyhounds:
I started a food co-op a few years ago and worked up to 16 restaurants. We saved between 10 and 15% on our wholesale food costs. That was after I took a fee for setting up and running the co-op. Believe it or not, the most difficult part was to convince independant owners that we could save them money by buying as a group. No one would listen to the fact that volume of sales is the only thing that suppliers watch - and the only thing that determines your wholesale cost.
We also approached the food manufacturers directly and would get a rebate from each, that the supplier would not know about. I tried to get at least $1.00 per case rebate. I figured it would be nice to know that we got paid for every lousey carton we had to break down before throwing it in the garbage.
I would strongly advise you to find a co-op and join it. Be careful though, some are much better than others.

Accent,
That sounds like a great idea. But, do you have to worry if all in the coop don't pay their share? Are the others liable for the unpaid amount? Wary, here.
Peggy

2greyhounds:
You do not have to make anyone pay 'dues'. You set up a contract with a food supplier for specific prices, (again, the price is lower as your volume is higher) then you decide what the invoice price will be to the co-op members. Then at the end of the month, the supplier sends the co-op (or whoever the contract was made with) the difference between the contract price and the invoice price. This is exactly the way franchise restaurants make money, or at least the franchisor. He keeps the money usually, between the contract and invoice price.
Many franchisees dont even realize that they are being cheated.
As far as the co-op members not paying, you let the supplier worry about who they give or do not give credit to. Usually you can get a price break if you go on 7 day credit maximum.
Hope I am explaining this so you understand how this works. Many in the food industry dont even know that this goes on. It is a very tough business in all aspects.

The problem I ran into with the coop idea was that the coop was going to consolidate the inventory list so that the coop could generate more rebates from individual manufacturers. I was very particular on certain brands and did not want to lose that flexibility of buying whatever I wanted. You were also roped into the supplier(s) that the coop had the contract with. So if you got pissed off at Sysco and they had the contract you had to grin and bear it or quit the coop. The coop required that you purchase a certain percentage of your food through them. I'm sure things have changed a lot so hopefully some of these problems have been resolved. BTW Guess where the suppliers make their money after they give these low contract bids to these national franchises?
Mark

mark,
"if i got pissed of at sysco?"
to be really nice on the matter of sysco if they were selling tickets like the romans did to see sysco fight the lions in the arena i would buy a block of tickets to ensure my uninteruppted view of the carnage!!!!!!!!!
with a hurricane coming i sure needed the laff and mark thanks cause you really provided it lol
jack
ps since this is a family site i was really holding back on my true feelings about them lol