Invest your time to manage costs and evaluate your profit

Restaurant owners tend to be focused on the food (the culinary or recipe people) or the guests, (the social people) but often they do not focus on the numbers that drive their business.  Many of the culinary types can give you a SWAG estimate of the plate cost of a menu item but don’t really accurately track the food cost of their business on even a monthly basis.  The social types are even less aware of cost relationships within their business.  They tend to only pay attention to cost when it is time to write the checks. 

The solution is to make sure that you have either a good accountant that is willing to seize the reins of cost management for your business or to have someone on your staff that is willing to invest the time necessary to harvest the numbers and put them into a meaningful report format for your analysis and evaluation.

There has been a lot of progress made with POS software to get some of the critical prime cost reporting integrated into the POS package.  Many POS packages have very good labor cost tracking, even if their reporting is a little on the clunky side.  Even the scheduling function is improving so that after the initial time investment, the POS will put together a functional schedule fairly quickly. 

The food cost management side is considerably more problematic.  The problem with the POS systems and many of the software packages out there right now is that there is substantial investment of time and data just to get them setup and running.  And after the setup, there must be quite a bit of updating to keep the costing current and accurate.  The POS people will help you get the system setup at a fundamental level, but often there are quite a few more steps to get a streamlined cost management system running.

On one recent consulting job, the restaurant owner that I was working with replied that he would be able to devote about 5 minutes a day to maintaining the data base so that it would provide the info he needed to run his business.  We were able to get everything setup so that he met that goal, but still had to bring him to the reality of devoting about 20 minutes every two weeks to pull and format the payroll for his payroll service.  He also had to devote about 30 minutes every week to updating the menu and payables data base so he could get an accurate food cost.  Believe me, he would like to press only a button or two and get all of the information, but we finally got him comfortable with the time investment. 

Just to note he does use both a payroll service and a CPA to pound all of the POS data into a report format that meets GAAP and allows his understanding and evaluation of the profitability of his restaurant.

It certainly isn’t simple, but if you want to be in the restaurant business next year, you will need to invest the time necessary to harvest and analyze your cost management numbers.  Invest your time, it is worth every bit of the perceived pain in the neck!