The financial investment in your restaurant should not be a guessing game. It’s risky to invest too much into something when you’re unsure of what it will yield. The point is to take the “guessing” out of financial management. To stay in business, you need to know how to calculate the correct performance metrics.

Each restaurant has its own set of needs and challenges, so the metrics calculated will be different. A business that has an excellent company culture will not have a need to focus on metrics related to employee engagement. Another business might prioritise operational excellence over the guest experience because of the restaurant’s operational impact on service and food quality.

The bottom line is that you need an accurate representation of how the restaurant is performing in certain areas before you identify which metrics to focus on. What’s required is access to accurate numbers. A Point of Sale (PoS) system is the perfect tool to provide these numbers. Not just any system will do, get one that includes accounting capabilities.

Calculate your overhead cost

The overhead figure describes the operational costs of a restaurant not related to direct food cost. Figuring out your overheads allows you to plan for current and future costs and analyse ways to reduce excessive expenditure.

To calculate your overheads, add together all the applicable expenses listed below. Remember, your overheads are unique to your restaurant, so some of these might not apply.

  • Property cost
  • Employee salaries
  • Paid advertising
  • Utilities i.e. Internet service

Now add all the overhead costs for the month to calculate the total cost.

Compare the overhead cost to sales. This will help you to properly allocate costs when setting up a budget. The equation will look like this:

(monthly sales*(1-gross profit%)) – overhead = net profit

So, if you are spending R100,000 a month on expenses, and turning over R300,000 with a food cost of 35%, your calculation will look like this:

(R300,000*(1-35%))*-R100,000 = R95,000 net profit

Now you can work on lowering your overheads to improve net profit. Anything you can do to nurture your restaurant profit margin is a worthwhile investment. Strategise ways to bring that number down without compromising the quality of your service.

Sales and net income

To increase sales, restaurant owners must make changes like adjusting the menu or increasing targeted advertising. But more revenue is meaningless if you’re significantly increasing costs. It’s important to understand how sales and net income work with each other. If you change one, how will it affect the other? Ensure that while you’re increasing sales, you’re not also significantly increasing costs.

Track inventory

As mentioned above, PoS is an important asset in any restaurant. There is so much you can accomplish with the software. But more importantly, you can meticulously track your inventory.

Pilot PoS accurately monitors inventory, recipe and raw material costs, along with daily prep item variances. Every week track your actual food cost expenditure per category, against your estimates.

The point is to identify hidden food costs that might crop up, such as increased packaging or raw materials, so you can adjust menu pricing or purchasing patterns accordingly. When you’re tracking your food costs, you can identify changes which might relate to seasonal demand.

On receipting, Pilot also warns you of any raw material costs changes. Pilot also recommends weekly supplier orders based on consumption over a selected period. Add in bulk to portion and yield calculations, and your stock control cycle is complete.

Here at Pilot, we’re on a quest to constantly find new ways to improve our solutions so you can enjoy financial success. Allow our software to crunch the numbers for you.

Read our e-book for more helpful advice on how to turn your business into a profit-generating machine in the restaurant industry.

Author : Rudi Badenhorst