How to stick to your budget

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1. Pay attention to your prime cost

Out of all the numbers you should be tracking, your prime cost should be at the top of your list. Prime cost is your ratio of costs to sales and provides a good barometer on how well your business is performing.

To calculate your prime cost:

  • Divide the total cost of goods sold (cost of labour, food, beverages, etc.) by total sales. e.g. $5,000 weekly costs / $15,000 weekly revenue x 100 = 33.3%
  • Ideally, this ratio should be no more than 60 to 65 per cent.

As a key indicator of profitability, it's important to calculate this number at least once a week, so you can see how your business is performing and take corrective actions as needed.

2. Keep staffing costs under control

According to industry insiders1, the labour cost percentage in the food service industry should be between 25-40% of total revenue, depending on the nature of the business, i.e. fast food versus fine dining. As one of the biggest components of your budget, it's important to watch for creeping labour costs and minimise overstaffing.

To calculate your labour costs:

· Divide your total payroll by the number of customers over a specific time
frame to see how much you are spending on each customer.

· Further divide your figures into departments:
for example, bar vs restaurant, to compare each area's costs.


To make tracking these numbers easier, you can deploy a digital scheduler such as Deputy2, which can also simplify your work scheduling, employee communication and administrative tasks.

3. Make the most of your marketing

Canada's restaurant industry generates around $85 million3 in annual sales. In order to get your fair share, you need to stand out from your competitors, and the best way to do that is through marketing. As a general rule of thumb, restaurants should look to spend 3 to 6 per cent of their monthly sales revenue4 on marketing (double for new locations). Fortunately, the rise of digital marketing automation allows businesses to cut costs while making it easier to track performance.

4. Carefully consider your equipment

Outfitting a restaurant with equipment can be costly.

To keep your budget under control:

· Focus on buying the right equipment by
consulting with your chefs and staff.

· Consider rent-to-own equipment, or leasing an
upgrade/return option. This can be a great idea for businesses that are
starting out, looking to extend their offering, or planning to expand.

· If you haven't already, consider investing in a
restaurant POS system, which can help collect critical data to assist with your
budgeting.

Having a solid budget under your belt can help free up time and energy to focus on what's important: delivering delicious food. By taking the necessary steps to track your budget, you'll greatly reduce the risks in your business, while arming yourself with information that will help maximise success.



1https://upserve.com/restaurant-insider/labor-cost-guidelines-restaurant/

2https://www.deputy.com/

3https://www.restaurantscanada.org/research/#industryKeyFacts

4http://restaurantmarketinglabs.com/restaurant-marketing-budget-recommendations-for-2016/

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