Hospitality and restaurants
A restaurant is a manufacturing business with perishable inventory, a retail business with hourly staff and a real estate business with a lease, run from a till. Profit lives in two numbers, food cost and labour cost, and in the lease that sits behind them. We bring weekly finance to restaurants, cafes, bars, hotels and hospitality operators across British Columbia, working alongside their CPA.
How the money works
- Prime cost, which is food and beverage cost plus labour, decides whether the business makes money, and it has to be measured weekly because it moves weekly
- Rent is fixed and sales are seasonal, so the quiet months are funded by the busy ones or by debt
- Menu prices are set by habit and by what the room will bear, and ingredient costs move without the menu moving
- Cash arrives daily but goes out in lumps for payroll, rent, suppliers and remittances, so the daily take hides the real position
The moves we make
- A weekly prime cost report: food and beverage cost and labour cost as a percentage of sales, by location
- Menu engineering: contribution and popularity by item, with prices and portions reset from actual ingredient cost
- Labour scheduling against a sales forecast by day and by daypart
- A 13-week cash flow with the seasonal pattern and the lumpy outflows modelled
Where cash and margin leak
Margin leaks in portions that grew, in waste nobody counts, in staff scheduled for a Saturday that was slow, in supplier price increases that were accepted without a check, in comps and discounts given freely, and in a menu where the popular items are the least profitable.
Cash leaks in the gap between daily sales and the lumps that go out: payroll every two weeks, rent on the first, supplier accounts on terms, GST and PST and liquor remittances on their dates. An operator who counts the till and not the calendar is surprised by the same weeks every year.
The numbers to watch every week
Sales by day and by daypart against last year and the forecast. Food and beverage cost as a percentage of sales, from actual purchases and counts. Labour as a percentage of sales, by week. Prime cost. Average cheque and covers. Cash on hand against the next two weeks of outflows. Supplier accounts aged.
Operators who review these every week, with their chef and their manager in the room, fix a cost problem in a week. Operators who review them with their accountant fix it the following year.
How pricing works in hospitality
Menu pricing is a contribution calculation per item: the price less the actual ingredient cost at current supplier prices. Items are then ranked by contribution and by popularity, and the menu is designed to sell the ones that do both. Prices move with costs, in small steps, more often than once a year.
Labour is the other half of pricing. A menu that needs a brigade to execute has a labour cost built into every plate. We model the menu, the schedule and the lease together, because a rent the sales cannot carry is a pricing problem too.
Questions from hospitality and restaurants owners
How often should we count inventory and check food cost?
Weekly, at least for the high-value items, with purchases reconciled to sales. A monthly count tells you about a problem after four weeks of it. Weekly tells you in time to fix the portion, the supplier or the waste.
Should we raise menu prices?
Usually some of them, by item, based on ingredient cost and popularity, rather than all of them by a percentage. The menu engineering work shows which items can carry an increase and which need a portion or a recipe change instead.
How do we survive the slow season?
Know the fixed costs per week, build a cash buffer in the busy season against a target, schedule labour to the forecast, negotiate supplier terms and rent timing where you can, and plan the slow-season menu and hours from the numbers. The 13-week cash flow shows it coming.
Start with a finance review.
Ninety minutes with Ali on your cash, margin and pricing. You leave with the four numbers to watch and the two or three moves that change them, whether or not we work together.