I was chatting with a hospitality consultant recently and we were sharing our dismay at how few industry professionals actually take the time to cost out their menus before they open. In fact, the truth is almost ninety percent of them don’t. That is of course until about six months down the line when they want to find out where all the money has gone, and unfortunately by then it is too late, if for no other reason than there is no time to tackle what can often be a daunting project.
Fact is, with real-estate, labor cost and government taxation hitting the roof, costing your business on a regular basis, might be the only thing that will allow you to survive.
Sure it’s wonderful when you are lucky enough to hire that brilliant young chef who can assemble a dish that looks like a three foot tall Michael Angelo sculpture and gets the Food and Wine award in the process. But does anyone in the restaurant have any idea how much that dish actually cost to produce. Did you take into account all of the aspects involved, such as labor, food and yield costs, prep time involved etc?
In 1980 I attended a school called The Restaurant School of Philadelphia. At the time it was a very small school with only about thirty students and the focus was to teach how to own and operate a restaurant. The curriculum was almost entirely dedicated to the nasty business of actually tracking the financial aspects of what it means to operate a restaurant.
When I opened my first restaurant in Seattle in the mid 80’s, I was able to calculate the pre opening and operating costs almost down to the penny and at the not so tender age of twenty six it was a huge feeling of accomplishment.
Over the course of the past thirty five years I have been involved with more food operations than I could ever fit on my resume and I can only think of one or two that took the time to get the numbers down on paper. Don’t get me wrong many of these businesses did just fine and some became icons of the American Food Scene. The primary reason being, that they had enough clientele streaming through the doors to cover the bottom line just by sheer cash volume. However these were the lucky ones. On the other side of the coin I have witnessed countless people squander millions of dollars, because they were too cheap, lazy, or inexperienced to do these calculations.
Listed below are some points which I think are imperative to calculate before opening your business. And please take my advice on this, the money you will spend doing these calculations might save you millions down the line. When I first learned these skills computers were rudimentary and there was no internet. It is now possible to download food costing forms, inventory programs, labor sheets and everything else in a matter of minutes. In fact all you have to do is type in the words Recipe Costing Template and hundreds of options will pop up right before your eyes. Because of this the work has become much easier than it used to be, there is no longer an excuse.