Lessons from Growing a Family Restaurant Business
Today, I want to share with you one of the easiest ways to increase restaurant profits: paying attention. For those of you who don’t know, I helped grow my family’s restaurant business from one location, doing just over a million dollars, to two locations doing just under three million dollars. We learned a lot along the way and tried several things that didn’t work.
Some things did work, and one thing we tried was signing up for some expensive software. It was supposed to help us get down to 55% prime cost. We spent several hundred dollars a month and all this time setting it up, and then guess what?
No one used it because it was too complicated. It’s important to keep things simple as you work on your business. We had the most success by just keeping it simple.
When we were able to cancel the subscription for that software, it saved us $800 a month. It was one of the first things we did when we could.
Increase Restaurant Profits with Google Sheets
After that, I took it upon myself to create a simple worksheet on Google Sheets. It’s live, so you don’t have to worry about losing it, and it’s in the cloud. You can either have your managers fill it out, or we actually have a virtual assistant that fills it out.
You don’t have to worry about someone paying attention to it. You can just delegate this task and make sure they’re doing it. Today, I just want to walk you through this worksheet so you can see how easy it is.
Just to give you a quick overview, we’re going to track sales and transactions up here.
I like tracking transactions because it gives you another data point to pay attention to. If your sales are up but your transactions are down, what does that tell you? You might have had some big catering orders or your prices have gone up. You want to make sure that you’re still having a good amount of foot traffic walking through the door.
Then we’re going to have a budget for labor hours, which is my favorite way to control labor costs, and also for purchasing for food cost. Don’t let this intimidate you; it’s really pretty simple. Let’s just start by filling it out.
Analyzing Sales and Transactions
We’re going to start by filling out a week, like last week. So we’ll start there. The first thing we’re going to do is put in last year’s numbers. When you do that, you want to make sure you’re comparing the same day of the week, not the same date. Because February 4th last year might have been a Monday or a Saturday, one day on either side of that Sunday.
We always want to compare the same day of the week because most likely you’re running the same specials. You don’t want to compare a busy brunch on Sunday to a Monday this year because it’s not a fair comparison.
So let’s make sure that we’re comparing the same day of the week, and I’m just going to throw some numbers in here. Now, I have a column right here for estimated sales. If you’ve been running your restaurant for a while, I’m sure you know how busy you are on any given day of the week within a couple of hundred dollars.
But, if you do catering or if you have big parties that make reservations, you wouldn’t be able to plan for that. So, you also want to be able to use your current trends to kind of say, “This is what we did last year, but we’ve been up a little bit, or we’ve been down a little bit.” So, where can we either cut back on labor, or where do we need to add an extra person?
Let’s say we were trending up, so we’re just going to add a little bit each day. Alright, so we’re up a little bit. And then, as the week goes, you’re going to put in your actual sales. And you can see there’s a variance down here that’s going to calculate.
As I said, you probably have a pretty good idea of where your sales are going to be. I don’t expect this variance to be too big. If it is, then you need to figure out what happened. Did you get a big order, or was there some weather or something that caused people not to come in?
After you fill out the whole week, you’re going to see each day up or down, and then a total at the end of the week. I’m just going to throw in some numbers here. So you can see, after the week is complete, or after you fill out last year’s sales, it’s going to calculate your average ticket.
Another good data point is to see if your average ticket is going up or down. I’m just throwing in numbers here, just so you can see how it works. Alright, didn’t mean for that to happen, to have exactly the same amount of transactions, let me just change this. Alright, so this last week difference isn’t going to have anything in there because there’s nothing below this.
So the difference is the whole thing. But as you can see, transactions were down 10 transactions, 1.1%.
Implementing Budgeted Hours and Labor Cost Control
So now, we’re going to move to the next step. And that’s filling out your labor percentage. I’m going to come back to these budgeted hours. But, let’s just throw in some numbers here.
You can see as you’re filling out the actual labor. And again, you should be able to pull this information from your POS.
It’s going to calculate your actual labor percentage. For the food costs, you’re going to throw in all your invoices for the week. Let’s say you get a truck on Monday and Thursday, so maybe your first truck is $3,000. You can see it’s going to give you a live running food cost percentage based on the sales that are already in there.
The budget is going to come down as well as we fill this out, and I’ll show you that in a second. Alright, so let’s just say that was your purchases for the week. So, this is what a complete week looks like. We’ve got sales vs. last year vs. predicted sales. What was the change in what we predicted and what actually happened.
Transactions vs. last year. I’m going to tell you the budgeted hours and budgeted food costs in a second. And then you’re going to have your actual labor costs in here. When you’re putting in your actual labor costs, if you’re just using the numbers calculated from POS, they might be slightly understated because you have FICA taxes and state unemployment taxes and stuff like that.
If you want to be super accurate, just make sure to add all of that. If you don’t have a way of just pulling that number, just as a rough estimate, you can multiply it times 1.065, which will give you a more accurate number. Alright. So we’ve got that week in here. Now let’s come up here to the top.
These numbers are your food costs and labor cost goals. I would recommend putting something in here that is a little bit lower than what you’re running currently right now, just to give yourself a little bit of a goal, a stretch goal.
So we’re at 35%, let’s go ahead and put 33% in here. And for labor cost, we’re at 27%, let’s say it’s closer to 30% with actual taxes, so let’s put 28% in here.
Like I mentioned earlier, my favorite way to control labor is with budgeted hours and labor hours. So, we need to figure out what your average hourly wage is so that we can give you an estimated budget of hours for each day.
To do that, just take a look at your last payroll, and we want to put everything in here. Again, if you’re using QuickBooks Online, it’s pretty easy to find this number. There’s a report literally called Total Payroll Costs. But you want to include everything: everyone’s pay, the employer taxes that you have to match, any other kind of benefits or contributions, and throw that in there.
So let’s say it was $14,000 in this example for a two-week pay period, even though we recommend semi-annual. My monthly payroll, just to keep things simple. And let’s say that was 900 hours. With the hours, if you have salaried managers, to keep things simple, just add 40 or 45 hours a week, however many hours you want to say they work, to your total hours, and include their pay in the total payroll cost.
If you want to be more accurate, you can subtract their pay from the total payroll cost and subtract their hours, and that’s going to give you a more accurate number. If you’re going to subtract out salaried managers, you’ll have to make sure that you’re adding it back in. It gets a little more complicated, so I recommend just adding their pay in here and just adding some hours to the total hours so you can keep everything nice and simple.
But as you can see now, this is filled out. So if we’re at closer to 30% when we add taxes, even though it’s showing 27% right now, our average wage is around $15.50. Based on the estimated sales that we put in here, it’s saying these are the budgeted hours we have each day. As you can see, it’s slightly less than what we’re actually running, maybe one or two days.
We’re under, but for the most part, it’s telling us we need to cut back on those hours. This is why I like to use hours because it makes sure everybody’s taking a break. Can you schedule someone 15 minutes later or 30 minutes later? Where can you get creative and really stagger the schedule so that you can hit these goals? Because again, within a couple hundred dollars, you know what your sales are going to be, you know what you’re paying your staff, so you can literally see how many hours you have to play with each day.
So let’s go ahead and do the next week. I’m going to copy the estimated sales and last year’s transactions.
Managing Food Costs and Setting Goals
Alright, so now we have a number for your food cost, and as you put in your invoices throughout the week, it’s going to come down. So, obviously, things happen throughout the week. Let’s say you had a busy Sunday, and you expect everything else to stay the same.
You know you have a little bit more wiggle room to order some more food. You can either guess, like, “Hey, I know I probably have another $200.” Or, if you wanted to make it official, just add the actual sales up here. That’s too much. And you can see that number jumped up a couple hundred bucks.
So again, try to make this super easy for your staff to use, for you to use, and as they go. This, as you fill this out, is probably a little low. Well, sales were a little higher than expected, so if you actually hit those sales with that number, but you can see if it was closer to the projected sales, it’s kind of in line with what we want to see.
So, that’s it. Again, as you fill this out, everything calculates. This, as you fill out the week, is going to get smaller, obviously.
So, both of these, as you can see, versus last week, versus last year, as you add transactions, both of those numbers are going to change. The labor is a running total, as well as the food cost, so you can see right now it’s showing 103%, but as we add more sales, it’s going to come down.
Adding New Weeks and Maintaining the Worksheet
So, that’s pretty much it. Again, like I said, the best thing that you can do to control your food and labor costs is just to start paying attention. Don’t just order blindly, don’t just schedule blindly. And after you’ve got all this set up to add a new week, it’s super easy.
I’ve highlighted these two cells gray, the week beginning, and then the running food cost total. Just highlight all the rows, right-click, insert rows above, and then you can just literally copy, Ctrl+C, and then paste it right there. You’ll change the week to the next week. Drag it over, reset the actual lines, and obviously, you’d fill in last year’s sales info.
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