2 Equations Every Restaurant Manager Should Know

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As a hospitality advisor I get more than a few questions re: operations and, as my wife will tell you, I give far too many answers away for free.

Lately however, I’ve been finding a pervasive lack of some truly basic knowledge that every owner, operator and manager really needs to have. 

I'm not sure if it's due to micromanagement or to so many people getting into the industry with no prior experience - either way, I feel compelled to share these basics because if you don’t know them (and it’s fine if you don't but say you did) - you absolutely NEED to know this stuff since a restaurant’s financial welfare…and very survival often depends on it.

COST OF GOODS SOLD Sold (AKA: COGS)

Beginning Inventory + Purchases During Time Period - Ending Inventory = Cost Of Goods Sold

 

FOOD COST* (Target 20-35% depending on concept)

Menu Price / Cost of Every Ingredient On The Dish = Food Cost

You could also work it backwards to determine:

MENU PRICE: Cost of All Food Product / .25 (or other desired Food Cost %) = Minimum Menu Price.

*Just don't forget about margins. Neither your landlord nor your employees want to be paid in percentages.