Top (7) Reasons Why Restaurants and Cafés Fail

With an estimated 60% of independently operated restaurants failing within the first year and furthermore, 80% failing in the first 3 to 5 years of operation, here are my top seven reasons for why Restaurants and Cafés Fail.

As owner-operator of Copper Pantry Restaurant consultancy firm, I come across a lot of struggling Restaurants and Cafes. Almost all of them fail, are not maintaining strong businesses or are not continuing to grow, for the reasons I mention below.

These are the fundamental and most basic of rules that must be thoroughly researched and accounted for. Assuming the answers will almost certainly result in failure.

 If you are unsure of any aspects of the task at hand you must certainly seek professional advice from a Hospitality Consultant specialist. To roll out the clichés, ‘A failure to plan, is a sure plan to fail….’ and ‘prevention is better than cure…’ are a lot more poignant when facing an owner who has raced in head first with rose tinted glasses on. Don’t be another statistic.

Restaurant business equals people business

Embrace this concept. Your vision is not enough, it is your ability to activate your team to execute your vision, and your business is people, both customers and staff alike.

Are you a People’s person? Are you a leader? Are you effectively hiring the right people? What is the workplace culture you have developed? Have you focused correctly on proper training, customer service, leadership and operational procedures, all with the customer in mind? Are your staffing levels correct?

You cannot blame your staff for this; have you set your expectations properly? Do you understand yourself what standards are expected to soar in this industry?

Solution 

Be tough when hiring, create a system that allows you to define your values and vision and then sell it with purpose. Create question templates, separated in interview stages to break down and find essential traits you feel necessary to execute your vision. This will be the ethos of your Restaurant and you must live and breathe it. Your enthusiasm will be contagious. You must drive to create a culture that you will be known for.
Be creative. Once you narrowed down the values and have established the correct candidates you believe have the expertise, attitude and most importantly references you require. Talk is cheap. Actually, make a part of hiring a head Chef, the necessity to cook, explain and present a mystery basket to showcase her or his talents. Do a mock table setting and see your wait staff’s reaction to you struggling to understand a menu or response to a particular dietary requirement.
Do not rush the hiring process. Find quality candidates and be impartial in deciding if they have what is required to execute the vision and values your Restaurant stands for.

Location

Just like when purchasing a property you will determine what aspects you require.  You will have a checklist and you will follow accordingly to suit your needs, transport accessibility, parks and schools for kids, surrounding amenities, shops, gyms etc.
Similarly, you need to choose your perspective location from every angle, especially your customer’s viewpoint; you need to consider the visibility, sufficient parking, and accessibility to foot traffic. Of course, budget and previous success or failure is in this chosen area

Solution

For this, you should work backwards, map out your ideal customer so you know who and where they are, why and how other Restaurants have worked or failed before you. What is the market rent for this area? If you are unfamiliar with the area seek professional advice as this may make or break the future success of your venture. It can be as simple as the wrong side of the right street. Choosing a cheap rent will be an option you may face but you may end up spending more energy and money trying to market the wrong location.

Uniqueness

Don’t be a jack-of-all-trades. The most successful Restaurants and Cafes know their concept, understand their niche and then execute it with clear vision. If you fail to stick to your unique identity or speciality you will encounter the following problems.

a) Overly complicated menus with too many items. This will create confusion for your customers while also creating a stock control and turnover nightmare, limiting job satisfaction for your staff.

b) No talking point for your customers to spread word of mouth.

c) More reading, more time, less turnover of tables = less revenue.

d) More cooking, more washing, more gas and electricity

e) Inability to cook multiple orders = slower more complicated service for kitchen staff.
 

Solution 

Simplicity is the hardest thing to achieve. Identify a niche, know who you are and always be the best at what you are doing.

Educate wait staff on the finer details of your dishes by allowing them to witness and taste the preparation and cooking. This will create harmony with the kitchen and front of house.
Correctly train your staff down to the last detail; obviously, this will be easier with a shorter menu. The devil is in the detail. Properly test your menu ideas and items and then execute with precision, accept criticism and feedback.

Overspending (Pre-opening)

Most Restaurants or Cafes tend to fall behind before the doors even swing open so it’s very important to plan your budgets correctly and allow your cash flow for add-ons. Things don’t always go as planned. These might include construction delays, additional cost from councils, design changes.

Other not so obvious expenses include staff advertising, and training, opening stock, marketing campaign and launch, insurance premiums and bank guarantees which can get into the ten of thousands and then hidden borrowing and legal expenses are all often overlooked or under calculated.

If you are inexperienced in project management it is advisable to seek professional guidance and even then many professionals can add as much as 15% contingency to allow for unforeseen complications which may affect a smooth launch.

Solution

Developing a building budget early on with the help of an expert who has worked on similar projects, a proven track record and perhaps industry contacts, and then sticking to it.

Knowing that delays are inevitable therefore budget accordingly.

Understand your hidden expenses (some listed above) by carefully researching common pitfalls or seeking professional advice.

Admin and cash flow (Post opening)

Knowing your percentages. I have consulted with clients who are financial advisers while also running a Restaurant and when asked their wage percentages, they have no figure or even an estimate of what it should be. The same can go for the cost of goods; knowing the ratios within your kitchen down to the pricing of each dish and having a simple and practical system to monitor your stock control is paramount to the running of any successful food business.

Also having a guideline as to a rental percentage should be the first thing in the process of looking at a location. Total sales expectations calculated down to the weekday versus the weekends and then working backward to ensure your rent is within budget is crucial before you ‘assume’ or get emotionally attached to a location.

Understanding the difference between variable and fixed expenses and monitoring this on a weekly basis to ascertain your on-going financial position is also a must.

By having the correct systems in place and taking vital snapshot figures on a daily and weekly basis and then simply entering them into a simple formula you can then see your position on a weekly, then seasonal or annual basis. This will affect purchasing and roistering decisions.

After you get the doors open, what now? It will take some time to ramp up your business and increase sales but from day one there are high labour and food costs and this will be so for the first few months as your staff find their way. You are going to have teething problems. A Well founded sales forecast is very important and even the most professionally run outfits can underestimate the shortage in cash flow in the initial stages, so allow for a deficit of up to 2 to 3 months in cash flow ‘after’ you open.

Solution

Understanding that excess funds will most certainly be required is essential before any major decisions are made or important documents are signed. If you are inexperienced in this area and unsure in any way of the true costs involved, you must seek professional advice, which will equate to a fraction of the costs associated with falling behind in opening or worse again failing to open at all. Each project will present individual, concept specific pitfalls.

Remaining fresh

In this industry, you are only as good as your last service! Staying on top of your brands appearance, social media presence, menus, audience preferences and general marketing is paramount to longevity. With constant trend changes and fresh competition continuously evolving you need to stay sharp to maintain your brand and it’s ability to remain fresh. World famous brands continue to aggressively market so don’t think your immune.

Solution

Keep a close eye on new trends and new offers arriving into the market, read food reviews, talk openly and gauge your chef’s interest in it. Don’t be afraid to change your kitchen leadership to make way for fresh talent. This is a high burn out industry and no one likes to admit they do not have the same passion they once had, so keep an eye out for signs of this. You can ruin your image in a short period if you fail to see signs of fatigue in your staff and their surroundings. Do you still have to passion yourself for your establishment? If not, you are competing with someone who does.

Working in the business and not on it

Running a Restaurant or Cafe and managing a Restaurant or Cafe are two separate tasks.  At the beginning stage, you will like and need to be hands-on in designing, training, creating systems, customer service and overseeing the critical launch and feedback.
Your product is always the core of your business and it’s absolutely essential the product remains consistent. However, It is crucial to have systems in place that will allow you to distance yourself from the hands-on tasks like helping in the kitchen and serving tables.

In due course your focus should be more about managing the business; monitoring cash flow, evaluating your menus, marketing, admin, keeping up to speed on industry changes, briefing your bookkeeper for wages, business activity statements and associated running expenses. If you are too busy completing the day-to-day tasks of running the business, who is managing the growth and future success of the business? 

Solution

From the offset prepare for your stepping back from the hands-on tasks. Create systems and manuals, embrace technology, plan and see this as an investment to hire a replacement that you can train to control the running of your establishment. Of course, this will be a further cost but without this, your growth will be limited and your energy wasted on jobs you will soon be resentful of.

The answers are out there. At Copper Pantry Restaurant and Café Consulting, my aim is to teach you from the mistakes I have made. You are not the first to attempt this and the answers could be the difference between success and failure.

Please check out my other blogs and drop me a line if you have any queries. Good Luck.

Best Dishes

Sean McBride

sean@copperpantry.com.au


What am I really selling in a Restaurant or a Café?

About 18 years ago while I was at a point where I was excited about running my own Restaurant/Café I met a guy, the owner, in his coffee shop. I inquired from him what it was like running his own place. He was an ex-marketing Guru and presented me with a question to answer mine. His question was, “what do you think the cosmetic industry sells?” I pondered and then proceeded to throw the obvious answers, Lipstick, perfume etc. his way. When he eventually put me from my misery with his answer, “hope” it changed my life for good. What a simple but profound moment, he then explained that owning a Cafe, what he sold, was “time out.”

My cooking skills at that stage were second to none and I took them and the simple lesson I was taught by that day and went on to create the very successful Sydney health food brand, Saladworks.

By identifying my prospected clientele as a time poor, health conscious professional I never lost sight of their fundamental needs; time, fresh healthy food, consistency and value for money. It was not just about what was in ‘our bowl’ but more about what the whole Saladworks experience represented to my customers. From the way I/We greeted and handed them their change, so they would not drop it while balancing a mobile phone, handbag, drink bottle or whatever (change first, carefully followed by neatly folded notes so the coins would not slide from the note to the floor) to the way we packaged, cleaned and presented their lunch so they would not have salad dressing on their newly ironed blouse or shirt. They didn't need to pay me for another headache in their day! Did they?

Would my product have been any different had I not had this encounter? Perhaps not but what it gave me was an ethos to build around my product/service and that ethos became the backbone of my companies philosophy and standards. This enabled me to create a culture for staff and customers alike to buy into. We cared.

My determination to maintaining those values commanded a very loyal following and the point to my tale is that it is not enough to just identify that people buy feelings, not products- but that you have the leadership/management skills, grit, integrity and vision to adhere to achieving such loyalty and big-picture thinking, regardless of any current issues you may or may not be facing. From personal, staffing, financial, to competition, suppliers or whatever.

Creating a connection and bond with your customer in an era of ‘startups’, will create loyalty, your customer, on a subconscious level will automatically gravitate towards your brand and associate their experience with one of relief.

Just think yourself how complex our lives have become where every chore we complete requires that we have a complete focus to participate. Setting up an Internet connection, on hold to your bank or mobile provider, changing private health insurance, or knowing the correct passwords after 5 rounds of identity checks for the right to speak to someone who has rung you!

To approach any service industry with your customer's wellbeing at the forefront of your thoughts and objectives will allow you to stand out from your competition and will command great loyalty on a subconscious level. Take the fear or even just some of the thinking out of the equation. Be it the actual execution or perhaps the design or flow of your concept to the menu formatting and point of sale and beyond.

Intentions alone will not allow for a seamless delivery of such noble causes, only prior planning and preparation shall prevent poor performances. So having a vision, although a great starting point, is only the beginning of the journey. It is critical before you announce your arrival that you have all your ducks in a row and sometimes only experience can prepare you for the common pitfalls that ultimately can be avoided. And we all know prevention is a lot simpler than cure.

So do your due diligence, note vulnerabilities and don’t be penny shy and pound-foolish.

The answers are out there. At Copper Pantry Restaurant and Café Consulting, our aim is to teach you from the mistakes we have made and learned from. You are not the first to attempt this and the answers could be the difference between success and failure.

Check out our other blogs and drop us a line if you have any queries. Good Luck.

 

Best Dishes

Sean McBride

 

sean@copperpantry.com.au

 

 

 

 


Common mistakes made in opening a Restaurant or a Cafe (Part - II)

1) Grand opening to soon

Of all the stores that I have opened, I have always gone with a soft opening approach. What this means is that I like to get my shop in order before I announce to the world "hey come look at me." I have attended meetings with very senior and a lot more educated strategist than I, who all criticise this soft opening approach and hammer home to me the importance of marketing from day one.

These individuals are educated by textbook, and although I understand the power and the importance of marketing, I also understand the timing. Only a Restaurant operations consultant or the staff of a newly opened Restaurant or Cafe can fully understand the mayhem that takes place with the opening of the new establishment.

Although it might be more costly to operate on a lull for a few weeks to sort out teething problems, when I do launch, I will be very sure that my establishment puts on a great performance and sends whatever punters that do come through the door, who I have welcomed, away with tales of success and high standards. Not in relaying a calamity of teething problems. You do not get a second chance to make a first impression. My marketing campaign also starts on day one but my first few clients are my staff whom I need to impress and secondly for them to impress me. Mess it up on day one and a good chance is you won't see these guests again, or any of their friends.

2) Don't focus on what you want or assume you know what other people want

A really simple but often overlooked set of questions to every business owner. Who is my customer and where is my customer?

Don't get bogged down in what you like, because what you like doesn't matter. Once you have decided on your area, conduct focus groups and research to get a sense of what people in your area want, or may not be available. Know your customer.

Alternatively if you have a chosen concept and offer which is unique, be sure you choose an appropriate location to market your product and are aware how much people will spend to have it. Too many times people miss the mark by not following the basics of supply and demand.

3) Location. Location. Location

Not just a term shouted from the rooftops by real estate agent's but an actual golden rule of retail. You will have a general idea and a desire for a location that's on your mind and throughout your search you may find suitable premises but the rent plus outgoings might be a bridge too far for you. This can be a scary moment to commit to signing a lease agreement that could tie you to that premises for upwards of seven years, I can acknowledge that.

I have worked in a two star Michelin Restaurant that was located in a very strange position, down a backstreet laneway, one that you would never dream to look and find. This is obviously a very niche market and can usually attract food enthusiasts on the search for such a dining experience, armed with a food guide or having already researched. Not a leisurely stroll where you are committed to pay such vast amounts for a dining experience. Not your spur of the moment lunch!  With that in mind convenient access and high visibility are critical. To attempt to save money on rent in an average location often results in average turnover and can lead to over extended budgets allocated to advertising in order to get noticed. Of course you must do your due diligence and know that you are paying a reasonable or ' market rent ' per square metre for your location. A little extra spent on rent can ensure turnover, turnover can ensure freshness, maintain consistent staffing levels and increase motivation.

4) Maintaining longevity in staff

Anybody with deep enough pockets can launch a Restaurant or a Cafe and attract staff to work in a new polished environment where the mice have yet to be separated from the men. Although chaotic at times, it will be a honeymoon period for some.

As any Restaurant or Café advisor will tell you. The first few months will be critical and also expensive allowing for overstaffing. When things settle down and you have built a solid client base and you are now operating at appropriate wage percentages, you will be at the mercy of your staff.

This industry tends to have quite a turnover of staff; it's just the type of person it attracts. The trick to your longevity will be consistency and the only way you can maintain consistency, will be with consistent staff.

For this, one must be realistic about your standards and your ability to maintain and govern them. Of course the variables are limitless but it is worth noting that what you launch yourself as, must be maintained. Keep this in mind at the menu development stage.

I have worked at a 3 chef's hatted Restaurant, Restaurant Of The Year and Best New Restaurant only to be followed by the loss of a Chef's Hat and eventual closure. It's demise. Reaching a certain standard and its inability to maintain it.

5) Appealingly to all

‘Jack of all trade's, master of none.’ I have discussed the point of uniqueness in greater detail in a separate blog but it requires mentioning briefly here as a point of concern and a major factor leading to the failure of many new restaurants or cafes.

You cannot appeal to everybody and if you try you will have confused customers and an over complicated kitchen. This will also leave you with no unique identity in the marketplace. It's best to find a gap, or a niche market and then put all your focus and energy into delivering to this space, with undivided attention. Having pages and pages of menu listings and multiple chicken dishes for instance will not allow you to stand out and be noted for your uniqueness and signature items. It will only confuse your customers. Again, know your customer.

At Copper Pantry Restaurant and Cafe Consulting Firm, my aim is to teach you from the mistakes I have made. Please check out my other blogs and drop me a line if you have any queries. Good Luck.


Common mistakes made while running a Restaurant or Cafe (Part - I)

Like any new business venture, many decisions need making. Opening a Restaurant or a Cafe is no different and because there are so many decisions to be made it's not hard to make some mistakes along the way. Here is a Hospitality Consultants Guide and some tips to avoiding common mistakes while opening a Restaurant or a Cafe.

1) Underestimating the finances required. Cash flow management.

It's not enough to have just a dynamic concept and great food. Most restaurants fall behind before the doors even open, so it's vital you plan correctly your budgets and cash flow and have allowances for add-ons.  It's very common for new Restaurant or Cafe owners to inadequately predict start-up costs required and fail to understand that things don't always go as planned. These might include construction delays, design changes and additional costs raised from local inspectors or building authorities.

Other less obvious costs may include licenses, permits, insurance premiums, pre-opening payrolls, bank guarantees and other associated borrowing expenses which are usually missed completely or grossly under estimated. Unless you are experienced in this field it is advisable to seek some experienced professional guidance in identifying and projecting finances required. Even with experience many professionals tend to add up to 15% contingency to allow for overruns which will enable a smooth launch.

2) Entrepreneurial explosions = clouded vision.

It's not enough to have a romantic dream of opening your own Restaurant or Cafe. You will require a clear vision as to your chosen demographic and food style. Also necessary is a realistic mindset in understanding the leadership skills that are required to work to achieve this in a very stressful environment, with long hours, egos and at an often-chaotic pace. Six absolute characteristics you will require are grit, empathy, strong communication skills, integrity, business savvy and finally, some more grit.

 3) A well-founded sales projection.

So let's say you overcome your first hurdle and the doors swing open. What now? It may take time to build your sales and even if your sales take off from day one your labour and food costs could be very high for the first few months as your staff find their feet. Teething problems are a given but run out of cash and you're finished.

A well-founded sales forecast is a must and even then the most professionally run outfits will allow a deficit for up to 2 to 3 months in cash flow. After the Restaurant or Cafe doors open.

4) Documented manuals/systems. Menu consulting/development.

Execute correctly your documents and working manuals and you are at least on track to having a foundation of which to work on.

As well documented in all of my teachings, consistency is the key to success and longevity. On any given day in a successful Restaurant or Cafe there will be thousands of tasks performed. This is the attraction of buying a franchise or license model, even though this requires ongoing expenses, it has a certain element of guidance and consistency, especially for inexperienced operators. What you're hopefully paying for is a well-documented system, which still requires implementation but is a good head start, (with the presumption of course that this model has been proven.) As I always say, to assume, is to make an 'ass', of 'u' and 'me'. Always do your due diligence if considering a franchise or license agreement or use a Restaurant consultant.

If you are not considering this option then think carefully about how you plan to lead a team by a vision solely placed in your head. The longer you operate without carefully documented manuals and guidelines the longer your Restaurant or Cafe will stay stuck in the often chaotic opening phase, a phase you want to put behind you as soon as possible. Failure to plan is a sure plan to fail. Find out more - Menu Consultant Melbourne.

5) Working in the business and not on it.

Managing a Restaurant or Cafe and running a Restaurant or Cafe are two separate tasks. Obviously at the beginning stage you will like and need to be hands-on in training, designing systems, customer service/feed back and overseeing the critical launch phase.

The core of your business is always your product and ensuring the product remains consistent. It is also important to have systems in place to allow you to distance yourself from the hands on tasks like serving tables and helping in the kitchen. Eventually your focus should be more managing the business by monitoring cash flow, planning marketing activities, evaluating your menus, administration, liaising with book keeper for wages and other associated running expenses. If you're doing the menial tasks of the day-to-day running of the business who is working on managing the future success of the business?

At Copper Pantry Restaurant and Café Consulting, my aim is to teach you from the mistakes I have made. Please check out my other blogs and drop me a line if you have any queries. Good Luck.


Uniqueness in your Restaurant or Cafe - A Major factor that contributes to the failure of Hospitality Businesses

Hospitality is a tough business, as any Restaurant or Café advisor will tell you. Everyone knows this, yet everyone looking to get into it also ignores it.

It is a fact that opening a Restaurant or Cafe could be one of the worst investments you could make. That's a big statement coming from someone who works in a Hospitality Consulting. I'm afraid it is the truth. Most restaurants fail.

You might ask then why anyone would want to be in such a business with such a high failure rate. Answer- The rewards, when executed correctly. Just like any other high-risk investment, the rewards are high. If you manage to get the formula correct and open the right kind of restaurant in the right location you could see higher than average profits, some of the more successful establishments, exceeding profits of 30% on sales. This could mean you can pay off your investment quickly and have lots of residual cash flow.

What is this magic formula you might ask? Unfortunately there is no clear answer to that question. Some highly experienced business people struggle in this unique industry and some very talented chefs have also failed due to a complete negligence to understand even the basics of business.

Simply put: Food is just like any other commodity. You buy or produce at a certain price, you then add your touch or not and sell at hopefully, a higher price, allowing for all your expenses in between. And I mean ‘all’ your expenses. Quantifying them, now that’s not so simple. (Refer to my costing blog)

There are many reasons for such a high failure rate in this equation. This blog will concentrate on one. Uniqueness, Or lack of.

You need to provide your customers with a reason to come to you and not spend their hard earned cash with someone else. Your claim to great food great service is not unique. Every other restaurant or cafe owner will make the same claim. Of course great food and service is very important but what will truly allow you to stand out from the rest is to tap into emotion.

50% of every buying decision is driven by emotion.

Think Mercedes, stands for affluence/pride. L’Oreal ageing cream, stands for hope/happiness. Jenny Craig, stands for health/fear. All strengthened by emotional connections.

If you make an emotional connection with your customers you will be remembered long after the pleasures of taste or efficiency. To create nostalgia or be remembered as very accommodating or nurturing, you will create an emotional connection. Your food and service can support a unique selling point, they just will not be the unique selling point.

No product can help to build a meaningful connection without looking at three aspects.

1) Who? It isn't just enough to pick a demographic of let's say 18 to 49 years of age. To emphasise such diversity, this could include, people who have never had sex but also people who could be grandparents. Judging on an emotional front as well as practically, their views about what they eat and the effects it has on their wellbeing are worlds apart.

2) Why? Why will your customer care about your product? It is not enough to announce your hero shots. You must be explaining, or better still demonstrating the effects and the value of your product to your customer. Without showing, you're just talking to your graphic artist.

3) How? How can range from, how does it work, to how does it compare to your competitors. Your customers will often establish a relationship with you by relating it to something they already know.

Lastly, (I cover this in greater detail in my image blog)

Are you effectively communicating your products personality and benefits through your choice of imagery and have you provided a strong enough environment to create an understanding and connection with your customer?

In today's world, visual perfection has become the norm.

We can go deeper in detail and show the effects theatrics could play in your food offer but for now we at least we can plant the seed so you can determine what it is you truly want to be known for. And how you can create an emotional connection with longevity.

At Copper Pantry Restaurant and Café Consulting, my aim is to teach you from the mistakes I have made. Please check out my other blogs and drop me a line if you have any queries. Good Luck.

Best Dishes

Sean McBride

sean@copperpantry.com.au


Food Costing - Menu Development in a Restaurant or Cafe

As any Hospitality consultant  will tell you, in relation to menu development, the secret ingredient for monitoring food cost is consistency. Having a consistent, 'practical system’, which enables you on a weekly basis to match your sales against your cost of goods (' COGS' = Money spent on produce and packaging to service sales.)

Having control over your menu costing and in turn your food cost percentages is a very empowering exercise and an early warning system to alert you to theft or waste.

Many blogs speak of doing a weekly stock take. Although this is the ideal scenario, actually completing this after a busy weekend and many unforeseen issues that may have arisen throughout the week. Physically calculating remaining stock down to the last kilogram on a Sunday night is not very practical in the real world and as such gets neglected or done half heartedly which of course is a Pointless exercise.

Having guidelines of percentages for running a restaurant or a cafe is very important. These percentages can vary however. For example, you might have high wages because preparing most of your food from scratch will result in reducing your food cost percentage but more labour. Or you may have more packaged items bought in and therefore lower your labour costs but a higher COGS. You will need to plan and know what each percentage should be in advance before attempting to truly realise your gross profits, net profits and fixed versus variable expenses.

Therefore, having a system where you can modify each dishes true and current cost on a spreadsheet, is a must for any modern day Restaurant or Café. I always use my costing formulas and at the push of a button can determine my exact, ‘ current market value ‘ menu costing.

Once you have the cost of goods including packaging for your dishes, you can then use a very simple equation to work out what you're selling price needs to be to determine your ideal cost of goods percentage. COGS / .33 will give you a selling price that represents a 33% COGS.

My aim is always 30% but I shall round to 33% to simplify dollar amounts in any equation.

Example: COGS or price of a dish = $5 to prepare (including packaging)
Then 5 / .33 for instance = $15.15. The Sale price required to achieve a 33 % COGS.

To keep track of this system I like to keep a journal (similar to set up below.) It's practical, fast and can easily be transferred at the end of the week to a spreadsheet if required. Pulling out your laptop in the middle of receiving goods is not very practical.

Journal
Date    Supplier name    Inv #    Amount GST

12/3/17    St George        Inv123    $ 110 None

And so forth, each entry, each week. By the end of the week you'll have a Total cost of goods. I also like to keep the items with a GST component in a separate column so the GST component can be allowed for and deducted accordingly. As this is money you can claim back on your quarterly BAS. (Business Activity Statement) so therefore is not a true expense.

Should any unusually large deliveries be received on a given week this can be divided over coming weeks to allow for a realistic COGS figure at the end of each week.

At the end of each trading week once you have a figure for total sales (minus GST of course.) It is then easy to divide your cost of goods by your total sales.

Example: Total sales minus GST = $10,000
(COGS) = $3,300

Cogs / Sales = cost of goods %
Then multiply by 100 and you get 33% cogs in this example.

As previously discussed you should have an ideal figure in percentages for your COGS, wages, rent etc.

Once you have agreed on your ‘ideal’ COGS figure, you can then monitor on a weekly basis and try and stay within a 1% variance of this figure, up or down. Some weeks your food cost might be slightly higher for a variety of reasons but what we are looking at here is an average COGS. If your menu consultant and menu costing is done correctly and your variance is greater than 1% continuously, you know then you have a problem. This could be a change of price in cost of goods received and not accounted for, over-portioning, poor food handling techniques, bad goods receiving procedures, or many other problems, including theft. This way you will know sooner rather than later and it is always easier to address a new problem than a deeply ingrained, old one!

As previously mentioned the ideal scenario is for a weekly stock take covering all items, which can number in the hundreds. That equation would look like this.

Starting inventory + purchases - ending inventory = COGS.

If you are monitoring and documenting each invoice and are able to isolate each week's spend. And you have done your menu costing and continue to hit your ideal COGS then you do not have a problem.

I personally have very strong opinions about treating a restaurant or Café as an investment and showing up each week to empty the safe. The system I mention is a very practical and convenient system for getting a quick snapshot of the figures required. This continuous assessment and some relatively cheap cameras installed for monitoring staff can give you all the answers you need.

How ever, if you are running a business as an investment or you are reading this because you have an ongoing problem regarding sales to profit ratio and don’t know how to address, then you most certainly need to dig deeper and implement a system of stock control, coupled with a correctly costed menu and proper food handling techniques. Possible, but only if executed correctly!

At Copper Pantry Restaurant and Café Consulting, my aim is to teach you from the mistakes I have made. Please check out my other blogs and drop me a line if you have any queries. Good Luck.

Best Dishes

Sean McBride

sean@copperpantry.com.au