Posted on Apr 25, 2016

Restaurant Efficiency

Improving restaurant efficiency can become an ongoing part of your point of sale and accounting systems, allowing you to make continuous improvements. This can help owners and managers exceed industry benchmarks, free up focus for customers and growth, and create an easier path to sell when it’s time.

What are the best ways to improve restaurant efficiency and create peace of mind to free up attention for restaurant growth and customer service? Restaurant owners and managers want to be as effective as they can, but often don’t know where to start to have the greatest impact.

Some of the elements of restaurant efficiency that help owners and managers to continuously identify improvements include:

  • Tracking key measures
  • Policies and procedures that create consistency
  • The point of sale (POS) system and other restaurant inventory software
  • The accounting system

Owners and managers can supercharge this journey to restaurant efficiency by working with professionals who know the industry benchmarks and the tactics that will help restaurants reach or exceed them. We’ll mention some key measures and benchmarks, but working with a restaurant accountant will also help you stay on top of industry trends and tools.

Key measures to track

Tracking and measurement are essential because they help uncover areas of weakness where a small change can create a great improvement.

Key measures of restaurant efficiency that should be tracked include:

  • Food cost/inventory turnover
  • Beverage cost (both alcoholic and non-alcoholic)
  • Payroll and employee benefits
  • Paper cost
  • Management salaries
  • Rent and occupancy

Food cost percentage is found by taking each dollar you make in sales and determining how much was spent on food, beverage and paper. Restaurants also need to account for any rebates received from vendors. Food cost will usually be a little lower in full service restaurants.

Payroll percentage is also calculated from sales dollars. This will be higher for full service restaurants.

The combined total of food cost and payroll percentage should be at or below 60 percent. The other 40 percent is not all profits. There is also rent, occupancy, taxes and other costs.

Controlling food costs

The National Restaurant Association reports that controlling food costs is a top WP Download Restaurant Efficiencyconcern of most restaurant operators; 67% of quick-service restaurants and 77% of fine dining restaurants named it as a moderate to significant challenge.

Improving food efficiency through better inventory turnover and lower food costs is one of the most important areas to track and manage when pursuing restaurant efficiency. This helps in ordering the correct amount of food to avoid spoilage, but food should also be used efficiently in the cooking process. This means having standards in place. Cooks shouldn’t use different amounts of ground beef in the burgers, for example.

Owners and managers can track food much like a manufacturer tracks product. What is the theoretical cost of goods sold and how many were sold of each recipe? How much is each dish costing compared to the standard for that recipe? For each meal consumed, what was the variance from the standard recipe?

If a restaurant serves a meal of steak and fries and had the food to make 100 meals, but only made 80 meals, you can track backwards through the process to find where the missing food went:

  • Is someone making non-standard meals?
  • Are meals being comped and not recorded?
  • Are meals being made wrong and have to be made over?

Some restaurant owners will have a costing system that integrates with their suppliers. Those without such a system can start with a simple spreadsheet and track item cost by month. Owners with multiple restaurants or a single large location should talk to their vendors and find out if there is a preferred tracking system to use.

Tracking food costs and meals can also highlight profitability by food segment, which allows each restaurant to promote and create more of the dishes that keep it profitable. And isn’t that one great reason to be in business?

From choosing the right restaurant software to finding areas where owners and managers can improve the bottom line, an experienced restaurant accountant has the inside knowledge you need.

Restaurant accountants know the techniques that help restaurants be more efficient. We know the benchmarks discussed here and we’ve helped other restaurants reach them. If you have a serious interest in making your restaurant more efficient, talk to the accounting team at Cornwell Jackson. You’ll be surprised what a difference it can make in your efficiency, bottom line and peace of mind.

SB HeadshotScott Bates, CPA, is a partner in Cornwell Jackson’s audit practice and leads the Cornwell Jackson business services practice, including outsourced accounting, bookkeeping, and payroll services. He is an expert for clients in restaurants, healthcare, real estate, auto and transportation, technology, service, construction, retail, and manufacturing and distribution industries.