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What is the correct ratio of food to staff costs and other overheads? |
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Written by Bacall & Conniff Saturday, 01 September 2007 13:25
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There is no "correct" ratio because so much depends on each individual operation - pricing structure, quantity, volume, etc.
Whenever I am asked a question such as this, I like to give my "Grey Goose vodka" story. Everyone pays the same for the product and yet may sell it for a different price - some for $12, some for $10, some for $8.50; also, some pour a 2 ½ oz., 3 oz. and others a 4 oz. martini (my kind of place). So, if someone asks "What should be my beverage cost?" the answer is, "It depends on what you sell it for and what size drink." There is no "correct" cost. While this is a simplistic example, the theory holds true for the entire operation.
If a restaurateur wants a very broad-based estimate, a good start would be the figures published by the National Restaurant Association, which compares one restaurant operation to others of the same type. However, the reality still holds that one must do their own analysis of operations in order to decide the correct ratio that pertains to their particular business. One should keep in mind however, something a long-time friend and very successful client once told me, "If your costs are too high, you're cheating yourself; if your costs are too low, you're cheating your customer."
The information given is provided for general,
non-specific educational purposes only, and should not be relied upon
as advice relating to your specific circumstances. For company-specific
advice, consult directly with your tax advisor.
James Conniff is the Managing Partner at Bacall
& Conniff, P.C., a full service CPA firm that provides industry
specific accounting solutions for restaurateurs. Their services
include: Weekly flash reports, Monthly financial statements,
Web-accounting, Optional bookkeeping & payroll services, and
Comprehensive tax & advisory services. They can be reached at
617-367-3250.
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