The odds are that the people you have working for you in your new restaurant do not know exactly how a restaurant works. For example, do you believe that your employees realize that your food and alcohol stock is counted as cash? The next time someone drops an egg, pours out a pot of coffee, or spills a drink, explain to them how much money they just flushed down the drain, or better yet, educate your entire staff on these very important business concepts, the most important of which is food inventory.

Avoid Lopsided Numbers

Ideally, your food inventory would equal to a one weeks supply or slightly less. If your establishment serves alcohol, you will need slightly more than that. The value of your food and alcohol are counted as cash. If you have too much or too little, your sales numbers are lopsided. What you want to see, is profit. This is the equation you want your employees to remember. Profit equals sales minus your establishment\’s expenses.

Sales, Sales, Sales

Put in a nutshell, If your expenses are higher than your sales, you are going backwards. You can only go backwards for so long without going under. If that happens, you will still owe the expenses but will have no way to generate the sales. Unless you come up with money, you may as well close your doors before it is too late. Now let\’s explain the two types of expenses and see if your workforce can come up with ideas for making some cuts. When you sell a meal or drink, the money made goes first towards the fixed expenses, then it must cover the cost of the food and the labor involved in serving it. Anything that is left over is profit for the restaurant.

– Fixed expenses are those that you cannot control. The rent or lease, insurance, and equipment or bank payments are all examples of fixed expenses.

– The ingredients of your mixed drinks and your food inventory are examples of variable expenses.

– The biggest expense most restaurants carry is the wage expense. Managers have to watch schedules and hours closely in order to keep their most productive employees working at the optimum hours. In the restaurant game, production is pay. If you want a pay raise, your production has to pay for it.

-To make this even more challenging, you must add 25% to 35% to each employees earning charged to the employer for variables such as training, workman\’s comp, and other labor related expenses per employee. To put this into perspective, it costs the restaurant approximately $30 extra dollars every time they pay you for $100 worth of labor.

Profit Equals Sales Minus Expenses

This is how it breaks down to the bottom line. In order for your restaurant to earn money, the money made from each sale needs to be enough to cover expenses with something left over for profit. Food inventory now becomes one of the most important aspects of running a successful restaurant, as does productivity. Any waste of food comes out of profit because it is as good as cash. Once your employees appreciate these hard restaurant facts, they may be able to find ways to help the restaurant earn money and grow by increasing sales in every and any way that they can.

Author Bio: For more information please visit our restaurant inventory website.

Category: Business
Keywords: fixed expenses,workforce,Sales,Lopsided Numbers,Restaurant Success,Profit