Is your restaurant or cafe healthy? Healthy and successful? Do you know your financials well enough to make a quick, smart, informed decision? As a restaurant and cafe owners you may become comfortable with how your restaurant or cafe works, and runs. That same comfort may not be felt by your staff. Is it working for you, the owner, but not the servers, kitchen staff or managers? This post is probably a little uncomfortable to read. Nonetheless, I am sharing the Three Financial Truths of ownership. If you are facing your finances, your staff know it, and you have a healthier business.
The Three Financial Truths you should face each month are
- menu costing
- monthly financial statement.
Do you have any systems in place to do an inventory, check your menu costing, and a day each month when you know you will look at your financial? These truths are not the special sauce for your entire restaurant. They merely are the easiest indicators to know that your are on track. The special sauce is the mission, the vision…the warm and fuzzy that makes the cogs of your business work. But admit it, these three truths support a healthy business. You cannot avoid creating systems for each truth. The systems provide organization, structure and trust that staff need to feel successful. The “Truths” ensure that you are successful. Numbers are the common denominator for each restaurant. If you are conducting Inventory, checking on menu costing, and reviewing your financial statements then you already are getting good basics!
What is important about each of the Three Financial Truths:
1. Inventory: It's a tracking system. Staff love to hate an inventory. Doing an inventory forces every one to count every thing. Each area of the restaurant will know what they need to order (if there is nothing), or how to create a special to use an item (if there is an abundance). Lead your staff by putting an inventory system in place. The mere habit of inventory informs staff and owners about many areas of weakness and strength.
2. Menu costing: know your food costs, know which menu items are more profitable. Many owners avoid this reality like the Black Plague of the Middle Ages. It’s not that scary, and can done in 15 minute during a rainy day. Checking a menu item assures everyone of profitability. Do not set out to cost every item on the menu all at once—you probably do not have the staff to complete such a big project. Instead, cost out items each month. Quickly you gain a range of information. Decide where to store that information: It’s good to know where it is in your POS (if you can get that detailed), or where it is on your computer. Most importantly, print out a copy of your menu costing, show it to managers, and ask for feedback. If they do not know how to talk about menu costing, or food costs when you first introduce the topic, lead the conversation by example. Show them what you learned from the formula of “what does a salad cost”. Use the benchmark that good food costs are 22%. Bad food costs start anywhere over 35%.
3. Financial statements: Some owners wait until two months or a quarter has gone by before looking at the numbers on paper. I recommend the BEFORE-DURING-AFTER method. Before the month begins agree on a goal for that month. During the month, determine if you are on target,ahead or behind. After the month has passed, 3-5 days into the next month, look at the financial statement. If you are Quickbooks savvy then this task is easy.
The Three Financial Truths are the easiest indicators to knowing that your business is on track. They indicate that your business is healthy, and successful. I have seen owners go from “I hate numbers” to “wow, we had a really good month, financially, and our best selling item on the menu is at a 22% food cost.” Jumping in and claiming your businesses financial health will create a business confidence you deserve as an owner. Create a healthy profit, gain a healthy business and live a healthy life.