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Monitor 3 Key Metrics to Help Control Your Restaurant’s Prime Costs

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In 2018, 18 states increased their minimum wage, with some areas going over the $15-per-hour mark. Add to that increases in insurance, food costs and occupancy and shrinking disposable income. If restaurateurs don’t make adjustments, they could face major losses or even closure.

But monitoring a few metrics could counter those challenges.

The key to controlling prime costs – cost of goods sold and labor – is to monitor and analyze them on a weekly basis. It is easier to review this week versus last week, and this week versus the same week last year (even though you won’t be able to analyze year over year until you have captured the data for a whole year). Analyzing the data weekly provides immediate feedback to key employees and allows managers to be more involved in the numbers. It allows them to make changes quicker than waiting for month end.

Three key metrics you should consider monitoring are:

Total Customer Count

Total customer count is the total number of customers visiting the restaurant over a certain period of time. If your point of sale (POS) system doesn’t capture this data for you, or you don’t have a POS system, you could capture this data by having the host/hostess keep track of the number of patrons that are seated during his/her shift. It’s best to track this number on a weekly basis. If your customer count is dropping, you may want to review your business plan, unless the economy or environment has changed.

Average Guest Check

Average guest check is total sales divided by total customer count for the same period. Once you capture your total customer count, this calculation is easy. If you are not capturing daily total sales, you should at least be capturing total weekly sales. If the average guest check is dropping, your servers might not be suggesting as many drink menu or dessert options, for example.

Average Daily Turns

Average daily turns is the number of seats divided into total customer count and simply indicates the number of customers you handle on a daily basis. Sometimes busing tables more quickly or improving your reservation process can increase this metric.

In the coming weeks, we’ll explore how to find other cost efficiencies by examining purchasing, food costing, menu costing, portion controls and hiring the right employees.

About Ericksen Krentel

Ericksen Krentel CPAs and Consultants, founded in New Orleans, Louisiana in 1960 with offices in New Orleans and Mandeville, believes that serving as the clients’ most trusted adviser is grounded in going beyond the numbers.

That includes helping clients achieve their business and personal financial goals by providing innovative and exceptional services in the following areas: audit and assurance services, tax compliance and planning, outsourced CFO services and business valuations for a variety of industries; employee benefit plan audits; fraud and forensic accounting; business planning; IT consulting; wealth management; loss calculations; and estate planning.

Learn more at www.ericksenkrentel.com.

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