By Jim Laube
Many independent restaurant owners don’t have a good handle on how their restaurant is actually performing even if they are diligent about having their financial statements prepared on a regular basis. If your restaurant’s Profit & Loss Statement isn’t formatted in an “industry standard” format, its value is very limited.
It’s not uncommon to work with independent operators whose P&Ls have operating expenses arranged in alphabetical order, misleading percentages on food and beverage costs, or other problems that make it very hard to determine how their restaurant is actually performing.
Here are the main categories that should be on every restaurant P&L. Formatting your P&L in this manner will make it consistent with the National Restaurant Association’s “Uniform System of Accounts for Restaurants” (USAR).
- Food Sales
- Beverage Sales
COST OF SALES:
- Food Cost (% shown as a % of “Food” Sales)
- Beverage Cost (% shown as a % of “Beverage” Sales)
- Employee Benefits
PRIME COST (total of Food, Beverage and Labor)
OTHER CONTROLLABLE EXPENSES:
- Direct Operating Expenses
- Music and Entertainment
- General and Administrative
- Repairs and Maintenance
CONTROLLABLE INCOME (Sales less Prime Cost and Other Controllable Expenses)
- Occupancy Costs
- Equipment Leases
- Depreciation and Amortization
RESTAURANT OPERATING INCOME (Controllable Income less Non-Controllable Expenses)
- Interest Expense
- Other (Income/Expense)
Using this format, you’ll be able to immediately see two of the most important numbers on a restaurant P&L, Prime Cost and Controllable Income. AND it also is easier to compare your key costs and margins to restaurant industry averages and other operations.
Using a P&L format designed specifically for restaurants will greatly enhance your understanding of how your restaurant is actually performing so you know what deserves your time and attention and what doesn’t.
This is just one of the many financial management issues Jim Laube will discuss in his workshop at Pizza Expo 2014 entitled “10 Very Expensive Financial Mistakes Restaurant Operators Make and How to Avoid Them,” scheduled for Tuesday, March 25, at 9 a.m.
This Pizza Expo Exclusive is part of a continuing series leading up to the International Pizza Expo at the Las Vegas Convention Center on March 24-27, 2014. Seminar speakers and demonstrators will provide professional advice on their area of expertise.
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To Learn more about International Pizza Expo, visit www.pizzaexpo.com.
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