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Running a Restaurant/Food, Liquor, Labor, Prime Cost


Dear Dave, I started a full service 125 seat inside restaurant with 125 seats seasonally outside May-Sept in 2009.  The restaurant is situated in a mixed use urban center in an upper middle income neighborhood.  The rent percentage averages about 9%.  The average entree is $28.00 with emphasis on Steaks and Seafood.  My sales average(last 2 years) is 1,450,000 (excludes sales tax).  The Food & Liquor (last 2 years) has been about 33.5% each, labor about 30%.  I am calculating my prime cost at about 63%.  Which cost percentage is too high or am I having unrealistic expectations to do an overall prime cost of 55-58%?  Ironically, all my other costs are in line and averaging about 5% profit the last two years.  Is there some type of baraometer that I can go by to see if I am on track with food, liquor and labor or am I missing something.  Granted depending on the menu, I realize the food cost will reflect that.  But, for an upscale steak and seafood house there has to be some type of average.  Also, with the liquor, where should I be?  Any piece of mind for this restaurant operator is greatly appreciated.

An anxious operator

Hi Beth,

You have no idea how much I appreciate the fact that you have given me enough information to answer intelligently.  Thank you!  That is not always the case.

Okay, looking at your prime costs (and taking into consideration your concept, check average, sales volume, etc.) the only number that is really out of line at all ( and I will qualify this in a minute) is your overall liquor costs.  Assuming that the 33.5% for liquor is a weighted cost including beer, wine and alcohol, it is high unless the preponderance of your alcoholic sales mix is wine.  If your Profit and Loss Statement does not break out each category, it should.  My "targets" for alcoholic beverage costs per category are (and again, this can vary by concept type): Beer: Bottled, 30%; Tap; 25%; Wine, 35% and Mixed drinks, 25%.  What your weighted cost for all of these combined will definitely vary dependent upon your sales within each category.  I hope this makes sense to you.  My guess is that unless you are selling more wine than anything else, you have a pretty good opportunity to improve costs in your beverage sales.  Usually it is not a question of pricing but more of controls.  A good draft beer system will give you above a 90% yield from each keg.  A poor system (beer not at the right temp, etc.) will only give you about a 70% yield.  With liquor, the problem is usually "shrink."  Free drinks, over pours and out and out theft are way more common than you would like to think.  There are a lot of controls that you can put in place, including having an outside company do weekly inventories and measure the "theoretical" inventory (what you SHOULD have on hand) against what your ACTUAL inventory is.  They can do this by utilizing the information from your POS system.

There may also be an opportunity to lower your labor cost percentage by more effective scheduling that is based upon projected sales rather than an "It's Thursday so we will have 5 cooks on the line like we do every Thursday" approach.  Ultimately, the best way to lower your labor cost percentage is to increase your sales volume.  

Without trying to be too self-serving, this kind of operational troubleshooting is one of our specialties.  We seldom fail to generate way more than our fees in savings to restaurant owners for this kind of work, and sometimes save them as much as ten times the cost of our fees over a year.  We can also "value engineer" your menu to place your highest profit margin items in the most prominent positions on the menu.  We also revamp menus, develop recipes, create operations manuals, etc.

I have a detailed restaurant Profit & Loss template that we often use with clients to help them better manage their costs.  If you would like to contact me directly at, I would be happy to email it to you with our compliments.

Beth, if you would like to contact me to schedule an absolutely no pressure, no fee call just to talk about your challenges, I would be happy to do that.  Just email me and we can find a time that will work for both of us.

If your prime costs are at 63.5% and reasonably consistent, you are doing better than many independent restaurants are doing.  But, that being said, if we could help you bring another 5% to your bottom line that would produce another $70k in annualized profit, and that is no small number.  

I hope this is helpful to you!  Feel free to contact me if you would like to.

David Foster

Foster and Associates
(417) 877-0428 office
(417) 849-1903 cell

Running a Restaurant

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David Foster


We have been in the restaurant industry for over 40 years and consult with restaurants, casinos and hotels nationwide. We love helping restaurant operators succeed and can answer any questions related to restaurant start-ups, business plans, operations, labor costs, food costs, liquor costs, employee turnover, marketing etc.


I am a seasoned foodservice veteran with nearly 42 years experience in the industry. My extensive background includes overseeing multi-unit, multi-concept restaurant operations ranging from cafeterias to fine dining, and everything in between. I have a strong hands-on operations and marketing background that give me a unique insight into the “Real World” challenges of the restaurant industry. I have extensive concept development, menu and recipe development and kitchen layout and design expertise. I am effective in analyzing operational needs and identifying practical solutions in today’s very dynamic foodservice environment. In the industry, I am respected by my peers and have served on the Board of Directors of the Missouri Restaurant Association and have been a featured speaker on the subject of Home Meal Replacement at various national events. I also served on the Culinary Advisory Board of the Ozark Technical College as well as serving on the Board of Directors of Big Brothers, Big Sisters of the Ozarks.

Member of the National Restaurant Association, Past Board Member of the Missouri Restaurant Association, Past Board Member of Big Brothers, Big Sisters of the Ozarks

The Consultant, Seasoned Views (a trade magazine for the restaurant industry)

Attended Drury College, Springfield, MO, Varsity Management, SRI

Awards and Honors
I have had restaurant projects featured in The Consultant (a magazine for foodservice consultants with worldwide circulation). I was honored for achieving the highest level of management competence by the Selection Research Institute.

Past/Present Clients
Sugar Creek Casino, Classic Rock Coffee Company, Mark Twain Brewing Company, Springfield Brewing Company, Bruegger's Bagels, M&M Grill, Paco Joe's, Holiday Inn, Hilton Garden Inn, Buffalo Run Casino, Golden Corral Corporation, Crosswinds Café, Chinese Chef, Mr. Dunderbak's Old World Market & Café, Bullfeather’s Wings and Grille, Mainstreet Market, Bear Rock Café, Cartoon's Oyster Bar & Grill, T's Redneck Roadhouse, Jim's Steakhouse, Neighbor's Mill Bakery & Café, Crazy Vine, San Francisco Oven, Maria's Mexican Restaurant, Andy's Frozen Custard, The Granite Club, Umi Japanese Steak, Seafood and Sushi, Springfield Grocer Company, US Foodservice, Premium Standard Farms, Smithfield, Dakota Organic, Kraft Foods, Allens, Inc.

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