Running a Restaurant/Restaurant Revenue

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Question
Hello,
I am needing advice on information regarding Food cost, gross earnings per year for restaurants. Our location is a Specialty Dine inn & carryout restaurant. I am working on my business plan and I am at the projection part of the plan.

Answer
Hi Deanie,

I can help.  We have a process we go through when doing financial projections that is probably a lot more detailed than you will want to do or be able to do.  Here are the key processes to get there:

Concept.  Part of your business plan is obviously to define your concept, style of service (full service, counter or other types of limited service, etc.  Make sure you have thought this through because it will impact your financials.

Menu.  The menu always follows the concept.  You should have a pretty strong idea as to your menu (for each daypart you will serve) and your price points.  If you are a fast casual or casual dining concept without breakfast, assume a food/beverage cost of about 35%.  If you have liquor or are a higher end concept, it will impact these costs.

Pricing/Check Average Per Person.  You will need to realistically estimate your check average by day part based upon your menu.  This is one of the key numbers you will use in creating projections.

Facility.  The type of concept and service style will dictate the size range of the building.  Fast casual can range from a low of about 2000 square feet to nearly 4000 square feet.  Estimating seating is critically important and one of the numbers you will use to do your projections.

Table turns.  The third key number will be table turns.  That is, how many times a day will you fill every seat in the house.  That can vary with the concept and number of dayparts served.  It is best to be conservative.  For casual dining, a daily total table turn rate of 1.5 is in keeping with industry averages.  For fast casual (think Panera Bread, Fazoli's, Chipotle, etc.) it will be higher.  Also, if you plan on any outdoor seating you will need to take into account that it is seasonal - no table turns when it is too cold, too hot, rainy, etc.  Your geographical location is a big factor in this.

Takeout.  Again, your concept is going to have a big influence on what percentage of your overall sales are gonna come from takeout.  Also, the design of your restaurant.  Is it going to be "takeout friendly?"  Quick Service Restaurants (I.E. Fast Food) often do more in takeout than dine-in, especially if they have a drive-thru.  Fast casual varies with the concept, but the more portable your foods the higher percentage of takeout.  Asian concepts always have a very high takeout percentage.  Not knowing your concept, I can't suggest what that should be.

Pulling it all together.  Your seating multiplied by table turn rate gives you dine-in guest per day averages.  For instance, 80 seats times 2.0 table turns per day (fast casual) gives you 160 guests.  Take that times your check average (let's say $10 per person just for the sake of easy math) gives you dine in daily sales of $800.  Let's also assume that your concept is reasonably takeout friendly and you can do about 40% as much takeout as you do dine in.  That adds another $320 in daily sales, making it $1120.  Now take that times the number of days per year you will be open.  Lets say you are open on Sundays but closed a few holidays, so we will say 360 days a year.  That equals $403,200 per year.  

There are lots and lots of other variables, but these are the basic steps in calculating your sales potential.  In order to calculate all of your fixed and variable costs, there is a LOT of work to be done if you want to be accurate.

We work with entrepreneurs across the country and help prepare these financials and even full Business Plans for start-ups.  I do have a restaurant profit and loss template I can send you for free that might be of help to you.  Contact me via email and I will be happy to do that.  Also, if you want to schedule a no obligation, no fee, no pressure phone conversation I would be happy to give you feedback on your concept and your plan.

David Foster
Foster and Associates
dfoster@fosterandassociates.net
(417) 849-1903 cell
(417) 877-0428 office

Running a Restaurant

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David Foster

Expertise

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.

Experience

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.

Organizations
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

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

Education/Credentials
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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