Lets compare profit percents!

as an Auditor in a previous life, there are many regional variations in accounting language

Food Costs s/b based on a “true” cost basis, not what was purchased that month or time period. You need to have a beg. inv #, a purchase #, and an ending inv # - that is a “true” cost - that # s/b compared to what is actually “bankable” and not compared w/promo or discount #'s - those s/b tracked but do not come into play here…personally I do not track paper or box costs here

Labor costs might include p/r exp or just raw labor. It is best to break out some categories, like driver’s wages, mgmt wages, etc, to give you a clearer picture. I track p/r taxes, bene and the like as a separate line item/category…

Controllable costs s/include paper/box costs, items you purchase to support your sales…

Then I would key in my “variable” costs, such as utilities and items associated to keeping the business open

Fixed costs might be viewed different for different operations…some are “buying” their real estate while others are renting - these #'s will be different for those different operators…those buying will have depreciation expenses that may be greater than the actual cost of doing business (IRS stuff) while those renters show actual expenses…

Bottom line is cash flow…you can show greater costs when you are buying the R.E., but your cash flow will be greater than your bottom line profit you report…

You should “shoot” for 60-65% combined costs, as a general rule of thumb - how you get there is your choice…

Some choose to make many items from scratch, thus lowering (theoretically) their food cost, but increasing their labor costs…(think making your dough vrs buying frozen)

Others may choose to do “buy-outs” and experience higher food costs but lower labor costs…(think buying rolls/cheesecake etc)

Hopefully I’ve not bored 2 many…

Semper Fi, USMC
Area Auditor, Inspector General Branch

I’m a former Auditor myself, a CPA, MBA, and a certified numbers geek. You can never bore me.

I agree with everything you said, and my internal books look just like this. However, what you propose is well beyond the non-accountants in the world. The sad reality is most operators I know, and I suspect most on this board, barely track this stuff at all, let alone break down into several subcategories.

Those that don’t will never understand just how much stuff they are missing. I remember a couple months back I posted my % in a thread similar to this, my numbers were scoffed at by some and said to be impossible. I wish more in here knew me better so that they knew it was indeed possible and that I am not the type to post BS in a forum. Maybe they would take the time to truly understand their place better.

thanks DFW…

Sad 2 say, I agree w/you, agreeing w/me (?)

People wouldn’t believe our one store does mid/hi 20’s in F/C and high teens in L/C, w/a $5 pie…

Volume cures all ills…

It was an 18% labor cost that people did not believe for me.

It is possible people.

What do you pay for cheese and pepperoni from your supplier? How do you blow out a $5 pie and keep cost that low???

I think there’s a lot of operators out there that don’t understand this one, and it’s really important. We do a weekly inventory, and calculate the COGS every week. You need to take a good inventory - get the scales out. I’ve talked to some local operators that will say they run XX% in COGS, but don’t run regular inventories.

I fear most get their COGS % by plugging their menu into a food costing program, and using that theoretical number as if it’s the truth. Or, they take their weekly food invoices and divide by sales… Both of those aren’t much better than having no information at all.

I break these out separate from food, beverage and beer costs. But, I still consider them COGS. Is that correct?

Yep… Just about 18% here too.

My theoretical cost on a 14" cheese pizza is $1.15. That’s a 23% cost of goods. Seems like that’s pretty possible.

But I sell mine for $12.99 :slight_smile:

This is a good topic to have come up, because I think cashbox accounting is what kills a lot of restaurants.

Piper
(Not a CPA, just a lowly finance degree :wink: )

My MBA had a concentration in finance. Nothing lowly about that. You learn so much on how to analyze numbers in finance. I wouldn’t be half the business owner I am now without my finance background.