COGS Help

[tonycbus]

Good afternoon. I’m trying to decide if I purchase a store, my first, and need some help on COGS.

Concept: DICO and delivery, 45 seats.

I would like a ballpark figure for COG purchased for a given week or month assuming $5k in sales.

The business is closed and the owner does not have previous invoices.

Thanks for any help.

 

[smeagol8]

lol, vague much? Anyway, COGS for 5K sales should be somewhere between $1000 and $1700. Thats food cost only…

 

[tonycbus]

Ha! I know it was vague, but you answered and I thank you. I’m trying to input numbers and calculations into my cost analysis and break even spreadsheets, but had no idea without previous invoices. With your numbers, I can work out multiple scenarios.

I’m not sure if I’m going to buy the business, though. The lease is $2200 a month which seems very high.

 

[bodegahwy]

I assume you mean 5K per week in sales? That comes to about 21K per month, so yes, at about 10.5% that rent is higher than I would recommend as a sustainable level for those sales. It should be survivable, but that high is not ideal. (Can we assume that the rent figure you quote includes all CAM/triple net expenses and is not just the minimum rent?)

On the other hand if sales were to rise to 7K per week that rent figure would be just over 7% of sales which is fine.

1. Is the 5K per week documented?
2. Why did the business close? Can you eliminate the location as the cause?
3. Are you looking at a lease assumption or a new lease?

If a new lease, simply tell the LL you are willing to pay 8% of gross sales (does not include sales tax) for the first year all in. i.e. includes all 3/net charges.

I would suggest that you use 33% of sales for COGS to include all supplies and paper as well as food and beverages. Hopefully you will get that down under 30% but budgeting higher is a good idea as very few new operators get the costs tightened down from day one.

 

[tonycbus]

bodegahwy:

I assume you mean 5K per week in sales? That comes to about 21K per month, so yes, at about 10.5% that rent is higher than I would recommend as a sustainable level for those sales. It should be survivable, but that high is not ideal. (Can we assume that the rent figure you quote includes all CAM/triple net expenses and is not just the minimum rent?)

On the other hand if sales were to rise to 7K per week that rent figure would be just over 7% of sales which is fine.

1. Is the 5K per week documented?
2. Why did the business close? Can you eliminate the location as the cause?
3. Are you looking at a lease assumption or a new lease?

If a new lease, simply tell the LL you are willing to pay 8% of gross sales (does not include sales tax) for the first year all in. i.e. includes all 3/net charges.

I would suggest that you use 33% of sales for COGS to include all supplies and paper as well as food and beverages. Hopefully you will get that down under 30% but budgeting higher is a good idea as very few new operators get the costs tightened down from day one.

Great info. I was using $5k as a benchmark to analyzing what-if scenarios.

The previous owner (store is now closed) average $2k per week. He did no marketing, did not deliver and did not have beer or wine with 35 seats of dine in. His menu was pizza only and a few salads. As far as location, I would be the fifth store (2 national chains and 2 locals) in a 5 mile radius that serves 160k population. I personally like the location as it’s nestled in a neighborhood, yet only a half mile from the main street through town.

As far as the lease goes, I’m going to try and renegotiate closer to $1500 a month. The worst the LL can do is say no.

 

[Bubba]

When negotiating a lease, remember that cash is very precious to the LL. He is probably more apt to give you other items in lieu of cash.
Think like free/reduced rent for several months. Help with remodel with your money and deduct from his rent.
Be sure to consider a 3yr to 5 yr lease with possible options afterwards. Try to have a clause that you can end the lease with a 2 or 3 month penalty payment.

 

[bodegahwy]

1. At $2000 per week the business could afford maybe $800 in rent.
2. Is the kitchen capable of producing 5X what it used? What kind of ovens do you have? Sales do not come in a flat pattern. To average 5K per week, you need to be able produce 8-9K per week in the big weeks which means 2K on big days.

 

[NicksPizza]

Also be sure you are assertive with marketing budget the 1st year … growing 2x the business in competition, off the main road will take some planned marketing. Quite doable of committed and budgeted.