Labor/food/fixed costs minus sales = profit/loss

[pizzatime]

labor / food /fixed costs minus sales = loss/profits

Do you agree???

pt

 

[bodegahwy]

No. Among other things, marketing is not a fixed cost.

 

[Patriot_sPizza]

No!

Net Sales (after sales tax & any other promo adj)
minus
ALL associated fixed & variable costs (food, labor, paper, advertising/marketing, cleaning, utilities, auto, bank, rent etc - not your building mortgage)
equals
net profit/loss

if you are buying/paying for the business, that is not an expense, but an asset/goodwill that can/should be depreciated over time

 

[pizzatime]

bodegahwy:

No. Among other things, marketing is not a fixed cost.

These are the basics

Marketing costs(if any) is added to equation

 

[pizzatime]

Patriot'sPizza:

No!

Net Sales (after sales tax & any other promo adj)
minus
ALL associated fixed & variable costs (food, labor, paper, advertising/marketing, cleaning, utilities, auto, bank, rent etc - not your building mortgage)
equals
net profit/loss

if you are buying/paying for the business, that is not an expense, but an asset/goodwill that can/should be depreciated over time

food and labor combined is whats called prime numbers. Prime should be 60% and under

food includes all food and paper cleaning supplies

fixed includes the majority of the rest

pt

 

[Piper]

Patriot'sPizza:

not your building mortgage

But the interest portion of the mortgage should in there as an expense.

pizzatime:

food and labor combined is whats called prime numbers. Prime should be 60% and under

If I ran 60% between food and labor I would have been out of business after 6 months. The ideal numbers for food and labor costs are going to vary widely based on concept and location.

 

[pizza2007]

Piper is right on.

In general, its posted somewhere on this site, you can use the 5 PRIME as a rough guide.

1. SALES (after sales taxes are removed)
2. COGS (all costs of goods sold)
3. LABOR (all labor costs)

4 EXPENSES (all other expenses, maintenance, banking, merchant, repair, rent, advertising, interest paid, etc…)

1. PROFIT (earnings before EBITA) - Sales minus cogs+labor+expenses = profit

My goal is, of course, increase sales, achieve a 40% labor+cogs, reduce expenses to 10-15%.

When I first opened, labor+cogs were 95%, so as you can figure, big time RED numbers. This year, that combo is 43%. Big labor/cogs don’t mean bad management, but of course, indicates low sales. Big sales can hide a lot of bad management, but not low sales. If you know you’re doing well on labor + cogs, then you’ll also know YOU HAVE TO BUILD SALES! But don’t forget, if you want to increase your profit, CUT EXPENSES!!

 

[pizzatime]

I have been in this business for many moons and I have never seen cog and labor at 40%. How is that even possible? Everyone I know runs /shoots for the same prime -60% food(cog) and labor. Average pizza 16" with good cheese sells for 10.95.

Some on this board would love to get just their food costs under 40%

pt

 

[Piper]

pizzatime:

I have been in this business for many moons and I have never seen cog and labor at 40%. How is that even possible? Everyone I know runs /shoots for the same prime -60% food(cog) and labor. Average pizza 16" with good cheese sells for 10.95.

Some on this board would love to get just their food costs under 40%

pt

My 16" cheese sells for $16.00.

 

[RobT]

Piper:

pizzatime:

I have been in this business for many moons and I have never seen cog and labor at 40%. How is that even possible? Everyone I know runs /shoots for the same prime -60% food(cog) and labor. Average pizza 16" with good cheese sells for 10.95.

Some on this board would love to get just their food costs under 40%

pt

My 16" cheese sells for $16.00.

If i sold my 16" cheese pizza for $16, my COG on that would be 13%.
Some of our markets would never support this price.

 

[bodegahwy]

After coupons and discounts, our combined food/labor has run as low as 54% during our big months. Over the course of an entire year we would be happy with 60%. Food typically runs about 29%. (“food” includes everything we use up: paper, supplies, condiments, drinks etc)

If I ran the place day to day without a manager, you could take 8-9% off the labor so the total would come down to less than 50% on the best months.

I do not find menu food cost to be a very useful number but food cost on a 16" cheese for us is also about 13%… but then there is the box, waste, spoilage, other less profitable products, cleaning supplies, condiments, napkins, paper plates, bad orders, mistakes… you get the picture.