How to Compare Your Restaurant

It is almost impossible to compare a restaurant’s operations with industry averages.  Organizations like the CRFA aggregate the smallest mom-and-pop with the largest chains to get their averages.  Not many restaurants are “average”, anyway.  Just about all industry statistics are based on surveys, not actual operating results.  Even though such surveys are anonymous, who wants to put down that their cost of sales is 40% or more?  So, the results are often skewed.
There is another way of compiling restaurant operating results.
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Restaurant Fraud & Theft – Part III

“What I like to drink most is wine that belongs to others.”
Diogenes.

Today’s post looks at alcohol related thefts once the alcohol has made its way to the coolers and shelves in the bar.  These types of alcohol theft are broad categories.  Within each there are many scams, too many to list.  As I have discussed many times on this blog and my tax blog, alcohol theft has dire tax consequences for a restaurant.  In Canada, the total cost of the theft can easily be twice the cost of the stolen alcohol.  That’s why it is so important to minimize theft in your operation.
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Restaurant Fraud & Theft – Part II

Part I in this series focused on fraud and theft up to the point your inventory becomes available for sale.  As we found out, lots can go wrong during the purchasing, receiving and inventory safeguarding processes.  These frauds and thefts involved uncooked food or unpoured alcohol.  Now, let’s uncork a bottle and turn up the heat.
Today, I want to discuss some of the major thefts that happen during “normal” operations.  These thefts involve cooked food or poured alcohol.  These are the ones that take place “right under your nose”.  Today’s post examines food theft.
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Restaurant Fraud & Theft – Part I

IT NEVER HAD A CHANCE TO BE SOLD
Today’s post covers fraud and theft of stock items before they are sold or used in your establishment.  These types of fraud relate to purchasing, receiving and inventory stock keeping.  Subsequent posts will cover additional types of fraud and theft.  These posts discuss one of the most important issues facing restaurateurs.
Any theft of product for sale can result in significant sales and income tax liabilities.  So significant, in fact, that it could put your restaurant or bar out of business.  My restaurant tax blog, Canadian Restaurant Tax Advisor, has a wealth of information about restaurant tax audits and their dire implications for you.
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Restaurant Theft Findings

Most restaurateurs know that theft is a problem in the hospitality industry, but very few know how much is going on in their own establishments. According to the U.S. National Restaurant Association, approximately 4% of all revenue is lost to in-house theft.  The latest figures from Statistics Canada, NPD Group and the CRFA, indicate that the average profit margin for Canadian restaurants was only 4.4% of operating revenue!  Based on these figures, approximately one-half of your profit is lost to employee theft.
As if that isn’t bad enough, the cost of missing alcohol is only half of the story.  Increasingly, restaurants and bars are learning that they have substantial tax liabilities resulting from stolen alcohol.  I urge you to learn more about this insidious practice, here.  It’s no wonder that 35% of restaurants fail because of employee theft!
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Make Butchered Inventory Perpetual

The majority of the cost of most entrées comes from the “protein” component – meat or fish.  Chefs try to maintain a consistent portion size, usually based on weight.  Despite consistent portions, the cost will fluctuate depending on the raw purchase cost and the butchering yield.  Even if you don’t have recipes fully documented and costed for every menu item, as a bare minimum, you should know the portion cost of the protein component of every plate.  Also, you need to track the number of portions in inventory at all times.  This will allow you to identify major cost problems that may be occurring.
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Cost Control is the Key to Survival

AbacusWhile there are some signs that we may be emerging from the recession, I think you’ll find that consumer behaviour has been changed, perhaps for many years to come.  Even your “well-off” customers are much more price conscious that they have ever been before.  Actually, they are more value conscious.  In order to “survive and thrive”, you have to continuously monitor your restaurant’s value proposition.
While there’s more to the value proposition than your menu and prices, these are the two aspects that can be adjusted fairly easily in the short-term.  These are also the two areas that most restaurateurs fiddle with first, when times get tough.  We could probably add labour into the mix, too.
Recessions always harm the restaurant industry.  People lose their jobs (or worry that they will lose them), cut back on meals outside the home, and spend less when they do go out.  Most restaurants experience a drop in both volume and check averages, often severely reducing (or eliminating) their profits.  To cover their fixed costs, restaurateurs will try everything to keep the customers they have and steal their competitors’ customers.  Most start with price reductions, either through coupons and discounts or with across the board price reductions.  It doesn’t take long to realize that quality or portion sizes have to be reduced to maintain profitable margins.  Easier said than done!
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POS for Thought

POS systemI’ve purchased several POS systems for my restaurants over the years.  As an accountant and restaurant owner, I think I can give you a bit of practical advice when it comes to implementing a POS system in your restaurant.  I visited a few web sites to see whether this topic had been adequately covered and found that there are still a few useful things to say.  This article fills in a few of the missing details you should know about.
Most advice is written by people associated with a particular POS developer or a firm that implements such systems.  Do you think they might be biased?  I do.  Based on my experience and research, all of the leading POS systems have very similar capabilities.  Many provide the usual management capabilities in the standard package.  Others provide functions commonly employed in a basic bistro style operation, and require you to purchase additional modules, if needed, such as inventory control (ingredients), menu engineering (recipes and costing), labour scheduling and time control, reservations, delivery, pool table rentals, etc…
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Counting Inventory a Waste of Time?

I’m sure all restaurant consultants and accountants advise their clients to count inventory regularly.  Depending on how many menu items and ingredients in use, and how many times you count inventory, this simple procedure can represent a very significant time commitment.  Let’s take a closer look at inventory counts and see whether they’re worth the time and effort.
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