The Five Numbers That Tell You Whether Your Restaurant Is Healthy

A restaurant does not fail because it is empty. It fails because it is busy at the wrong margins.

Most operators can recite last night's sales to the dollar and have no idea whether the business underneath is sound. Revenue is the number everyone watches. It is almost never the number that decides whether you keep the doors open.

You do not need a finance degree to see trouble coming. Five numbers tell you most of what you need to know. Read them honestly once a month and you will catch problems while they are still cheap to fix.

I. Food cost

Your food cost is what you spend on ingredients as a share of the food you sell — for most full-service restaurants, 28 to 35 percent of food sales. Drift above the mid-thirties and either your menu is priced behind your costs, portions have crept, purchasing is loose, or product is walking out the back door.

II. Beverage cost

Beverage is the most forgiving line you have, and the most commonly wasted. Pour cost should sit roughly 18 to 24 percent of beverage sales. Beverage carries a far better margin than food, so tightening it drops almost entirely to the bottom line.

III. Labor cost

As a share of total revenue, full-service labor now runs around a 36 percent median — profitable operators hold it nearer 34. The conversation is not 'cut people,' it is 'match hours to demand.' Most overspend hides in the soft hours.

IV. Prime cost

Food, beverage, and labor combined against revenue — the single most honest gauge of health. Keep it at or below 60 to 65 percent for a full-service restaurant. Past 65, the math stops working no matter how busy you are.

V. Occupancy cost

Rent and the cost of being in your building, as a share of sales. Aim for 8 to 10 percent or below. You cannot fix it week to week — which is why it deserves a hard look before you sign the lease.

Reading them together

Any one number can mislead. Read together, they tell a story: high food cost with healthy labor points to purchasing or pricing; healthy food with runaway labor points to scheduling; a good prime cost crushed by occupancy points to a real-estate decision. The discipline is pulling your own five numbers on the same day every month and refusing to look away from the one that is drifting.

The DC Group — an independent hospitality practice. Operating worldwide. info@thedcgroup.ca