Eight Unavoidable Costs in the Restaurant Industry

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When it comes to running a restaurant, there are a few aspects that everyone can expect. There will be slow Tuesday nights and more than a few broken plates—especially if you are a greek taverna. But, in reality, many costs are simply unavoidable in the restaurant business. What are some of these costs exactly?

Eight almost unavoidable costs of doing business in the service industry include rent, business insurance, payroll, point-of-sale systems, consequences of theft, replacement of kitchen equipment and marketing expenses. Which of these expenses is higher for an individual restaurant will depend on many factors such as location and type of business.

And while knowing that those costs alone won’t be enough, it may help some restaurants find valuable silver linings otherwise. sunk costs. That’s why we’ve compiled the following list to help everyone learn more about eight unavoidable restaurant industry costs and how they can think about each more strategically.

Lease

If there’s one fixed cost that’s likely to keep a restaurant owner from staring at the ceiling at night, it’s how they’ll cover their rent. In desirable locations, the main cost of a restaurant is rent. To ensure the rent is sustainable, most restaurants should aim to do not pay more than 10% of their sales in annual rent.

Fortunately, most landlords are as invested in the success of their tenants as the businesses themselves. (Don’t expect them to cut rents if they have no contractual reason to do so.) And ultimately, it’s hard to run a restaurant without a kitchen and physical space to accommodate customers. – make sure you get the rent paid on time.

Business Insurance

No upstart restaurant should overlook the importance of fully understanding their insurance expenses. For example, many different factors may combine in the evolution of a particular institution. restaurant insurance cost. Aspects such as restaurant location, number of employees, policy limits and claims history can all make a difference. And any restaurant will want to better understand how coverage such as commercial property, workers’ compensation, and general liability can be rolled into one policy to help owners save money.

Some business owners may overlook the price of insurance, especially in the service industry. As a result, many pay little attention to insurance, even viewing it as just another monthly fee they must pay to stay in business. Such a view, however, is short-sighted. Quality insurance can help protect an entrepreneur’s investment in the industry and keep a restaurant running in times of adversity. But the price of insurance is rarely set in stone and can change quickly depending on the factors above. This volatility is why it’s always best to get quotes from multiple vendors to see which coverage and price best suits the requirements of the coffee shop.

Employees

A good staff is the cornerstone of any establishment. After all, who wouldn’t want to frequent a local hangout where everyone knows his name? But, even more, the dishes in the back do not wash themselves. (As many restaurateurs will point out, paying someone to wash these dishes can almost be such a regulatory hassle that they might want to do it themselves.)

Yet good help will always be hard to come by and it is always much more expensive to cyclically find and train new employees. So, training alone, before payroll, is one of the reasons why employees will always be one of the most expensive aspects of running a restaurant.

Raw materials

Ingredients will always be one of the price inputs that a bistro will be most sensitive to. This sensitivity is because more expensive ingredients mean dishes will be more expensive to prepare, and business owners can only eat into their margin before they have to raise prices. When this happens, customers tend to notice it. Therefore, going against this trend can lead to competitive advantage. However, how long a company will be able to sustain this is largely unknown.

Point of sale systems

There are many reasons why a good POS system is worth its weight in gold. The best ones will be easy to use and train employees, but versatile enough to be able to provide rich data for properties. There are several well-known POS providers, some of the industry leaders being Toast, TouchBistro, Vend and Block (formerly known as Square).

Pilfering

In some industries, workplace theft is called narrowing. And while everyone would like to believe that won’t be a problem, theft will likely occur in many restaurant environments. Fortunately, there are several ways to combat theft.

First, don’t let your guard down when it comes to expensive items like wine or liquor. Keep them away from customers or employees who might be looking for a five-finger discount. Second, keep track of inventory so that a few misplaced beer bottles or rack of lamb will alert you when they go missing.

Finally, don’t keep anyone from suspecting if things start to go missing, including property. As much as we would all like to trust our business partners, it was shown this some owners and managers have no qualms about plundering their businesses.

kitchen equipment

Kitchen supply stores may stay in business for a reason. However, even if you buy high-quality cookware and take good care of it, you’ll likely find yourself replacing worn-out items more often than not. This constant turnover of kitchen equipment in most professional kitchens puts tremendous strain on the tools of their trade. For this reason, any restaurant should be sure to budget for repairs and replacement of kitchen utensils, appliances, and gadgets.

Marketing

Finally, there are the (almost unavoidable) marketing expenses. Every restaurateur dreams of their place being the kind of overnight success that spreads so virally by word of mouth that there’s a line out the door for a table after opening night. And while some lucky establishments can book months in advance99% of restaurants won’t be so lucky.

For mere mortals to eat, a good marketing plan can help attract customers that will keep a business healthy and help spread awareness of the restaurant’s good deeds. Social media ads can be a good place to start, as can making sure your website is properly optimized for search engines. A marketing professional can help get your business on the right track if you’re not sure where to start.

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