Enterprise Insight:
FINANCIAL ANALYSIS Part III: Labor Control and Costing

In the hospitality business, we say it is all about the staff. What does this mean? You need to source, hire, train and manage your staff for longevity. That is the key, you cannot be complacent about these 4 key roles to managing your business, your staff and ultimately managing your costs.
 The other big number to the prime costs is the labor costs. Labor cost percentages including benefits can run enterprises 25-35% of sales. Having said that some enterprises achieve a lower labor cost percentage but may have a higher food cost percentage. The important piece here is that together these costs do not exceed 65% of sales, and then you have already put your business in a good place to be financially viable.

For all enterprises, a budget for all operating costs should be prepared. To really understand your labor costs, you must first present a staff schedule for each revenue center. Creating a schedule allow you to have a greater understanding of what positions you will need for that business, what you will pay for each position and ultimately is the labor cost percent in line with industry standards above. Let us say, hen calculating these numbers your labor cost comes to 40% of sales for your budget. What can you do to achieve a lower labor cost percent? 1) Produce more sales to pay for the existing staff you have on budget. 2) Streamline processes to reduce the number of staff needed on any given shift. 3) Make changes in the wages of employees and the number of hours worked in order to reduce your overall labor budget. Awareness of the budget and percentages needed to keep in line, you will be more empowered to understanding how best to manage your staff and labor costs. Sourcing, Hiring, Training and Managing your staff will invariably create a positive culture around your business and reduce employee turnover.

Happy Staffing… TaraPaige Group

https://paigepapers.com/2011/11/30/labor-costs/

Enterprise Insight:
FINANCIAL ANALYSIS Part II: RECIPE COSTING

To run a profitable enterprise, all businesses must control their prime costs. Experience and expertise tells us, all food & beverage and labor costs should be 65% of sales or less in order to achieve profitability. Today, we are going to share with you a few tips on how to start your business with 30% (product) food & beverage costs or less.

First, when embarking on a new enterprise, all businesses must understand how much one portion of each product you sell costs; recipe costing. This includes the raw ingredients to produce that product. Once we get a total recipe cost for each product, the next step is to price your products. Let us say you want to achieve 30% food cost for your business and you are producing and selling sandwiches. After you have done your calculation and have determined one sandwich costs $2.50, there is a simple formula to determine your selling price. $ Food Cost / Food Cost % = $ Selling Price. In our example, to achieve a 30% food cost, we would have to sell our sandwich for $8.33 = ($2.50 / 30% ).
[Read more…]

https://paigepapers.com/2011/10/24/recipe_costing/

Enterprise Insight:
FINANCIAL ANALYSIS Part I: THE MEASURE OF BUSINESS SUCCESS

How do you measure success for your business? This is a question all operators should be asking. Many operators measure business success by how long the line is in the store. Successful operators measure business success by how profitable they are at the end of each month in addition to happy guests. Can lines out the door and financial profitability be mutually inclusive? Yes, they can!

Lines out the door represent you have a following and you are hitting your stride with your core guests. What this does not represent is whether or not you are a financially viable business. For financial viability, many factors must be looked at in order to manage your business effectively. The main factor / cost that affects all hospitality enterprises are prime costs. [Read more…]

https://paigepapers.com/2011/09/27/themeasureofbusinesssuccess/