The restaurant industry is known to have very slim margins when it comes to profit, which means it can be difficult to budget, even if you are operating a small corner café. Budgeting for a restaurant is more than just knowing your food and salary costs. You need to understand market pricing, invoicing, tracking inventory, and more. These three tips can help you get better control of your budget and increase your profitability.
The first step in creating a realistic budget for your café is to understand all of your costs. You will have fixed expenses, like rent or mortgage, insurance, and loan payments. Variable costs will include salaries, supplies, and utilities, which will change each month. One way to create an estimate of all costs is to enter all income expenses into a spreadsheet for three months. At the end of the three months, total the amounts and divide by three to get an average per month total. Base your budget on the average totals.
One of the most important factors to understand in the restaurant industry is food costs. You want your income to be higher than your expenses which means you need to know what it costs you to create each item you sell. This means you need to know not only what each one of the kaiser buns you use costs, but also the cost of the meat, lettuce, cheese, and condiments on each sandwich. Once you determine the cost of that sandwich, look at what you are charging. Food costs should be between 28 and 35 percent of revenue. So, if you are selling that sandwich for $6, your food costs need to be between $1.50 and $2.10. If your food costs are above $2.10, you need to either find lower-cost menu items or raise prices to get within the range.
Although adjusting food costs is a great first step in managing your café budget, you can also improve the bottom line by increasing sales. Marketing the café is usually the first step in growing a customer base, whether it is posted on social media, advertising on local television and radio stations, or flyers sent to homes in the area. A customer loyalty program is another way you can boost profits. Although marketing is not always free, the return on your investment may be well worth the cost in order to bring in customers.
A corner café has many of the same challenges when it comes to budgeting as a five-star restaurant. These tips can help you better manage your business and increase profits.