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FLORIDA EDITION
FLORIDA’S FOODSERVICE INDUSTRY NEWSPAPER ◆ $3
VOLUME 22 NUMBER 1
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What are Prime Costs?
The Prime Costs in a restaurant con- sists of food, beverages, and labor. The Prime Costs for a restaurant should be within the range of 63%-68% of sales. Restaurants that generally only buy enough inventory to return to par levels can usually expect food and beverage costs to be a fairly consistent percentage of sales. Monitoring prime costs is very important since these expenses make up such a large part of total expenses. We recommend that a restaurant monitor these expenses on a weekly basis. See our blog “The Importance of Weekly Reports in Quick Service Restaurants.”
How do I analyze the prime costs in my restaurant?
u Determine whether prime costs are within range (63%-68%)
u Compare food and beverage cost percentages to the target and prior week u Investigateanincreaseordecrease in food and beverage costs from the tar-
get or prior week of 2% or more
u Compare scheduled hours to ac-
tual hours
Some explanations for increased food and beverage costs
u Purchases greater than par level – Both the basic and advanced weekly profit and loss reports do not consider the change between begin- ning and ending inventory. Instead, weekly purchases are used to estimate the cost of sales.
u Supplier cost increases – Cost in- creases can be due to seasonal fluctuations or general inflation. Seasonal cost fluctua- tions can be considered by using an aver- age cost or, alternatively, the highest expected cost. An inflation factor can be in- cluded in the menu pricing calculation to compensate for the effects of inflation. When using either of these two methods, the cost percentage will still fluctuate, but the variance will be expected. Managers can isolate the source of cost increases by comparing recent purchase prices of high volume ingredients with the food costs used to calculate the menu price.
u Over-portioning – Over-portion- ing is a relatively easy problem to correct and can be identified by observing the preparation of meals. In most cases, the problem can be traced to employees who are not aware of or forgot the standard portion sizes. Individual training sessions can usually remedy the problem.
u Waste – Waste usually results when meals are carelessly prepared by inexperienced personnel and can again be identified by observing kitchen oper- ations. Operators can also examine the contents of garbage cans for excessive amounts of food that could indicate waste or spoilage. Some restaurants have been able to reduce their trash removal costs by having local farmers pick up their waste for livestock feed.
u Spoilage – Although some spoilage is inevitable, an unusually high amount may indicate that the inventory levels are too high and par levels need to be adjusted. Spoilage can also occur if employees aren’t arranging the storage area so that the old inventory gets drawn first. Regular inventory counts are an ef- fective way to identify slow moving and improperly arranged inventory items.
u Theft – Restaurants are particu- larly susceptible to theft, but is often dif- ficult to confirm without a significant amount of investigation. Therefore, the possibility of theft should only be pur- sued when other possible reasons are ruled out.
Comparing Scheduled Hours to Actual Hours
Scheduled hours can be posted to the weekly profit and loss report when the schedule is prepared and actual hours can be posted at the end of each day. The manager should question any variances between the actual and scheduled hours. Read more about this in our blog “Efficient Scheduling of Employees in Quick Service Restaurants.”
If you have any questions or would like help with your monthly accounting, please give us a call. We have extensive experience working with quick service restaurants and love to see them succeed!
Michael Allen, CPA is the founder of Allen & Company, PC. He can be reached at 1350 Wooten Lake Road, Suite 206, Kennesaw, Georgia 30144. Call (770) 428-6229 or (770) 425-5481 (Fax). Email kallen@allenandcompanypc.com. Online at www.allenandcompanypc.com.
Michael Allen, CPA
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Cody’s Original Roadhouse expanding
in Florida
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Oceanic breaking ground in Pompano
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Capriotti’s Sandwich Shop reports major growth in 2017
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Tropical Smoothie Café signs new Florida deal
Leading fast casual cafe closes 20th anniversary year with more than 180 franchise agreements and 104 new openings
Atlanta, GA – Tropical Smoothie Cafe, the leading fast casual cafe con- cept known for its better-for-you food and smoothies with a tropical twist, announced that franchise and food- service veteran Emily Harrington has signed her second multi-unit fran- chise agreement with the company in less than a year to develop eight more cafes throughout Florida. Harrington currently has four locations open in Tampa with her fifth slated to open in January 2018. Development plans for the additional eight cafes are currently
underway, which are slated to open over the next several years throughout Pasco County. Tropical Smoothie Cafe has experienced a surge in franchise development recently, with Harrington’s two multi-unit deals con- tributing to the more than 180 agree- ments signed in 2017 alone.
“As our 20th anniversary year comes to an end, we have several ac- complishments to celebrate, such as surpassing our goal of opening 100 lo-
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