Costs basics
This Costs basics Info Guide will give you a better understanding of the types of costs involved in running your restaurant business and your cost drivers.
Your costs may include the following:
You may also be making repayment over an agreed period to an investor or to the person from whom you bought your business.
Remember!
Pay your taxes on time - not only routine taxes such as PAYE/PRSI or VAT, but also income tax or corporation tax on your profits.
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Costs vary with each individual restaurant.
Remember!
Identifying your cost drivers will help you to manage your cost-base and focus your efforts where improvements can be made.
Costs are driven by three factors:
To be open for business, you must incur certain fixed costs, regardless of the level of business you do.
Fixed costs include rent and rates, lease of equipment, bank repayments, your head chef’s salary and accounting fees.
These costs are fixed on a weekly, monthly or annual basis – you have little scope to avoid them although you may be able to reduce them.
Remember!
You must have enough gross-profit to cover your fixed costs in order for your business to survive.
Variable costs include purchases of stock and costs of part-time waiting staff. These costs vary depending on the level of activity - the more sales you make the more variable costs you incur.
Decisions you make to improve performance, enhance customer experience or increase capacity give rise to:
One-off costs often require a significant outlay. Finance usually needs to be arranged from lenders to fund one-off costs including:
- Set-up costs, eg key money
- New equipment and furniture
- Health and Safety systems, eg implementing a Hazard Analysis and Critical Control Points (HACCP) system
You can control the timing and amounts of discretionary costs. These are often incurred when you want to increase capacity by improving performance or by enhancing the customer experience.
Examples of discretionary costs include:
- marketing and promotional spend.
- staff training and development.
- artwork and new menus.
- a new bar-coding system.
Remember!
You must have enough sales to cover all your fixed and variable costs in order for your business to survive!
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