Prime cost is the total cost of goods sold COGS.
For Profit's Sake - Inventory Your Beverage Cost by Ron Gorodesky and Ed McCarron The food and drink is great, the service fabulous and the restaurant is busier than ever - but are you wondering why the bottom-line isn't all it should be? Alcohol sales beverage sales are an easy way to increase profitability because the costs are lower and the gross margin is far greater for beverage than for food.
However, beverage costs must be controlled if an operation is to reach maximum potential of gross profit from beverage sales. Every reduction in beverage cost percentage renders a higher gross profit. Beverage costs that are above industry averages can negatively impact your profitability.
Because of the impact beverage costs can make on an operation, it is important to know where beverage cost falls in relation to total sales on a daily or weekly basis.
Beyond the bottom line, beverage costs also reflect an operation's control systems, management skill level, and value provided to the customers. One can't miss article in each issue! Sign-up for free and get the very next issue Despite its importance, we find many restaurant managers do not calculate beverage cost correctly, or if they do, they do not fully understand the process.
If calculated correctly, the ratio can be compared to industry averages and previous performance. Alcoholic beverages are included in beverage cost calculations. Soft drinks, juices, coffees, and other non-alcoholic beverage sales are included in food cost calculations.
With an accurate beverage cost, steps can be taken to improve the operation and ultimately improve the bottom line. The following is a step-by-step method for calculating beverage cost including an example and a worksheet to calculate your own beverage cost.
The industry standard is based on the Uniform System of Accounts for Restaurants a handbook available from the National Restaurant Association. This system clearly identifies what items are included in each part of the beverage cost formula and is briefly outlined below.
The beverage sales and costs should be generated during a set accounting time period of at least two weeks or more typically, every 28 days, or monthly. Soft drinks, juices, coffee, and other non-alcoholic beverage sales are included in food cost calculations, not beverage cost calculations.
It is critical that the elements of the beverage cost calculation sales, inventories and purchases are representative of this time period. BEVERAGE SALES This is the relatively easy part - total the customer checks or reports from point-of-sale registers - making sure to only include sales generated from beverage sources sources other than beverage should be allocated to a "food" or "other income" account.
Remember to use sales generated only within the allotted time frame. In our experience, this part of the calculation is often computed incorrectly.
Determining the amount of purchases for the time period is straightforward: Total all beverage purchases include delivery charges Example: Many restaurants consider only purchases in determining beverage cost. This does not create an accurate beverage cost percentage - depending on the day purchases are made and what the cut-off date is for including sales in the beverage cost calculation, your beverage cost could appear higher or lower than it actually is.On Slide 5, you can see the key financial performance metrics for our fourth quarter.
Net sales totaled $ billion, up 2% from last year. Organic net sales increased 1%, driven by a positive net. Independents who calculate and analyze their food and labor each week instead of just monthly, report a prime cost savings of % of sales.
Get your weekly food and labor costs quickly and efficiently.
Labor-to-revenue ratio is a financial analysis tool that compares the amount of money a company spends on its employees to the amount of money it makes in net sales. Dividing labor cost by net sales for a given period yields this ratio. Multiplying the result by converts it to percentage.
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Summary of Features & Benefits: The Inventory Master worksheet is used to automatically convert purchase unit cost to recipe unit cost. Holds up to ingredients, menu items and sub-recipes.
Financial Analysis. Adjust both sales and cost of labor using the same steps as those employed for adjusting food or beverage cost percentage and compute a new labor cost as follows. Chapter Food and Beverage Cost Control.
60 terms. Cost Control Review Sheet. 16 terms. Food and Beverage Cost Control Chapter 1.