The first thing we reviewed in detail was the financial statements. They were produced by a bookkeeping service that was inexpensive and inaccurate. We reformatted the numbers so the owners could read, understand, and calculate basic costs associated with the restaurant business. Once the financials were reformatted we compared their numbers to local and national standards which were very important in setting goals for performance.

Profit and Loss Analysis
When we first evaluated the clients’ financial statement, the food cost was running at 36%, beverage costs were extremely high, and labor was at 32%. Based upon their concept and our knowledge of the industry in general, we felt those numbers were out of line so that became the initial focus of our analysis. Listed below you will see the major areas we worked with this client on.

• Assisted with the formation of a marketing plan
• Recommended delivery services and other forms of sales increases

Food Costs:
• Reviewed ordering system
• Trained and facilitated menu costing
• Helped to standardize/control portioning
• Adjusted current heavy discounting program
• Trained and implemented taking of inventories

Beverage Costs:
• Reviewed their portioning & refill policy
• Cost all beverage items
• Adjusted pricing

Labor Costs:
• Recommended scheduling practices
• Recommended in & out audits
• Recommended job descriptions and bonus programs for management

Controllable Costs:
• Cleaning supplies – recommended purveyors
• Credit card discounts – recommended providers
• Insurances – recommended broker
• Paper products – recommended change and several suppliers

Summary of Results
After making the above changes and recommendations, their restaurants saw an improvement in all areas, with their net operating profits increasing by 4.5% at location #1 and 2.3% at location #2. The overall results are generating additional profit estimated at $60,000 annually.

About the Author

Jean Hagan, PrincipalJean Hagan
Restaurant, Hospitality
Jean has owned, operated, and consulted in the restaurant industry for more than 30 years. During that time, she worked with a well-known national chain; owned a food and beverage company that operated multiple restaurants, bars, and event spaces in the Squaw Valley area; and became the president, CEO, CFO, and shareholder of one of the highest-grossing restaurants in California. Today, Jean is Principal and leads the Restaurant Operations Consulting practice at KROST. » Full Bio