Restaurant Costs, Pricing and Profits

[chickie]

I am in a debate of sorts on a board that is not industry related, and need to know:

in a regular restaurant, what percentage of your final menu price is your actual cost. Assume that you own the property outright - no mortgage.

I was taught that the rough rule 25% was food cost, 25% was labor, 25% was overhead, 25% was profit - is that still the case?

this is a sample of the menu, if that helps

14 oz New York Strip Steak - Served with balsamic red onions, watercress, and roasted Yukon potatoes finished with veal demi-glace. - $26.99

7 oz Filet Mignon - Glazed with maple BBQ sauce and accompanied by cream cheese mashed potatoes. - $26.99

Beef Bourguignonne - Served with roasted mushrooms, red wine, Pappardelle noodles, and chive creme fraiche. - $21.99

Grilled Pork Chop - Served with sauteed herb gnocchi, wilted rapini, and Icewine apple butter. - $20.99

Herb Crusted Prime Rib - Served with Roasted Yukon potatoes, finished with veal demi-glace. - $21.99

Mushroom Filet Mignon - Baby portobella wild mushroom risotto with white truffle and herb butter sauce topped with fried parsnips. - $27.99

Seared Free-Range Chicken - Served over white beans and seasonal marinated veggies topped with lavender butter. - $19.99

Seared King Salmon - Served over sweet maple corn cake with candied walnuts and maple-ginger glaze. - $20.99

Shrimp, Scallop, & Mussel Bouillabaisse - Served over a pearl couscous with rich vegetable broth. - $22.99

Spiced Black Bean Cake - Roasted red pepper stuffed with black bean and corn dressing served with noodle salad and peanut sauce. - $15.99

edited for clarity

Edited November 2, 2007 by chickie (log)

[Ore]

It doesn't really work that way...

"In a REGULAR restaurant"...funny!

Take the top two items of the sample menu - both are beef, priced the same at the menu but with a completely different food cost.

Is it safe to ASSume that the Mushroom Filet Mignon is also seven oz.? If 25% food cost is what you're running, you should be fine! That is on the low side.

Steakhouses see very high costs of food and therefore try to do an a la carte system and charge $8 for a side dish to make up the slack.

Change your numbers to more like:

35% food cost - 35% labor cost - 25% overhead - and 5% profit!

Ahh - the restaurant industry...

(or a small example of a "regular" restaurant!)

[chickie]

I always find it depressing that I am way funnier when I am not trying to be

35% food cost - really? It has been a long time since I have worked in a restaurant, but when I envision my old Exec Chef running 35%, I imagine him writhing on the floor in the throes of a coronary.

Or is 35% an exception because it is a steakhouse? 5% profit just seems ridiculously small for a profit margin.

Anyone else? What is your target %'s?

Edited November 2, 2007 by chickie (log)

[Fat Guy]

If you own the property you should be able to do better than 5% profit. But, if you own a desirable piece of commercial property you can probably make more money by being a landlord to Applebee's than you can by running a restaurant yourself -- and it's a lot less stressful.

[wallchef]

Depends on volume of the restaurant, but no, 35% isn't out of the question. I, however like to stay around 30%, usually end up around 32%. It is uniform across the board, you may have an entree at 37% but have a couple of apps at 28%.

[Timh]

This brings up an interesting point on the whole food cost/ profit issue. As a small independant, I strive for 25% average, some of my plates are below 15%, but anyway, looking at the most expensive cuts you need to ask, can you charge the crazy price to maintain the standard or do you need to adjust to your market. My example is my veal loin, my food cost is @ 36%, but I make 17$ on each dish, so at a lower price, I sell more. Its a longhaul type deal.

[naes]

In my culinary management program we were taught to always look at food (which includes beverage) together with labor and to not let the combined total exceed 65%. The reason being is that these two items are the only things you really have control over in an operation. Once your rent is set, it's set.

As for profit, it depends on if all the sales are being reported, but you can expect on average around 10 to 15%. Of course, "average" means nothing to an actual operating restaurant.

[SundaySous]

Round up and leave the ".99" to your competition. Your a professional don't insult your guests.

[Basildog]

How about .95 ?

[SundaySous]

How about .95 ?

←

Hmmmn I never thought about $.95 interesting.

[Peter B Wolf]

As long time members of this board know, I am retired after just a few months under 50 years working as Apprentice, Journeyman, Commis, Cook, Chef and Ezecutive Chef, Consultant and Instructor. These 50 years swept me into at times totally unknown territories and literally Foreign countries.

I also have sharpened and honed my experience in the Hospitality Industry as F&B Manager and Restaurant Manager in places like Hotel kitchens, Corporate and privat Restaurants, country clubs and US Military Officers' Clubs. I must confess I never ever worked my profession in a Fast Food chain establishment (or privat fast food).

I would like to make a couple of points here

First, 'Ore' and 'Wallchef' are closer to reality than others, and 'Fat Guy' has the right answer.

Second, 'costing a menu out' is harder than one thinks, but when one talks strictly 'Food Cost' and/or 'Food Cost Percentages', that is exactly what is ment by it. It consists of all product ingredients needed to prepare a particular recipe which in turn leads to a meal item served. These costs must include all condiments and so called assists as even a 'cooking medium' such as the fat a piece of meat is fried in, and that may only be a tablespoon. It does matter, cost is cost.

In the 'Food Cost' are no other items included, such as energy as heat source for cooking, this falls under the category 'Utilities, but the 'dusting with flour' does !!

A so called "Menu Mix" allows to be more forgiving in cost percentages for high "COST" (to the producer) while low "COST" produced items may result in higher end/sales price.

Always remember one thing: " You can't 'bank' Percentages, You can only 'bank' Dollars. "

Third, the 'rounding up of pennies/cents' used to be in my past as follows:

Fast Food places, anything goes.

So called 'Family' or 'moderate priced' Restaurants: anything on the menu up to $ 10.00 round up to "quarters" (0.25), over $ 10.00 and up to $ 20.00 round up to "50 Cents", and higher end places above $ 20.00 use Dollar figures only.

One note of caution, at times it may be necessary to actually 'round-down' to list a realistic sales price.

My motto always was, The Restaurant Business is not the Grocery Business with 'endings like $ 0.67' , nor is it like the Used Car Business, where everything ends with $..,999.99

As always, I stand to be corrected.

[jackal10]

I agree with Fat Guy, Restaurant from an investors view are really disgused real-estate speculation.

Thanks to the internet (eg http://members.ebay.com/ws/eBayISAPI.dll?V...gourmetfoodsusa ) we can do the sums

14oz NY strip steak Probably choice, wholesale about $6, If it had been prime then it would say it on the menu and the cost would be much higher. Even cheaper if bone-in. .

Say $1 for the onions and potatoes. Food cost 25.99%

FIlet mignon a little cheaper, say $5 plus sides, food costs about 22%

and there are some cheats: Mushroom Filet Mignon, for example does not specify the weight and I bet the truffle in the sauce is from a truffle oil bottle

My guess is they are running under 25% food cost.

When I ran a high end restaurant we aimed for 30% food cost, 30% staff, 30% overheads, 10% profit before tax. 10% is a slim margin

[SundaySous]

I wonder how the mortgage if there is one is counted? Seems to me it could be both an over head cost and a profit.

[qrn]

Back in the olden days I was the bean counter for a rest. and we shot for a 23-25% food cost..and a similar labor cost...We owned the property and had some live entertainment.

After being in several other businesses for the last 40 years, and wrestling with pricing, the answer is ,you charge "what the market will bear".. And if you can't make a suitable profit, find something else to do....Don't live and die by a %..

With this sage advice and $10, you can get a cuppa coffee almost anywhere!

Bud

[ChefCrash]

I wonder how the mortgage if there is one is counted? Seems to me it could be both an over head cost and a profit.

←

Yes. The mortgage payment would be taxable income, that is, the portion of it which goes towards paying for the principle owed. However, interest on said mortgage along with building and equipment depreciation is deductible, and will offset any taxes on income applied to the principle. At least in the first half of the loan term.

[RAHiggins1]

In my lowly 6 years experience of "Casa De Waffle" (Waffle House) as a unit manager in a high volume semi-fast food restaurant. Our overlords broke out the whips whenever we exceeded 30% food cost with the ideal percentage being at 28.5%. Labor was kept to 18% (which explains the dregs of society you find serving you behind their counters.) There were other operating expenses in the P&L but the bottom line profit was/is usually between 8% and 12%.

As the manager it was my responsibility to find ways to engourage the servers to push low cost items such as Orange Juice to offset the higher costs of the proteins.

I usually took a $10 bill out of the cash drawer and taped it to the front of one of the iceboxes. Whomever sold the most OJ got the $$. Customers would see it and ask what it was about and end up getting involved on helping their server win the $$.

All very low brow in consideration of my esteemed colleagues here at eGullet, but an experience in making profit in this industry never the less.

* Deleted a comment not relative to this topic.

Edited November 5, 2007 by RAHiggins1 (log)

[Ore]

Its a tough game. I'm in the transition of moving to the Steel Fabrication Industry...