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9 Business Facts All Staff Should Know

By Ken Burgin

Does your staff know how your restaurant business actually works?

They probably weren't taught this at school or in their last job. Without guidance, they'll make up their own reasons to explain your insistence on efficiency or extra sales effort...and they may not get it right.

Regular briefing on business fundamentals can grow them into real "business partners" - there are huge benefits if you take the time. If you want to learn more about business, look into an online business management degree.

Start with these:

Profit = Sales minus Expenses. If expenses are higher than sales, we can only stay open as long as someone finds extra cash to make up the difference. If it runs out, the business will close.

There are 2 types of Expense: Fixed and Variable. The ingredients for making a pizza or cocktail are variable costs - mostly raw materials and labor. Rent and insurance are examples of fixed costs. The profit made on the pizza or cocktail first have to pay for the Fixed Costs.

Food and Liquor Stock is just like Cash. Most businesses keep a week's supply of food in stock, and several weeks of liquor. More than this and the boss should be getting worried - it's easy to be overstocked.

Boosting Sales is usually more profitable than Cutting Costs. But most people find it easier to cut rather than grow, so it needs smart leadership to handle them both. When you find someone who loves to sell, look after them!

There are only 100 cents in a Dollar. Take 100 coins and ask staff to divide them up for rent, wages and all the other business expenses. What did they get wrong - any surprises?

Staff is usually the biggest expense in hospitality. That's why the boss watches the roster closely, and why productivity is so important. And why wage rises are a challenge, unless there's a matching rise in productivity.

Extras or 'On-costs' add 30% or more to the total cost of staff. Examples are workers compensation, leave, uniforms, training and staff meals. For every $100 per week you're paid, add at least another $30.

New equipment is paid for by profits. There's nowhere else to get the money, unless we borrow it (then it has to be repaid). The best equipment has a fast 'return on investment' - it pays for itself quickly by saving labor and ingredients, or creating more sales.

The cost of small items can be surprisingly high. Work out the exact cost of a strawberry, an olive, a scroop of ground coffee, a teaspoon or a napkin. How many are lost or wasted each week?

Ken Burgin is the Owner of Profitable Hospitality, an Australian based website for restaurant professionals.

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