Key Target Numbers for Running a Successful Restaurant

We are constantly asked to suggest the “right” target numbers that independent and chain restaurant operators should shoot for relative to costs, sales, rent and return-on-investment. It’s a tricky question because………..

We are constantly asked to suggest the “right” target numbers that independent and chain restaurant operators should shoot for relative to costs, sales, rent and return-on-investment. It’s a tricky question because of the wide variety of foodservice operations and segments in our industry, ranging from quick-service to fast casual to family dining to casual theme to healthcare and contact foodservice, not to mention the menu type and range. Obviously the answer varies depending on the type of operation and the skill of the operators.

So while it’s challenging to suggest an exact number and impossible to detail the “correct” number, it is safe to propose a general and effective range that every operator should shoot for.

Rather than re-invent the wheel, I asked speaker, author and consultant Jim Laube, a nationally recognized expert on foodservice accounting and profitability to share his experience on the topic. These are his suggested “rules of thumb” relative to costs and sales:

Sales to Investment (Annual Sales/Startup Cost)

Leasehold—at least 1.5 to 1.
Own land and building—at least 1 to 1.

Sales Per Square Foot

Losing Money
Full-service–$150 or less.
Limited-service—$200 or less.
Break-even
Full-service–$150 to $250.
Limited-service–$200-$300.
Moderate Profit
Full-service–$250-$350.
Limited-service–$300-$400.
High Profit
Full-service—More than $350.
Limited-service—More than $400.

Food Cost

Generally—28 percent to 32 percent as a percentage of total food sales.

Alcohol Beverage Costs

Liquor—18 percent to 20 percent as a percentage of total bar sales.
Bar consumables—4 percent to 5 percent as a percentage of total bar sales.
Bottled beer—24 percent to 28 percent as a percentage of total bar sales.
Draft beer—15 percent to 18 percent as a percentage of total bar sales.
Wine—35 percent to 45 percent as a percentage of total bar sales.

Nonalcohol Beverages

Soft drinks (post mix)—10 percent to 15 percent as a percentage of nonalcoholic beverage sales.
Regular coffee—15 percent to 20 percent as a percentage of nonalcoholic beverage sales.
Specialty coffee—12 percent to 18 percent as a percentage of nonalcoholic beverage sales.
Iced tea—5 percent to 10 percent as a percentage of nonalcoholic beverage sales.

Paper Cost

Full Service—1 percent to 2 percent as a percentage of total sales.
Limited-service—3 percent to 4 percent as a percentage of total sales.

Payroll Cost

Full-service—30 percent to 35 percent as a percentage of total sales.
Limited-service—25 percent to 30 percent as a percentage of total sales.

Management Salaries

Ten percent or less as a percentage of total sales.

Hourly Employee Gross Payroll
Full-service—18 percent to 20 percent as a percentage of total sales.
Limited-service—15 percent to18 percent as a percentage of total sales.

Employee Benefits

Five percent to six percent as a percentage of total sales.
Twenty-percent to 23 percent as a percentage of gross payroll.

Prime Cost (food and beverage costs plus labor costs)

Full-service—65 percent as a percentage of total sales.
Table-service—60 percent as a percentage of total sales.

Occupancy and Rent

Rent—6 percent or less as a percentage of total sales.
Occupancy—10 percent or less as a percentage of total sales.

Assess you own operation against these numbers and allow for variances based on your menu and concept. If you’re within the right range, congratulations. If you’re not, make the necessary changes. And don’t forget that training is at the heart of every successful transformation from losing money to making money.

No train, no gain.