Friday, September 21, 2007

Marginal Profits: Redux

I've been informed by a few different people that my already dismal restaurant financial projections are actually substantially over-optimistic.

According to a chef friend of mine, food cost is usually averaged to ~30% of an item's price.

Additionally, I underestimated non-labor overhead quite a bit. Shit gets broken a lot. Utilities and maintenance costs are also much higher.

I knew my floor team was a skeleton crew but it's apparently an unfeasibly small staff for a busy night.

I also failed to fully consider the level of capital equipment that goes into opening a restaurant.

So what does this all mean? It means that a successful restaurant actually operates at a 4%-6% profit margin and most restaurants that stay open operate on a mere 1%-2% profit margin.

Put that in your pipe and smoke it.

No comments: