Whether you are running a bar or a restaurant, controlling costs is one of the key elements to success.
There are two categories of costs in any establishment: fixed and variable. Both of these areas can be controlled in different ways.
Fixed costs are the costs that you incur in your business that are somewhat static; that is, they don't change based on increases or decreases your sales volumes.
These include costs such as rent, taxes, insurance, accounting, legal fees, utilities, regular maintenance and so on.
Fixed costs are generally accounted for individually in your budget. Because you know approximately how much these costs are on a regular basis, you estimate the expense in their respective budget line.
But don't just leave it at that … even though they are 'fixed', don't think that you can't have control over them. You can still control them by being aware of what their fluctuations are.
Some easy ways to control fixed costs:
• Turn on equipment like hood fans and ovens only when necessary
• Install compact fluorescent light bulbs
• Install a programmable thermostat to control air conditioning or heat
• Recycle glass and plastics where possible to keep rubbish pickup costs down
By addressing these areas on a daily basis, you are controlling your fixed costs.
Variable costs are those that can be directly attributed to increases and decreases in sales. For instance, food and beverage costs go up with increased food and beverage sales and down with decreased sales.
Of course, ingredient costs are a very important part of your variable costs, but control is also important.
Easy ways to keep your variable costs in line:
• Receiving control – proper rotation procedures ensure that the older product is used before the newer product
• Portion control – develop standard recipes for staff to use during production
• Waste control – in both prep and production, waste can be a big part of variable cost control
• Procedures – be sure that your staff is following proper order and issuing procedures (no product without a 'chit' ensures that you get your revenue for every item that leaves your kitchen or bar)
Labor costs are often referred to as semi-variable costs, because 'salaried' staff members come under the 'fixed' section of the labor cost, and the 'hourly' staff members make up the variable cost.
Labour cost control tips:
• Know how many staff members you need on a meal shift and develop your schedule accordingly
• Decrease your variable labour by using your salaried staff on the floor during slower mealtimes
• Use 'on call' staff, and call them off if you don't need them
• Stagger start times to maximise labour on meal shifts
Of course there are many more ways to be sure that your fixed and variable costs are under control; but taking care of the 'little things', like those listed above, really goes a long way in the success and profit of your establishment.