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I don’t like using them, but here they are.
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 to $300.
Moderate Profit
Full-service – $250 to $350.
Limited-service – $300 to $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.
Alcoholic 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.
Nonalcoholic 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.
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 to 18 percent as a percentage of total sales.
Employee Benefits
Five percent to 6 percent as a percentage of total sales.
Twenty percent to 23 percent as a percentage of gross payroll.
Prime Cost
Full-service - 65 percent as a percentage of total sales.
Limited-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.
Jeffrey is a 30 year veteran of creating, operating, Coaching and consulting with successful restaurant & hotel concepts that include national, international, franchised and independent brands. He is also the president and founder of Summers Hospitality Group a full-service, national and international, Restaurant & Hospitality Coaching and consulting firm based in Fort Worth, Texas. Besides helping clients achieve success by working with them one-on-one, Jeffrey frequently speaks at and attend numerous industry events as well as at local, state and national small business groups in order to share his passion for the business of food and hospitality. You can call Jeffrey toll free at 888-9988-SHG (744) for a free consultation or email him using the form below.
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KM Norton May 13 2011 - 2:00 pm
Where do you factor in the cost of cleaning supplies, etc?
What do you include in the Prime Cost group?
I’ve been around the food business for many years, and yes a rule of thumb is just that. On food costs though I would say 31 -33% is the median and where most casual dining and QSR should fall. Fine dining or white table cloth runs 25-28%, and buffets run 40-45%. I’m not quite sure where fast food falls on the spectrum though.
Jeffrey Summers May 13 2011 - 3:27 pm
Cleaning supplies are Direct Operating Expenses. Prime Costs are always food, beverage and labor by definition.
The rest is semantics. You need to analyze your food cost within the context of your own individual business. Two hamburger businesses on opposite sides of the street which use the same broadline vendor and products, with similar menus and pricing can have totally different cost and profit structures. There really are no two alike.
Jeffrey Summers Apr 16 2009 - 1:13 pm
I don’t like them because they aren’t real. Each business is unique in every single category and to use ROT as standards by which to measure success is simply to not understand the numbers to begin with. COGS can vary dramatically even among extremely similar concepts. I don’t care if your food cost falls within the acceptable range for your category, if your ideal shows it should have been 4 points lower. The same can be said of every other category – including labor. If you want to use a standard by which to understand your success in managing specific cost areas, use ideal cost measurements. This can and should be done for every category. This is the biggest area where we find cost savings when we visit a new client.
As for segmenting individual cost categories, you absolutely should. This goes for food, liquor and labor. How else can you gauge where cost opportunities or inefficiencies exist?
On the question of ROT for waste, comps, etc… No I do not. Because there are none. Any waste should be unacceptable unless you are simply physically unable to eliminate it. This is why determining yields is critical in engineering your recipes – if you do. Comps, whether positive (VIP) or negative (mistakes) are a marketing function and totally discretionary but you have to ask yourself, ‘why do you have negative comps?’ The answer will determine your appropriate levels.
I count basement s.f. if it is deemed as usable space by either local ordinance or the terms of your lease or purchase agreement.
I appreciate the love. Hope to see you here more often!
Lizzie Larock Apr 16 2009 - 12:43 pm
Hi Jeffrey, just wondering why you don’t like using the rules of thumb. They do seem quite helpful. Also, do you recommend breaking down your liquor cost into each of those separate categories? On our monthly inventory we lump together our liquor, beer & draft beer costs together and only separate out the wine. Also curious to know if you have a rule of thumb for what percentage of waste, comps & vip comps should be. Do you count basement square footage in the square footage sales model or just restaurant floor & kitchen? Thanks – love your site!
Jeffrey Summers Apr 8 2009 - 9:40 am
Thanks Harold. I’m looking forward to hearing more from you.
Harold (SMM) Apr 7 2009 - 3:51 pm
Hey, Jeffrey, thanks for posting these rules of thumb. I found you via twitter. I’m going to “thumb” through the rest of your site. Looks good.