Hey, restaurant owner and operators.
Here we are toward the beginning of a new year.
I hope the first month has been fantastic for you.
This is a great time to talk about restaurant budgets
and how simple they actually are
and how useful they will be
in helping you hit your target food cost,
beverage cost, beer, wine, liquor.
How to hit all of your costs? Keep them all inline in this new year.
We're going to talk about it right now.
Hey, everybody. Ryan Gromfin here – author, speaker, chef, restaurateur,
and the founder of the Restaurantboss.com,
as well as clickBACON.com.
And budgets, they don't sound fun but trust me,
they're super important and they actually are fun.
So, I get this question a lot of times.
Why do I even need a budget in my restaurant?
And here's the analogy that I use.
See, let's say that you like to shoot guns for fun,
so you go out to the target range or
a friend's backyard and you put a beer can on a rock and
you know you try to shoot it.
And when you hit it, it explodes and it's all great, and that's fun,
but if you were a sniper in the military,
if you were a police officer, if you needed your weapon for protection,
you probably wouldn't practice shooting against a beer can on a rock.
You probably want to shoot against a target.
I have a friend who is a sports rifleman.
He's actually kind of an expert.
He can hit quarters at a thousand yards at 3,000 feet,
that's pretty insane, but we were talking about it the other day and
in order to calibrate his rifle,
he first sets up a target and he'll take a shot and then he'll adjust the scope,
take another shot and adjust his scope until he's ready.
And then when he's got it all dialed in,
he'll start trying to knock off these quarters at a thousand yards.
The point is is that if he didn't start with that target,
he wouldn't know is he high? Is he low? Is he left? Or is he right?
See, in our restaurants a lot of times at the end of the month,
we may miss our target,
but we don't even have a target.
We may have a high food cost,
but if we didn't start the month with a budget,
and then start measuring against that budget at that certain benchmarks,
then we really can't be angry and we didn't hit our
target costs of goods sold, or our target food costs or labor costs.
So a budget helps keep you in line.
It helps you know where you need to make adjustments.
Now people often say to me, well, budgets are too complicated.
And I remember I was trying to set up my first budget
way back in the day for a client,
and I'll be honest with you,
I went a little crazy on this budget and I had every
single ine item and this budget took me weeks to create,
and then when it was all done, I was like, why am I tracking
half of these expenses that don't change?
When I started looking at their gas bill, their gas bill stays the same the whole year.
Sure, it goes up a little bit in the winter, goes down a little bit in the summer,
but not only does it stay pretty flat,
they can't control it. There's nothing they could realistically do
to change their gas bill.
So we redid the budget
and I realize there's really no point of tracking that.
So what should you be tracking in your restaurant?
Your variable expenses,
your cost of goods sold which is exactly that, it's the cost
of any good that you sell, so this is your food cost,
beer cost, wine cost, liquor cost, etc.
Your labor which is fully controllable,
and then there's this other category called direct operating expenses.
I'm not going to get into too much detail about what a direct operating expense is here,
but basically, anything related to sales
that isn't a cost of goods sold.
So, for example, to-go containers in most restaurants are direct operating expense
because the busier you are,
the more to-go containers you're going to use,
but you don't actually sell to-go containers
to your customers.
So now, let's get right into this. Let's create a budget.
A lot of people think budgets are really complicated and hard to create,
but I'm going to walk you through a quick exercise to show you how simple
creating a budget actually is.
I want you to pull out a piece of paper right now
if you don't already have one out, and I want you to write a 100,000 at the top.
Let's just assume you're going to do a $100,000 in sales
in the next month, okay?
Now if you're going to do $100,000 in sales, I have a question for you.
If you want your costs of goods sold to be 30%,
how much can you spend on purchases?
I'll give you another second here. $100,000 in sales,
your target is a 30% cost of goods sold,
how much can you spend on purchases?
If you said $30,000, that's right.
That's how easy it is to create a budget.
Now, let's do the same thing for labor.
Same $100,000 in sales, you want to have a 30% labor cost.
Well, don't spend more than $30,000
on labor throughout the month. So when you set up your schedules,
set them up so they don't cost more than 30,000 in a month.
Now, I know this sounds simple. Simple isn't always easy,
but this is actually how simple it is to create a budget.
Where it starts to get complex is when you have multiple
different categories like food, which maybe 60-70% of your sales.
Beer, which might be 10% of your sales, wine, liquor, etc.
So, we started to use spreadsheets for all this and they looked a little bit like this.
You can see like they'll get the job done,
but they're kind of dirty, they're kind of ugly.
Well, guess what? It's 2018 folks. If you're still using spreadsheets,
you're ten years behind.
You should be using some software for this.
Now, there's a lot of different software tools out there.
I happen to have created a tool called BACON,
which is what you're looking at right now,
and this is exactly how I teach my clients
and how users of the software can create a budget,
and then use it every month.
I want to thank you for watching that video.
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Thank you so much.