Basics Page

For managers that are fairly new to the industry. We are posting the basic restaurant math that is required for the daily operation.

We get allot of questions on the  following subjects and hope to get feedback from others that wish to contribute their knowledge.

                                                                                              Labor Control

Labor cost projection = Sales prediction Budget labor percentage   Ex.     $3000.00 x .29 = $870.00 

Labor Hour projection = Labor Cost prediction  / Average hourly rate of pay    Ex. $3000.00 x .29 = $870.00 / $8.03 = 108.5 hours

Calculating Average rate of pay = Add all of your employees wages together and divide that number by the total number of employees. Ex. Mary $10.25  Sue $11.00 Tom $9.00 Will $7.25 = $37.50 / 4 = $9.38  

Managers salary to hourly = managers salary / 52 / 40    Ex. $42000.00 / 52 / 40 = $20.19. Remember, when you are predicting labor factor in your managers wage if you are required!

Labor percentage calculating = Labor dollar total / Sales total = labor %   Ex. $1325.26 / $5000.00 = 27%

Taxes = Payroll taxes will have to be taken into consideration if your store requires you to factor them into your labor wages and predictions. The rule of thumb is 13% that is right 13%. 

                                                                                            Food Cost Control

Food cost projection = Same principal as labor prediction. Most managers like to forecast their food cost needs by the week and divide that by how ever many orders they have from vendors in that week. To go one step further a fine tuned manager will incorporate several categories at once. For example a manager may order Food, Paper products and cleaning supplies from a single vendor at once. Rather than calculate each separately he or she will simply combine the budgeted totals.

Ex. Budgeted Food cost % = 25%   Paper = 4%  and Cleaning supplies = 2% for a grand total of 31% Cost of Goods or COG. Then to use this method properly you should base your predictions on the length of your reporting period. Most reporting periods are monthly so we will use this in our following sample. Remember this applies to most operations but may not work for yours if you contract multiple vendors. Now if we predict sales for the month to be $21500.00 then multiply that by your combined COG total.

Ex  $21500 x .31 = $6665.00 you then divide this number by the total deliveries from your prime vendor during this period.

= $6665.00 divided by 4 weeks divided by 2 deliveries per week. Your math will look like this:$6665.00 / 4 = $1666.24 / 2 = $833.13. Be sure to download the prediction tools available on our tools page. 

                                                                      Constructing a restaurant employee schedule

Schedules This area is (arguably) the most important budgetary concern of any restaurant. Building an effective schedule requires some preliminary information gathering. #1 sales expectations, #2 your average rate of pay, #3 knowledge of station manning hour requirements. We will offer the following scheduling situation. Your bakery opens at 4am your prep person comes in at 2am -7 at $7.50 an hr. plus a cashier is in at 3:30 am-9:30am and a relief cashier from 9:30am - 1pm. Both make $6.50 an hr, and a waiter at 3:45 - 11:45am and 5am - 1 pm for the second waitress that both make $4.25 an hr. You want to schedule in a dish washer at 8am-2pm to help with the dishes and cleaning. This person earns $7.00 an hr. A bus person will come in at 6am-1pm to assist with the rush at $6.25 an hr. The store also has a salaried manager and asst. manager that you will have to take into account when building your schedule their combined salaries total $41000.00 a year. Our bakery closes at 1pm 

First our projected sales for the day is $2100.00 

Our average rate of pay is $6.93 based on 8 employees with a combined wage total of $55.46 divided by the total number of employees. Remember the formula for the managers wage per hr is wage / 52 /40 = hourly wage.

Our budget labor is 29% so $2100 x 29% = $609.00 (minus $79.17 for payroll taxes?) / $6.93 = 88 hours to schedule your employees including managers and if your not required to factor in taxes. If you  subtract taxes you have only have 76.5 hr's to schedule your employees including managers.  Most managers would subtract the manager wage (hours) off the top and use the balance of the hours to complete the schedule. Make sense?  There is a free restaurant schedule that takes the pain out of the math available on our download page. Also there are several tools that will assist with the calculations on the same page. The rule of thumb is that you should base your labor forecast by which ever of the following methods is suitable for your operation. 1. last year same date plus adjustments for budgeted sales increase expectations 2. Last 3 months same day in the period added together and divided by three. 3. Last three weeks same day added and divided by three. Which ever method you use to achieve a foundation or rough forecast. Remember to take into account local up coming events, Sales trends, Restaurant promotions and weather. 


Issues and considerations  Profit margins in the hospitality industry are small so just as important as the other cost controls is your  unexpected costs, mainly fraud, waste and abuse. Consider the following

Clear trash bags. Employees are less likely to "shop" at your restaurant via the trash pickup method. Key logging system. Don't give your employees a chance to make unauthorized copies for after hour access. Security codes never give out your managers code or you'll have more managers than you can handle. Guest check averages. Fluctuations are cause for concern and you should investigate. Excessive no sales or .01 open misc. are costing you cash, investigate. Inventory variances should be monitored and corrected. Manager returns after the fact or at the end of the shift should be regarded as a unacceptable practice. Promotional discounts. Always require a coupon or discount card for any promo or discount. Never allow your employees or cashiers to count down their own drawer. Beware of calculators, toothpicks, staples, paperclips by or near any of your cash registers. Items such as these can be used in skimming techniques. Never allow leftovers or doggie bags to be taken home by your employees. I have seen operations allow this and trust me the cooks and staff will make leftovers. Don't allow coats backpacks or duffle bags into the work space. I had a employee of many years mistakenly drop a 12 pack of beer on the floor when the bottom broke out the backpack he brought to work every day after school. 

                                                                                       Management success

If you show leadership your employees will respect your decisions and direction. Leadership in the hospitality industry is a must or failure will be either fast or slow coming but its coming. Never show weakness in decision making situations. A good manager will know every aspect of his or her operation, job description, policy and procedure. I feel that a well respected manager achieves respect  by getting in there and getting dirty when required I'm talking dish's to bussing nothings beneath you. Also a good manager can make multiple decisions at once and communicate directives on the fly.