Small cafe

03jatkin

Hi!

To give you a little background information I'm asking for some advice on a catering business.
My dad is running his own business but is working 7 days a week and I fear he doesn't have the time to consider his in and out going costs and I'm worried he's being a busy fool and is going to become bankrupt!

I want to help him out so tomorrow I'm going to look at setting up a big spreadsheet to get an idea of his incoming and outgoing and work out what his costs are.

My biggest fear is that he is over staffing does anybody have any experience and catering and know how much money you spend o staff on comparison to turn over? My mum used to have a pub and she was sure it was something like 6% of gross turnover but she can't remember!

Any advice or help would be greatly appreciated!


Jamie

jfdi

Traditionally it's equal split ........food cost, staff cost, overheads, profit.

So food costs should generate approx 4 x income

jfdi

Traditionally it's equal split ........food cost, staff cost, overheads, profit.

So food costs should generate approx 4 x income

03jatkin

Looking into all the costs today with him and one of the bills I'm surprised by is he's currently paying around about £2000 a year on building insurance which was stipulated in the lease and apparently it goes through the landlord as the policy holder, this to me sounded massively expensive!

Does anybody have any idea what sort of costs this should be for a small cafe which has around 60 covers and a flat attached to the main cafe.

Any help Is appreciated!!

Many thanks
Jamie

paddyrg

If it's in the lease, he's pretty much shafted. Commercial leases are not like consumer contracts and are almost always bound by the terms signed up for (short of killing people and illegal acts). If he agreed to give the landlord £2k/year for 'insurance', then that's what he has to do.

Errata

A cafe always means a higher insurance premium, as does a flat attached to a cafe, for all the obvious reasons.
Get some quotes on each of the properties for comparison?

paulwf

What you are creating is a P&L (profit and loss) sheet. Basically you do a full stocktake on the last day of every month then by adding up your daily cashing up sheets and going through your monthly bank statement you can list all the outgoings.

Firstly you get an accurate profit (or loss) figure and turnover for each month so you get an idea of how the business is doing and how seasonal it is. This should help forecast when you run promotions, when you need more staff and when you can cut back on seasonal workers, when you should run your stock down and so on.

Secondly you generate a gross profit (GP) figure, this is how much your ingredients cost as a percentage and is the cornerstone of any catering business. Next is staffing cost which is always high for catering, you can't put a set figure on it as it depends how hands on or hands off the owner is. Very roughly lets say 15% to 35% of turnover. 6% doesn't sound right to me.

It might be worth getting a book keeper, at least to set it up. Once you have a system set up it should be easy to generate monthly reports.

The first point of action is to go through all invoices and contracts and negotiate better prices. Catering wholesalers rarely have fixed prices, everything is up for negotiation. They are also notorious for putting prices up over time and not telling you, chances are prices have "drifted" and it might be worth changing suppliers. There is also a very high chance you can get better deals on insurance, credit card terminal, banking, telephone, broadband etc etc with a few calls. I bet within a week and with a few calls you can save the business £1000 a year absolute minimum.

Take a hard look at your catering suppliers, more often than not supermarkets are cheaper. I found it was better to open a little later and spend the time shopping for deals around the supermarkets and pound shops, it saved far more money than I could generate by opening a little earlier and getting it all delivered.

Once you get monthly p&l figures the whole fun of running a business is to relenetlessly improve them month after month. Saving just 1% on gp and 1% on staffing can have a massive effect on overall profit. I've seen businesses go from a loss to a profit simply by improving gp by 5%. To increase try and put prices up a little if some items are underpriced, its amazing how little customers care if you increase food prices by 5p here and 10p there. Drive down ingredient costs month by month by finding better deals.

You should have a system for creating staff rotas so you can look at last year and compare that to budgets for this year. Try and shave off an hour here and half an hour there, it all adds up.

I've heard it said that catering is a penny business. What that means it that every penny counts, you are selling a high volume of low value products. Suppose you sell 10,000 meals a year, saving just 1p per meal by finding a better deal on oil or napkins or washing up liquid is an other £100 in your pocket. Letting costs drift upwards by just 10p per portion because you are working 7 days a week and never having a chance to check invoices means £1000 less you get to take home. Monitoring costs month on month is absolutely vital.

Kris_Niederberger

In the catering business you must have organize everything before spending the money. So far as spending money on staff is concerned it shouldn't exceed from the 10% of gross business earnings.

Pennywise

Kris_Niederberger wrote: »

So far as spending money on staff is concerned it shouldn't exceed from the 10% of gross business earnings.

That's a crazy sweeping statement. If a small cafe has a turnover of £70,000 p.a., there's no way you could staff it for just £7,000! That's just 3 hours of minimum wage staff per day for 360 days per year. Simply not achievable with the prep time before opening and cleaning down after closing - it'd only be open an hour a day and you can't get £70k p.a. of sales on being open only an hour a day. A cafe is a labour intensive business. 30% of turnover is a more achievable target to aim/hope for.

gb12345

Pennywise wrote: »

That's a crazy sweeping statement.

As a wild guess, I would say that "Kris" is just upping his post count so he can come back and post his :spam:.