Do You Really Know What It Costs to Run a Restaurant?

The hospitality and tourism industry in Canada is struggling to find workers. Latest stats are projecting a shortage of 130,000 needed workers in Canada.  These include chefs, cooks and hospitality staff.  If you have a passion for this industry, I’m here to tell you that there are vast opportunities for work.

Pardon the pun, but this industry is starving for good motivated and reliable workers. Whether front or back of the house, it can be a rewarding and fun way to earn money in general or to pursue it professionally long term.

A key topic I like to talk about to young workers entering this industry is have an appreciation and perspective as to what it really costs to run a restaurant.  As you enter the Food Service Industry, do you truly understand the profitability of a restaurant and how you can actually influence an owner’s profitability?

The staff of a restaurant are the heart and
soul of the guest experience in a restaurant,  but they are also critical contributors as to
how well the owners will make money at the end of the day.

One exercise I love to do, is ask industry people what they think the average profit a restaurant makes for every dollar in sales it generates. It’s interesting to hear anything from 10 cents to 60 cents for every dollar taken into the business. Every time I ask this question, very few come close to the truer number for Canada which is slightly under 5 cents for every dollar generated.

For every dollar generated in sales, the owner/operator gets to keep 4-5 cents of that dollar as profit

Think about what I’m saying, for every dollar generated in sales, the owner/operator gets to keep 4-5 cents of that dollar as profit.  Most young staff that I talk to have this perception of cash and vast amounts of money coming into the cash register on a busy Friday night.  Surely, with all this cash coming in the business means the owner/operator is doing very well for themselves?  While this can be true in some cases that run a very tight operation, but, the majority of our independent restaurant operators are nowhere near that perception of profitability.

To further expand on this idea, let’s think about that same restaurant doing $500,000 in annual sales.   If they are keeping this industry average for profit of 5% (5 cents on the dollar), they will have earned only $25,000 in profit at the end of the year or $68.00 a day in profits.

Now that I’ve opened your eyes to the real costs and profitability of running a restaurant, this is where your role as an employee at that restaurant can really make or break an operator’s ability to make money.

Everyday, while working in a restaurant, you have an opportunity to help that operator keep their 5% or $68.00/day in profit by paying attention to the details.

A simple example is when an employee breaks a plate or glass in the restaurant. Restaurant grade dinnerware is not cheap as they are made more robust for the industry.  That cost of a broken plate, glass, etc automatically knocks down that original $68.00/day to a much smaller number. How about how often you take a nibble for food off the line, a free beverage from the bar, etc.  For those back of house employees, how often do you waste, spoil and/or burn food in the kitchen. All those items that go in the trash can versus on the customers plate has the same negative effect on those $68.00 day in profit.

I’m just a scratching of the service, but hopefully this outline will create some awareness and appreciation for the challenges of today’s restaurant employers.