Sample result
Prime Cost Analyzer for Restaurants
The owner asked this:«I am about to hire two more people for the new location. Before I sign, tell me whether my cost structure can carry it.»
① The three months, and what appears once they are normalized by operating days
| Month | Operating days | Sales excluding tax | Food and beverage | Full labor cost | Prime cost | Points | Remainder |
|---|---|---|---|---|---|---|---|
| June | 29 | 208,400,000 | 70,900,000 | 58,600,000 | 129,500,000 | 62.1 % | 78,900,000 |
| July | 31 | 221,600,000 | 75,300,000 | 61,900,000 | 137,200,000 | 61.9 % | 84,400,000 |
| August | 30 | 214,000,000 | 72,800,000 | 59,920,000 | 132,720,000 | 62.0 % | 81,280,000 |
July looked like the best month of the quarter: 13 million more in sales and 5.5 million more remainder than June. Normalized, it was not.
| Month | Sales per operating day | Remainder per operating day |
|---|---|---|
| June | 7,186,000 | 2,721,000 |
| July | 7,148,000 | 2,723,000 |
| August | 7,133,000 | 2,709,000 |
July was not a better month: it was a longer one. All three are flat, and a business that is flat three months running does not have a bad-month problem: it has a structure.
Sazón de Origen's prime cost is 62.0 %. Of every 100,000 pesos coming in, 62,000 leave before rent is paid. That leaves 81,280,000 COP a month for rent, utilities, admin and profit, and out of that comes the 8 % operating margin the house declares —17,120,000—; the other 64,160,000 are occupancy and overheads, 30.0 points of sales.
Anatomy of the number: product puts in 34.0 points (54.9 % of prime cost) and payroll 28.0 (45.1 %).
② Which half gets attacked, and what happens to the hire
The declared goal is lifting operating margin from 8 % to 14 % in 12 months without touching menu prices. With occupancy and overheads pinned at 30.0 points, those 6 points can only come from one place: prime cost has to drop from 62.0 to 56.0.
| Half | Today | Where the points would come from | Points in sight |
|---|---|---|---|
| Product (food and beverage) | 34.0 % | The gap between what the recipes say and what gets consumed | 2.7 |
| Payroll | 28.0 % | Over-staffed bands at the new location, without touching the peak | 1.3 |
| Subtotal | 4.0 | ||
| Missing | Sales mix, occupancy or short sales | 2.0 |
Diagnosis, and it takes a side: the imbalance is in product, not in payroll. Two reasons, both arguable. First: the original location holds 26.0 % payroll with the same menu and the same average ticket, so the house's 28.0 % is not a model problem, it is a two-year-old location that has not found its footing yet. Second: 2.7 of the 4.0 visible points sit on the product side, and that side costs nobody their job.
On the hire: not yet. Two more people at the new location run around 5,400,000 a month with charges, that is 2.5 points of total sales. If they bring no new sales —and reinforcing a slow band does not— prime cost goes from 62.0 to 64.5 and the goal moves 2.5 points in the wrong direction. The 30-day lever is exactly the opposite: freeze the hire until product delivers its 2.7 points, and look at this table again on the first working day of next month.
And a warning from the trade: this indicator does not replace break-even or contribution margin per dish. Nor is a low prime cost the same as a business that leaves money; the three get read together or none of them gets read.
SUPUESTO: no industry prime-cost band is used here, and that is deliberate. The 56.0 % ceiling comes from the house's own arithmetic: the 6 margin points the goal asks for, without touching menu prices, with occupancy and overheads at 30.0 points. Source: the sales, food cost, labor cost and goal declared by Sazón de Origen. If the house agreed to move menu prices, or renegotiated the new location's rent, the ceiling moves and this whole table gets recalculated.
The full example has 1 more part(s): you see them inside the library, with your account.