I don’t like using them, but here they are.
Sales to Investment (Annual Sales/Startup Cost)
Leasehold – at least 1.5 to 1
Own Land and Building – at least 1 to 1
Sales Per Square Foot
Losing Money
Full-service – $150 or less.
Limited-service - $200 or less.
Break-even
Full-service – $150 to $250.
Limited-service – $200 to $300.
Moderate Profit
Full-service – $250 to $350.
Limited-service – $300 to $400.
High Profit
Full-service – More than $350.
Limited-service – More than $400.
Food Cost
Generally – 28 percent to 32 percent as a percentage of total food sales.
Alcoholic Beverage Costs
Liquor – 18 percent to 20 percent as a percentage of total bar sales.
Bar consumables – 4 percent to 5 percent as a percentage of total bar sales.
Bottled beer – 24 percent to 28 percent as a percentage of total bar sales.
Draft beer – 15 percent to 18 percent as a percentage of total bar sales.
Wine – 35 percent to 45 percent as a percentage of total bar sales.
Nonalcoholic Beverages
Soft drinks (post-mix) – 10 percent to 15 percent as a percentage of nonalcoholic beverage sales.
Regular coffee – 15 percent to 20 percent as a percentage of nonalcoholic beverage sales.
Paper Cost
Full-service – 1 percent to 2 percent as a percentage of total sales.
Limited-service - 3 percent to 4 percent as a percentage of total sales.
Payroll Cost
Full-service– 30 percent to 35 percent as a percentage of total sales.
Limited-service - 25 percent to 30 percent as a percentage of total sales.
Management Salaries
Ten percent or less as a percentage of total sales.
Hourly Employee Gross Payroll
Full-service - 18 percent to 20 percent as a percentage of total sales.
Limited-service - 15 percent to 18 percent as a percentage of total sales.
Employee Benefits
Five percent to 6 percent as a percentage of total sales.
Twenty percent to 23 percent as a percentage of gross payroll.
Prime Cost
Full-service - 65 percent as a percentage of total sales.
Limited-service – 60 percent as a percentage of total sales.
Occupancy and Rent
Rent – 6 percent or less as a percentage of total sales.
Occupancy – 10 percent or less as a percentage of total sales.
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Hey, Jeffrey, thanks for posting these rules of thumb. I found you via twitter. I’m going to “thumb” through the rest of your site. Looks good.
Thanks Harold. I’m looking forward to hearing more from you.
Hi Jeffrey, just wondering why you don’t like using the rules of thumb. They do seem quite helpful. Also, do you recommend breaking down your liquor cost into each of those separate categories? On our monthly inventory we lump together our liquor, beer & draft beer costs together and only separate out the wine. Also curious to know if you have a rule of thumb for what percentage of waste, comps & vip comps should be. Do you count basement square footage in the square footage sales model or just restaurant floor & kitchen? Thanks – love your site!
I don’t like them because they aren’t real. Each business is unique in every single category and to use ROT as standards by which to measure success is simply to not understand the numbers to begin with. COGS can vary dramatically even among extremely similar concepts. I don’t care if your food cost falls within the acceptable range for your category, if your ideal shows it should have been 4 points lower. The same can be said of every other category – including labor. If you want to use a standard by which to understand your success in managing specific cost areas, use ideal cost measurements. This can and should be done for every category. This is the biggest area where we find cost savings when we visit a new client.
As for segmenting individual cost categories, you absolutely should. This goes for food, liquor and labor. How else can you gauge where cost opportunities or inefficiencies exist?
On the question of ROT for waste, comps, etc… No I do not. Because there are none. Any waste should be unacceptable unless you are simply physically unable to eliminate it. This is why determining yields is critical in engineering your recipes – if you do. Comps, whether positive (VIP) or negative (mistakes) are a marketing function and totally discretionary but you have to ask yourself, ‘why do you have negative comps?’ The answer will determine your appropriate levels.
I count basement s.f. if it is deemed as usable space by either local ordinance or the terms of your lease or purchase agreement.
I appreciate the love. Hope to see you here more often!