![]() It's good to compare current sales with the same period of the prior year and to a budget or forecast. Strong sales volume can make up for quite a few management mistakes and cost control glitches - at least for a while anyway. While this is pretty obvious, the top line is the single biggest profit-determining factor on the P&L. Integrate the steps described in this article to help turn around inconsistent or lackluster financial performance. Too few restaurants employ effective budgeting, which is a critical path to effective management and profitability. The restaurant P&L and budget formats differ from that of other businesses in that they make it easier to identify the four major checkpoints restaurants need to monitor - sales, prime cost, controllable profit and net income. ![]() (We strongly suggest you adopt the restaurant industry P&L format as recommended by and the National Restaurant Association.)Īdditional Resources: The Best Way to Format Your Restaurant's P&L The budget is your hypothetical profit-and-loss statement (P&L) therefore, it should be formatted the same as a monthly P&L. It forces management to consider changing conditions and adapt their operations to maintain profitability and consistency of product and service. A budget is an organizational plan expressed in monetary terms. The vast majority of restaurant failures can be attributed, at least in part, to the absence of a plan or practical budget upon which decisions, accountability and actions are based.Ī budget is a fundamental tool by which business owners and managers can predict, with reasonable accuracy, whether their restaurant will profit, break even or lose money. Unfortunately, more than 60 percent of all restaurants end up on the most hazardous of these routes by their third year of existence. But the most treacherous road leads to failure, and in some cases, financial ruin. Another, less desirable road is that which leads to break-even, or merely hanging on. The most preferred route is to take the road to profitability and success. "If you don't know where you are going, any road will get you there." For restaurant owners there are three "financial" roads, each leading to a different destination. Article How to Create a Realistic Budget For Your Restaurant by Joe Erickson
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