Sales – costs = profit. It’s simple. If profits are good, there are more smiles and generosity – the fundamentals of hospitality. If money is tight, there’s not much for extras, and shortcuts will usually cut into service and quality. Everyone needs to understand restaurant profitability.
It’s easy for staff to misunderstand the profitability of a business – they assume that you’re making money on the first coffee sold on Monday morning, and it’s $3.50 profit on the $4.00 price. The financial literacy of staff is another training topic, but in the meantime it’s good for them to learn more about business essentials…
Why are restaurant profits so important?
- Profits mean more tax is paid – which pays for schools, roads and hospitals. If the tax rate on business profits is 30%, that’s $300 paid for every $1000 of profit. No profit = no taxes.
- The business can afford better (and often expensive) kitchen and coffee equipment, which is usually easier to use.
- They can afford better-quality ingredients instead of always hunting for the cheapest.
- Profitable businesses can pay for good uniforms, not cheap ones. Or provide them for staff instead of insisting they use their own.
- Profitable businesses can afford professional cleaning, so the place sparkles everywhere. They also buy flowers, quality furnishings and good tableware – small things that add up.
- Pay for staff training and offering staff opportunities for staff development. Hard-up businesses never do this.
- Profits allow for business expansion, which means more people employed and more opportunities for promotion, and work for your friends.
- The boss is more likely to take staff to a trade show and dinner afterwards, or take all the staff to the restaurant awards dinner.
- Managers don’t stress if someone has time off for urgent family reasons – they can afford to be generous.
- A profitable business shows staff how to operate successfully – a great learning opportunity if they have dreams of their own cafe or restaurant in the future.
- Profit gives the business a value, making it easier to sell. A business that’s easy to sell is usually fresh, lively and popular.
…and finally, a profitable businesses can give the boss a good holiday – making her more generous, smiling and easier to be around!
