Union MarketHigh expectations and a vision of success dance in the heads of every new restaurant owner. Weeks of work goes into planning menus, finding your niche, costing out the food and hiring your crew. Failure is not an option!

Except it is. And a very real one.

Many restaurants come and go for a variety of reasons, but one that comes to mind is the lack of understanding that raw food costs and labor can sink you rather quickly.

The cost of ingredients for each recipe is something that you must know and understand completely from the very start. Some restaurants price their menu items with a cushion, in order to weather the storm of changing prices, then sit back thinking they will check it again in a few months. There is a reason why food and gas prices are called volatile and are sometimes excluded in today’s Consumer Index numbers. It’s important to be on top of those changing numbers.

I’m not talking about watching the weekly invoice totals go up and down; it’s more about knowing what the cost of each menu item is. Herein lies the power to make adjustments to keep your costs in line.

A case in point: Eight or so years ago, when food inflation had subtly kicked in, I wasn’t paying attention. Sure, my invoices should have signaled a problem but I thought I knew better, thinking the market would go back down. Suddenly I was on the wrong side of my budget before discovering I had a problem. It cost me money and money that I couldn’t afford to lose. Catering income plummeted, and daily income almost disappeared as I compared it to my expenses. The question quickly becomes, “How do you recapture your losses?”

You don’t.

You learn from your mistakes and journey on, if you are one of the lucky ones. Others close their doors.

Another important key to keep an eye on is labor. It’s so tempting to hire extra people to have on hand to cover those occasional big events or to lessen the impact of quickly departing employees. If you can afford that luxury then go for it, but most  restaurants are living close to the line in today’s economy. Having a small, affordable crew and treating them well makes for a loyal work force. They will be happy to help you be successful in the eyes of your customers as well as think twice about skipping work or bailing out on you at the last minute.

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