Running a restaurant is pretty great, but it does come with a fair share of nuisances and obligations. Calculating restaurant overheads is not as simple as it sounds, but it’s also not exactly rocket science. As long as you know what you’re doing and as long as you manage to keep everything under control, calculating restaurant overhead shouldn’t be too hard.
If you’re a complete novice and are struggling to keep up with the pace, take a moment and check some of the tips and tricks we’ve covered in this article. They are designed to help you overcome some of the most frequent obstacles many restaurant owners are faced with when calculating costs.
What are Overhead Costs?
Overhead costs refer to ongoing expenses that come with running a restaurant such as advertising, utilities, rent, and salaries. The important thing to remember is that this concept applies only to expenses that are not related to the costs of raw materials, food, and other components related to producing goods.
The vast majority of these expenses are fixed, and most of them aren’t susceptible to change. However, there are still a couple of things you can do in order to figure out how to reduce overhead costs.
How To Calculate Overhead Costs?
Most restaurant owners calculate their expenses on a monthly basis. It’s completely arbitrary, so you can do it on whichever basis you deem necessary. However, doing it on a monthly basis is an optimal solution as it doesn’t require as much dedication and time.
The first thing you need to do is draw up a list of your monthly expenses. This list should contain your rent, equipment, salaries, taxes, and other fixed expenses. Once you make the aforementioned list, all you have to do is add all costs up.
Once you have the monthly overhead, you can use it to calculate the overall efficiency of your restaurant. In order to do that you can use the following formula:
OPS= OH/TMS ×100
Where OPS is overhead as a percentage of sales, OH is overhead, and TMS is total monthly sales.
How to Lower Overhead Costs?
Now that you know how to calculate the costs, it’s time to see whether it’s possible to reduce them.
Try Negotiating Over Your Rent Bill
Most landlords will be willing to renegotiate the terms of your contract as long as you have something to offer in compensation. For example, if you commit to staying there for a while, your landlord might be willing to lower your rent and help increase your profit.
In case they are not willing to cooperate, you can always sublease a part of your venue and make money that way. For example, if you have a large kitchen space that is not being used by your employees, don’t hesitate to sublease it to another business entity and make some money that way.
Invest in Quality Equipment and Save Money
The vast majority of modern dishwashers, stoves, and other appliances is already designed to save money in the long run. Some of them contain smart technologies that save a lot of power, thus reducing your bills and overhead. Other appliances are equipped with components that save water and use smart timers to save power.
Most of these units also cut labor costs because they don’t require as much maintenance and care as some other (usually obsolete) hardware.
If you want to learn more, read our other articles! For more information, get in touch with Glimpse, today.
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- Average Bar Profit Margins And How To Maximize Yours
- What is the Average ROI for Restaurants?
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