Restaurant Cost Controls

Restaurant operations are logically divided into four basic elements: cost of merchandise purchased for resale; salaries and wages, including employee benefits; operating expenses; and net income. The first two elements can be divided into three major cost categories: food cost, beverage cost, and salaries and wages. These three costs, combined into what is sometimes known as prime cost, typically consume between 60 and 70% of the restaurant sales dollar while operating expenses and net income represent the balance. The object of control procedures is to provide a flow of information on those variable costs and expenses which management can influence through professional management techniques. Although operating and other expenses are partly variable, many are fixed and the overall share of the income dollar is relatively small. Therefore, controls should be put in place for Food and beverage costs and payroll expenses because they represent the largest controllable cost elements. The purpose of this section is to suggest controls over those three major cost elements, and illustrations are included. However, each restaurant operation has different requirements, and controls should be developed and modified to meet individual needs.