You are likely using the traditional Gregorian 12-month calendar to plan vacations, celebrate holidays, pay rent and mortgages, and plan your daily life. It’s the calendar you were raised with and are used to. However, when it comes to labor scheduling and forecasting in a restaurant or bar, you disregard months and plan for the week because every week contains the same number of weekdays and weekends, making budgeting and trend analysis more consistent, predictable, accurate, and comparable.
Yet, many independent restaurants and restaurant groups use monthly financial reports (profit and loss statement, balance sheet, etc.) to assess their financial performance. This creates a performance analysis conundrum because every month has a different number of days, as well as a different number of weekends and weekdays. This issue is exacerbated in late-night nightclubs and bars that generate a larger share of their sales over a few days per week. This monthly reporting inconsistency also applies to other retail industries, not just hospitality.
As a result, the 52/53-week year has been widely adopted by many restaurants, bars, nightclubs, restaurant groups/chains/franchises, and retailers for their financial reporting, demonstrating its industry acceptance and effectiveness. We did an in-depth analysis of the calendars adopted by the nation’s largest restaurants and chains to demonstrate the prevalence of the 52/53-week year in the restaurant industry, and you can access it here.
In this article, we’ll explain how the 52/53-week calendar works and its advantages and challenges so that you can decide whether it’s the right fit for your restaurant, bar, nightclub, or hospitality group.
How the 52/53-Week Year Works
A 52/53-week year is divided into 52 x 7-day weeks grouped into four or five-week blocks known as periods, with 364 days. The deviation from 365 to 364 days in a year is managed by adding an additional week to the last period every five or six years so the year can be ‘caught up’ to align with the calendar year. This additional week is where the 53-week comes from. This ensures consistency in reporting between seasons and holidays and demonstrates the adaptability and resilience of the 52/53-week year.
In the 52/53-week calendar, the equivalent of a month is known as a period. A period can be a group of four to six weeks. The periods are crucial for comparability and performance analysis and must be defined carefully to ensure accurate comparison. There are four options for periods in a 52/53-week calendar, each with its own benefits and considerations:
- 13 x 4-week periods: The year is divided into 13 periods, each lasting four weeks. The advantage of the 13 x 4-week period year is that every period can be compared to each other because it contains the same number of weekends and weekdays. You can run a report showing trailing periods, such as the last rolling 3 or 13 and see comparable periods. The disadvantage of the 13 x 4-week period year is that you will not have comparable quarters because one quarter will have four four-week periods instead of three.
- 4-4-5/4-5-4/5-4-4: The year is divided into four fiscal quarters, each divided into three periods of four or five weeks. For example, 4-4-5 means each quarter includes two 4-week periods and one 5-week period for a total of 13 weeks. You can choose the variant that most accurately suits your business. This method allows you to have more accurately comparable quarters instead of periods. The 4-4-5 calendar is widely used by publicly traded companies because they must issue quarterly reports to their shareholders.
Advantages and Challenges of a 52/53-Week Year
So far, we have only discussed the advantages of using a 52/53-week year instead of a traditional Gregorian calendar year for financial reporting. However, the 52/53-week year is not ideal for every operation. Although it is more commonly used among publicly traded national restaurant chains, franchises, and larger restaurant groups, as shown here, it may not be ideal for your setup and preferences. Below are the advantages and challenges of implementing the 52/53-week year for financial reporting purposes:
Advantages
- All periods can be compared to others because they contain the same number of weekends and weekdays in each period. Comparing months in a restaurant business is not ideal because every month contains a different number of weekdays and weekends. A month with five weekends instead of four weekends will show very different results.
- Labor scheduling and sales forecasting are typically managed weekly. Financial reporting is more valuable when aligned with management and operational decision-making.
- Inventory counts fall on the same day of the week, usually Sunday or Monday, typically a slow day in restaurants, regardless of the period. This results in more predictable, consistent, and low-stress inventory counts. Many restaurants are closed on Monday, so Sunday will also be the day with the lowest inventory count, thus reducing the time required for inventory.
- Payroll is typically processed on a weekly or biweekly basis. Aligning pay periods with reporting periods results in more accurate labor costs because your accountant is not required to estimate and accrue the amount of payroll and labor costs in the gap period between the end of a week and a month.
- Budgeting and assessing prime costs align with the P&L. Most restaurants budget and assess their prime costs (cost of goods sold and labor) weekly. By reporting your P&L and financial statements weekly, you are streamlining your reporting and budgeting and ensuring they’re all aligned.
- It is the preferred reporting calendar by venture capitalists and other private equity investors that are trying to invest, grow, sell, and/or go public.
Challenges
- Recognizing expenses typically billed on a Gregorian monthly basis, like rent, utilities, and insurance, becomes challenging. You will need to annualize the cost and then divide it into weekly periods to get an accurate expense on the P&L.
- Recognizing depreciation expense becomes challenging because most independently owned restaurants are recording depreciation based on their tax returns, calculated on a Gregorian calendar year, or using a fixed asset software that doesn’t support a 52-week year.
- 52/53 weeks can’t be evenly divided into quarters with periods with the same number of weeks. Therefore, it can be a challenge to compare previous periods.
- Some major accounting systems*, like QuickBooks, can’t support a 52/53-week year. However, The Fork CPAs provides a reporting solution that allows you to use Quickbooks Online (QBO) and adopt a 52/53-week year. Contact us to learn more.
- Your accountant may be unwilling to adopt a 52/53-week year because it drastically changes their procedures and systems for managing the books and sales tax. If you face this challenge, please contact us, and we will help you.
*Restaurant365 has a feature that allows you to run two separate fiscal year structures for the same legal entity which allows you to cater to your operational and finance teams based on their needs and preferences.
Implementing a 52/53 Week Fiscal Year
Implementing a 52/53-week Fiscal Year can be frightening after all these years of using a Gregorian calendar year. The accounting challenges that come with it guarantee that your accountant, controller, bookkeeper, or CFO will oppose it if they’re not a seasoned hospitality accountant. It may seem like the only option is to convert your accounting systems to Restaurant365, which is an option, but there are alternatives!
At The Fork CPAs, we can offer a 13 x 4 week reporting calendar for Quickbooks Online (QBO) users as well. Although many of our clients prefer the Gregorian monthly calendar due to its simplicity and understandability, we have helped many restaurants convert to a 52/53-week fiscal year by leveraging our team of hospitality experts and technology stack.
Feel free to schedule a discovery call to learn how we can streamline and modernize your restaurant, bar, or nightclub’s financial reporting.
