Category Archives: Restaurant Growth and Profitability

Profits Interest: Tax Free Equity in a Restaurant Partnership

If structured effectively, issuing sweat equity can reward and incentivize employees in a restaurant group. However, when the equity in an LLC (taxed as a partnership) is granted, the value of that equity is generally taxed upon vesting, thus subjecting the employees to tax without receiving any cash. The value of the equity is also

Top 5 Alternatives to a POS Loan

Running a restaurant is akin to juggling a flaming chainsaw while riding a unicycle. You’re constantly managing staff, inventory, vendors, marketing, and of course, your customers and their needs. On top of all that, you need to make sure your financial tightrope doesn’t snap. Is a loan from your POS provider the best safety net for

Determining Your Restaurant’s Cash Reserves and Working Capital Requirements

Cash Reserves Working Capital Requirement

A restaurant’s sustainability and growth potential are highly driven by its capitalization and the amount of liquid assets (like cash) that it retains. If a restaurant is not properly capitalized, its operations will be strained, vendors will not extend terms, and it will be unable to take advantage of growth opportunities. If a restaurant is

Financing Your Restaurant Expansion: Unlock the Secrets

Financing Your Restaurant Expansion

You’ve tasted success with your restaurant, and now you’re looking to savor more of it, perhaps by adding more seats, sprucing up the décor, or even taking a leap to open a brand-new location. As enticing as expansion can be, it often comes with a side dish of financial challenges. How do you fund this

How to Calculate and Assess Controllable Profit

How to Calculate and Assess Controllable Profit

Every restaurant has controllable and non-controllable expenses. Controllable profit measures the amount left over after deducting controllable expenses from your sales. A seasoned and effective general manager will maximize controllable profit by monitoring and managing the controllable expenses. In this article, you’ll learn how to calculate controllable profit and why it’s an important measure of

How to Control Restaurant Labor Costs in 3 Steps

Labor cost as a percentage of sales indicates whether or not labor should be adjusted in a restaurant. However, actually controlling and managing labor cost requires more analysis. Labor cost can be controlled through effective scheduling and improving employee productivity, but only if you have access to actionable data and reliable reports and have the

The Ideal Labor Cost for a Restaurant or Bar

The ideal labor cost in a restaurant differs for every concept because it depends on the overall prime costs as a percentage of sales. Prime costs, which is the cost of goods (COGS) plus labor, should never exceed 65% for full-service restaurants and 60% for quick-service restaurants. Therefore, the ideal labor cost is the amount

How to Use Financial Data to Achieve Ideal COGS in 3 Steps

This is not another article telling you to order shredded carrots instead of shredding them in-house. Instead, we will show you how to use your financial data to achieve the ideal cost of goods sold (COGS) that will guarantee profitability in three steps if your other KPIs are in order. First, we’ll show you the

How to Calculate a Restaurant Valuation (Part II)

In Part 1, we outlined how to assess the viability and value of a new restaurant project using the sales-to-investment ratio. In this article, we walk you through valuing an existing restaurant and how these valuations are determined by thinking like an investor, and describe common pitfalls and factors that could affect a restaurant’s valuation.

Assessing a Restaurant Investment (Part I)

Building a new restaurant, expanding or selling an existing restaurant, or admitting a new partner require an accurate valuation so that you will know how to structure the terms of a deal. Whether you are a single-unit or multi-unit concept, the value of your restaurant is mostly driven by profitability and cash flow at the