| Although "Prime Cost" is rarely found as a line item | | | | to see one example of a DAR. You'll need to know |
| on a restaurant P&L allowing an excessive prime | | | | F&B purchases for the day as well as total labor |
| cost is a key contributor to failure in the hospitality. | | | | dollars. The "control" concept is the same no matter |
| We all know that whatever segment of the industry | | | | what size operation you have. |
| we're in; full or quick service, pub or cafe, coffee | | | | Note: When computing daily labor expense you might |
| shop or espresso stand, that it's all about controlling | | | | as well figure Sales-Per-Man-Hour a well. Just divide |
| your business. Control requires information. Your | | | | the total number of hours by total sales. "SPMH" is a |
| accountant deals with your operation after the fact | | | | measure of productivity which does not take into |
| when the money is already spent. | | | | account different pay levels. It does not replace a |
| Be Pro Active. Don't Wait For Your Accountant to | | | | labor cost figure but it's just good to know. Again if |
| Tell You You're In Trouble! | | | | you click on the link in the "Bio Box" you'll find more |
| What Is "Prime Cost"? Simply stated it is a | | | | information about this kind of stuff. |
| restaurant's total food and beverage costs plus total | | | | What Do You Look at First on Your P&L? |
| payroll costs for a specific period of time. That total | | | | It's common to hear people comment that they look |
| divided by total sales = P.C.% | | | | first at the bottom line. My first glance at a P&L |
| It's just that easy! The important thing is the ability | | | | statement is Prime Cost and, since it is rare for it to |
| to view Cost of Goods Sold and Labor Expense as a | | | | be included as a line item, I usually have to figure the |
| single number or percentage. One way to insure that | | | | percentage in my head. Prime cost is one of the best |
| you are on the road to profitability road is complete | | | | indicators of restaurant profitability and how well the |
| a cost estimate. This should be done weekly so you'll | | | | business is managed on a day-to-day basis. |
| have the opportunity to correct unprofitable trends. | | | | Restaurants whose P.C. is anything above 57% nearly |
| Some even calculate their prime cost percentage on | | | | always have issues with product consistency and |
| a daily basis. However, in most instances a weekly | | | | food quality and for that matter, poor management |
| summary is sufficient. It's really not that difficult to | | | | practices. How a restaurant controls its prime cost is |
| add a couple items to your Daily Activity Report. You | | | | often a very telling indicator of how well the business |
| do have a DAR, right? If not , click on the link below | | | | is being managed overall. |