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Now that online ordering is fast growing to be a major norm, you need to reevaluate the value of your physical location. One of the most significant ones is the reduction in foot traffic. The landscape has changed since the pandemic, with new restaurant trends emerging as we speak. It might be the ideal place back when you started – but does it remain that way until now? Now, it’s safe to assume that you’ve done your research when choosing that precise location for your restaurant. There are a couple of ways that you can go about trying to minimize your rental expenses, such as the following. Thus, it makes sense that managers should focus on this significant red mark to reduce their total overhead. It’s highly unlikely that you own the building that your establishment is in, so rent remains to be one of the biggest cost drivers in any restaurant. We’ll split it into several parts after the most major cost drivers of your overhead: rent, utilities, labor, and waste. How you can do that is what we’ll discuss in this section. If you know what to do next, you will see this number lessen significantly over the next couple of payment periods. Your overhead costs merely serve as a metric for the things that you’re doing right. So you know how to calculate your overhead costs – great! But that information isn’t actionable if you don’t know what to do next. Calculate for restaurant efficiency (overhead as a percentage of sales).Add up all your monthly expenses to find overhead costs.The entire process can be summed up as follows: Overhead as a percentage of sales = Overhead / Total Monthly Sales x 100 With both these figures, you can then calculate the overall efficiency of your establishment with this formula. Next, gather your total monthly sales from POS data.
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This will give you your monthly overhead. Once you’ve listed everything in the right payment periods, just add everything up. For example, if you only pay your taxes every quarter, divide your total tax cost to accommodate how much you’ll have to save each month. Some of the most common expenses managers include in their overhead calculations are as follows:Įnsure that all of these bills have the same monthly period of payment. Whatever period you choose for your calculations, it doesn’t change the first step of your calculations, which is to make a list of all your expenses. Most managers decide to calculate monthly expenses since the patterns are already laid out and thus won’t take as much time. Overhead costs are recurring expenses, so you can decide whether to calculate them on a monthly or any other arbitrary basis.