The 2% Time Bomb Why Most Restaurants Fail Speakers Dixie McCurly - PowerPoint PPT Presentation

The 2% Time Bomb Why Most Restaurants Fail

Speakers Dixie McCurly Stephen Gross

The 2% Time Bomb Why Most Restaurants Fail

Agenda - Introductions - - What is The 2% Time Bomb? - - How do you prevent it? - - Q&A -

What is The 2% Time Bomb?

The 2% Time Bomb? All of the small, seemingly insignificant , over-runs that cause waste ! 2% 2% 2% 2% 2%

#1 - Food Costs Food & Alcohol TICK! Industry Standards = 26-36%

#2 - Payroll & Benefits Wages, Employer Taxes, Workers’ Comp TICK! Industry Standards = 30% - 40%

#3 - Controllable Expenses (Sales - Costs - Payroll) = Controllable Expenses TICK! Industry Standards = 7% - 12%

#4 - Occupancy Expenses Rent, trash removal, parking/valet, utilities, CAM charges, etc TICK! Industry Standards = 5% - 10%

#5 - General & Administrative Rentals, Licenses & Permits, laundry & linens, cleaning/janitorial, etc TICK! Industry Standards = 1% - 5%

2%: What’s the Big Deal? Industry 2% Over-run IMPACT $3MM Averages 2% $60,000 Food Costs 2% $60,000 Payroll & Benefits 2% $60,000 Controllable Expenses 2% $60,000 Occupancy Exp 2% $60,000 G&A WASTE: 10% $300,000 $3,000,000 Revenue * 10% Waste = $300,000

Additional Time Bomb Examples • RENT COSTS % exceed 4% • CURRENT RATIO below .7:1 • INVENTORY DAYS AVG above 7 days • LARGE DEBTS at opening • Cash goes missing by 2% Now 10% can easily grow to 20%!!

The 2% Time Bomb How Do You Prevent It?

The 2% Time Bomb How Do You Prevent It?

How Do You Diffuse The Bomb?

Manage What Works For Successful Restaurants! i.e. stick to the industry standards

Manage What Works For Successful Restaurants! i.e. stick to the industry standards

5 Steps To Help DEFUSE The Time Bomb • Step 1: Gather insights from annual trends • Step 2: Troubleshoot profit margins • Step 3: Reduce Expenses by category • Step 4: Understand cash flow • Step 5: Maintain professional systems & procedures

Step 1 Gather Insights From Annual Trends

Step 2 Troubleshoot Profit Margins

Step 3 Reduce Expenses By Category

Sales % vs Costs AP Aging? %? Cash Balances Actual vs Budget? Step 4 Understand Cash Flow

Step 5 Maintain Professional Systems & Procedures

Monthly Meeting Agenda Monthly Meeting Agenda

4%

2%

2% 2% 2% OK! OK! OK!

2% 2% 2%

The Bottom Line

National Sales Growing From Year To Year

% Of Failed Restaurants 59% Fail within 3 years 26% 19% 14%

Defuse The Bomb! Food Sales $3,000,000 Food Costs 31% Payroll & 35% Benefits Controllable 10% Income Occupancy 10% 5% Expense 5% 0% EBITDA

What You Now Know: What Is The 2% Time Bomb? All of the small, seemingly insignificant , over-runs that cause waste! How To Prevent It? Manage to what works for successful restaurants! i.e. industry standards The Importance Of Maintaining Proper Systems And Procedures To Help You!

Questions & Answers

The 2% Time Bomb Why Most Restaurants Fail