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Archive for February, 2010

I confess, the title of today’s post was the best I could come up with to try and make internal controls sound interesting.  Truth is, the mere mention of internal controls makes most accountants’ eyes glaze over.  While they may not be “fun”, they certainly are profitable.  I’ll be writing extensively on the topic in the future, because the lack of effective internal controls will eventually destroy otherwise sound businesses.  It’s a tough task, but I will try to keep the discussions practical and avoid theoretical, technical details.

Internal controls are the backbone of your operations.  They help ensure that things get done the way they are supposed to and help ensure the accuracy of your financial reports.  They include both preventive and detective controls.  Whether you know it or not, you already have some internal controls in your restaurant.  The question is how good are they?

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On this blog, I mainly talk about controlling costs in restaurants.  When we look at sales taxes that restaurants pay, we rarely consider them to be “costs”.  Sales taxes are considered “trust” taxes.  Restaurants, retailers and other businesses that charge sales taxes are really collecting them on behalf of the government.  This means that sales taxes are not revenues and the remittance of sales taxes is not an expense.

So, it should be obvious that restaurants don’t have sales tax expenses.  However, many restaurants do have sales tax expenses!  I’m going to tell you how.

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I’ve been scouring the net for useful information on a variety of topics related to restaurant cost control.  I have to tell you that it is a pretty discouraging task.  The vast majority of the web sites and blogs offer very little useful information for a restaurateur who wants to manage his or her operations better.  Many blog articles are far too simplistic to be of any use.  It is a waste of time reading (or even scanning them)!  Others  offer a huge number of articles, videos and templates, but usually require you to sign up as a “member” (i.e. customer).  A quick review of their offerings suggest that you are not likely to get your money’s worth.  A few sites offer advice that is, well, wrong.  I hope to correct this deficiency, with an ongoing series of blog entries on this site.  In the mean time, you might consider Joe Dunbar’s blog, Food Cost Control.  Joe’s blog is one of the best I’ve come across so far.  Maybe I have a soft spot for his site, because he’s so analytical!

Today’s topic is restaurant costs.

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Recently, the Canadian Restaurant and Foodservices Association (CRFA) published three calculators to help restaurateurs determine the effect of the new HST, effective July 1, 2010, on their prices.  The calculators cover wine, spirits and beer.  I’ve included the links, below.  Perhaps a short note is necessary to help you use them properly.  They are set up for “typical” value, medium and premium priced examples.  Unfortunately, you aren’t able to change the net cost figures, but they will give you an idea as to the effects on your prices and the price that your customers will be paying come July.

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Wine inventory is different from food inventory in one very important aspect.  Wine turns over a lot slower than food.  In other words, it stays on the shelf longer.  While food must be sold quickly, or it perishes, wine often improves with age.

The size and composition of a wine list depends on the type and style of restaurant.  Higher priced, fine dining restaurants tend to have larger wine lists and include higher priced wines, while casual dining restaurants feature a smaller selection of reasonably priced labels that appeal to a larger audience.

We usually categorize wines by varietals, countries and price, and often show the wines by-the-glass separately.  This is helpful for the customer trying to make a selection, but it is much less useful to the owner/manager.  There are at least four different categories of wine, and each has its own unique profit profile and implications for analyzing costs.

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