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Archive for the ‘Cost Control’ Category

MinimumWageRoadSign

In my last post, I wrote about a study that predicts increases in the minimum wage will lead to significantly more restaurant closures.  Clearly, many restaurants and bars are unable (or failed) to raise their prices in response to increases in the minimum wage, resulting in their ultimate demise. (more…)

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minwage1

Premier Kathleen Wynn has announced that Ontario’s minimum wage will be increasing, substantially, over the next year and a bit. Based on studies done in other places, the jump in wages is likely to have a significant impact on small businesses, especially restaurants and bars. (more…)

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If I had been the founder of Groupon when Google offered up $6 billion for it, the door wouldn’t have hit me on the back-side as I rushed to the bank to cash the cheque! While I think Groupon is an interesting concept, they are really greedy, and ultimately, it will be their downfall. Let me explain.

Groupon seeks out businesses that are willing to offer deep discounts for their goods and services. Usually, the discounts are around 50%. Groupon takes another 25% or so for publicizing the offer and collecting the funds from the bargain-hunters. That leaves the business with only 25% of what it would normally take in on a sale.

Groupon talks businesses into signing up by claiming that they may lose a bit on the first sale, but they will make it up on subsequent sales. Nonsense. Alternatively, if businesses have excess capacity, they can accommodate lower-paying customers, because they only have to cover the incremental (or marginal) cost of servicing the customer. This works for spas and other similar businesses. There aren’t too many businesses that have a marginal cost less than 25%.

What about restaurants? They are probably the most popular Groupon category, based on demand. Is it worth it for a restaurant to sign up for Groupon?

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While I’m not a fan of Groupon coupons, at least for restaurants, I felt compelled to write a few articles about it.  Today’s piece covers accounting for Groupon coupons, because I’ve seen some really weird accounting recommendations and far-from-best-practices.  As far as I know, none of the more unusual accounting has been suggested by real accountants!

Future articles will cover how to generate the proper entries in QuickBooks, how to set up your Point of Sale (POS) system to properly account for redemptions of Groupon certificates, and why you may be in for a huge shock when the tax man comes a knocking.

For what it’s worth, if you really, really think you need to use Groupon (or Living Social) coupons at your restaurant, at least get the accounting right.  There are four types of entries that need to be made in your accounting system, which are:

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It is almost impossible to compare a restaurant’s operations with industry averages.  Organizations like the CRFA aggregate the smallest mom-and-pop with the largest chains to get their averages.  Not many restaurants are “average”, anyway.  Just about all industry statistics are based on surveys, not actual operating results.  Even though such surveys are anonymous, who wants to put down that their cost of sales is 40% or more?  So, the results are often skewed.

There is another way of compiling restaurant operating results.

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