Variable costs are directly related to sales. Other variable costs include food , beverages, and some labour costs . Usually, the major variable cost is food and most of the labour.
Examples of variable costs are sales commissions, direct labor costs , cost of raw materials used in production, and utility costs . The total variable cost is simply the quantity of output multiplied by the variable cost per unit of output.
In general, expect to spend an average of $115,655 for kitchen and bar equipment. Furniture and tables can cost $40,000 alone, so be sure to plan accordingly.
If a restaurant does $20,000 per week and the total cost of food and beverages is $7,000 for that week, then the food cost is considered 35 percent. If, at the same restaurant, labor (including payroll taxes and benefits) equal $5,000 for the week, then the labor cost is 25 percent.
Calculate an employee’s labor cost per hour by adding their gross wages to the total cost of related expenses (including annual payroll taxes and annual overhead), then dividing by the number of hours the employee works each year. This will help determine how much an employee costs their employer per hour.
Variable costs vary based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output. Fixed costs may include lease and rental payments, insurance, and interest payments.
Variable expenses are defined as such because the amount you spend may vary each month. Although variable costs are quite often discretionary expenses, some may be necessities. Buying gas for your car each month is a variable expense, as are car repairs and maintenance. Grocery shopping is also a variable expense.
There are three main variables: independent variable , dependent variable and controlled variables.
Variable expenses , also called variable costs, are expenses that can change over time. Variable expenses differ from fixed expenses , such as your mortgage or rent, that remain the same throughout the term of your loan or lease.
According to one study, restaurants in the U.S. spend an average of $2.90 per square foot on electricity and $0.85 per square foot on natural gas annually, which breaks down to about 3% to 5% of your restaurant’s overall operating costs.
The range for restaurant profit margin typically spans anywhere from 0 – 15 percent, but usually restaurants fall between a 3 – 5 percent average restaurant profit margin.
While there are not any industry barriers, poor business acumen, no management, and lack of financial planning among first-time restaurateurs are some of the primary reasons why restaurants fail .
To run a profitable restaurant, most owners and operators keep food costs between 28 and 35% of revenue. With that said, there is no such thing as an ideal food cost percentage; it varies depending on the type of food they serve and the restaurant’s overhead and operating expenses.
On average, the cost to open a restaurant is between $100 and $800 per square foot, with costs varying based on location, concept, size, materials, new or existing location, and equipment.
Lease as Percentage of Sales In most cases, the industry’s collective experience shows that the lease cost should total no more than 5 to 8 percent of the restaurant’s total revenues. On that basis, a neighborhood restaurant with $800,000 in sales should expect to pay $40,000 to $64,000 a year.