operating ratios ???

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bingo88 in Atlanta, Georgia

87 months ago

We are in the initial stages of a business plan for a casual dining concept, freestanding, sports bar theme, approx $2 million in annual revenues.

Could someone provide rough estimates for:

1. food as % of sales
2. beverage as % of sales
3. annual property insurance (assuming we are leasing or leasing to own)
4. marketing as a % of sales
5. repairs and maintenance as a % of sales

Thank you.

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Mark Sanders in Peoria, Arizona

87 months ago

Because of the genaric nature of the five questions, they cannot be answered with any degree of accuracy without nore information. Regarding food cost as a percentage of food sales depends on your menu mix. For example do you serve breakfast/brunch, what is the percentage of non-alcholic beverages sold, what is the percentage of deserts/appetizers sold, what is your non-entree plate cost etc. I would also need to know the prevailing retail pricing for the Atlanta market. Not having any of this information, I would recommend that you price your menu at a 26%-28% cost ratio.
As to pour cost for your bar, the industry stand is 16%. However, as a "sports bar" your beer to liquor ratio would be higher than in a dinner house or cocktail lounge. Therefore, your pour cost would be higher more in the 18%-20% range.
When you ask about "property insurance" premiums, are you asking about just coverage for property damage or are you speaking of all insurance (i.e. liability, personal property, workmens comp, equipment repair etc.). Premiums are also impacted by factors such as; claim history, location, building age and size, community socio-economic demographic, fire and health department scores etc. I would reccomend that you consider that your total insurance cost to be no greater than $1 per square foot of space per month. For example if your store has a footprint of 3000 square feet, then your annual premiums would be $36,000.
When it comes to marketing/advertising, are you considering media advertising, print advertising or local marketing? If you were a franchise your franchise fee would be approximately 7% of your revenue and half of that would be allocated to brand marketing. In your case, your annual marketing budget would be $70,000 or 3.5% of revenue. However, in the case of a free standing independent restaurant paid advertising is often a waste of money! As a very successful restauranteur once told me, "the only effective advertising is word-of-mouth".

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