Friday, August 23, 2013

How much should I sell?

One of the big things that most first time and even some experienced restaurateurs don't know how to do is figure out what their targets really mean. It's quite simple to say, we need to do revenues of Rs. 500,000 but what that really translates to in terms of number of people per month, business growth, costs are things that are usually not thought about.

If you take into account an average inflation of 8% in India, your business needs to grow more than 8% a year in order to be considered a growing and healthy business. Taking conservative growth of 12% or 1% a month. Sales of Rs. 500,000 today should grow to Rs. 525,500 in 6 months and Rs. 557,900 in one year.

How does this translate to the number of people you need to come and eat at your restaurant?
If your restaurant's planned average spend per person is Rs. 150 you need to attract 3,333 people each month or 111 people each day. If the APC is Rs. 400 this changes to 1,250 people / month and 42 people each day. Here's a table that takes you over a few different scenarios.

Hopefully this helps you plan just a little better and not be surprised on how many people you need to have coming through your doors!

Month Monthly Revenue 150 400 500 550
1 500000 3333 111 1250 42 1000 33 909 30
6 525505 3503 117 1314 44 1051 35 955 32
12 557834 3719 124 1395 46 1116 37 1014 34

Thursday, November 1, 2012

Multi-Cusine!!! Really?

A few days back we went to the restaurant because of the promise of good steak. As soon as we reached there the first thing I noticed was the section for steak was hidden in the back on the menu, the first few pages had everything from Vietnamese, Indian, Chinese to Italian food.

After starting a restaurant, I understand why this has happened but just think about it a little. If you're going to put that much pressure on the kitchen to produce all this food, will you really be able to do justice? I know customer ask for all this food but they're also the first people to complain if the Chinese food they're eating in a steak house isn't good. This leads to people thinking that the restaurant isn't good even though you're probably putting out great steaks.

Top Tip: Keep your menu simple, I know people coming to the restaurant will ask for everything from biryani to pasta but if you can resist the urge to serve food that I can assure you will be average; people will start coming there for what you're good at and these are the people you want to serve anyway!

Saturday, October 20, 2012

How bribes affect everyone!

I know everyone is against bribes (except I suppose the people taking them) but we're all paying them anyway, either willingly or unwillingly. Let's try and figure out how much its really costing us!

Let's take the most basic license required for any business in India, the Trade License. The official cost of a trade license varies from Rs. 25 to Rs. 50000 depending on the type of business you're thinking of opening. The bribe one gets asked for, for the license is usually about 2 - 4 times depending on how big a restaurant you want to open. Let's assume you're asked for 1.5 L in bribe. This brings the price of the license to Rs. 2,00,000 or Rs. 550 per day. This is the cost of just one license. Add to this the fact that you have to get a food license, labor license, music & entertainment license, get harassed by the traffic cops for money and you can see how this figure suddenly climbs to a substantial amount. If a restaurant gets 50 customers a day, between Rs. 25 & Rs. 50 per person is going in "incidental expenses" for a restaurant in Bangalore. This money can be used to get drinking water to everyone in Tamil Nadu!

PS: if you want a wine, beer or a full alcohol license in Karnataka the bribe is anywhere between 10 - 18 times the cost of an actual license. a Rs. 6000 wine license can cost anywhere upto 1,00,000, beer about Rs. 50 L & a full alcohol up to Rs. 80L!!!

Wednesday, October 17, 2012

The real cost of restaurant food?

When a lot of us go to a restaurant, we’re not quite sure why the price of a plate of potato wedges or chicken wings is what it is. This usually leads us to believe that the restaurant is pricy. What most of us don’t realize is that the process of pricing a menu item is a very complicated equation. Things like the cost of raw ingredients, rent, salaries, electricity and water all make up the equation. 

Let’s take a simple example of the chicken wing; if the cost of 1 kg of chicken wings is Rs. 280, we get 4 plates from 1 kg of wings, this implies the cost per plate is Rs. 70. The other ingredients that include honey, herbs, seasoning etc. cost Rs. 15 per plate. The cost of fuel being burnt is Rs. 10 (remember the cost of commercial gas is 3.5 times the cost of domestic gas), baking the wings in the oven results in electricity of Rs. 10 being used (a small restaurant pays about Rs. 50,000 in Bangalore for electricity). The salary of the person making this is about Rs. 50 per hour & the salary of the waiter serving you the dish is about Rs. 40. All this adds up to Rs. 185. On top of this take the astronomical rents restaurants have to pay, the large sum of money that has been invested in opening the restaurant and there is the salaries of the manager & owners. Add all this and suddenly you’ll be surprised if the cost of wings cost you less than Rs. 380!

So the next time you’re tempted to complain about how expensive a plate of chicken wings is because you had to pay Rs. 250 for it. Think again!