How to Budget a Restaurant in 15 Easy Minutes

If you’re starting in the restaurant business, you’ll quickly understand how critical budgeting is. There are several advantages to arranging a restaurant’s budget in advance.

One of the most essential benefits is the ability to forecast operating expenses, spend less than sales, and reinvest profits in expanding your business.

If you want to learn more about How to Budget a Restaurant, you’ve come to the correct spot. This article goes through how to get started in great detail.

How to budget a restaurant? Record and Categorize Everything, Keep Track of your Sales Numbers, List Down All Expenses, Don’t Be Afraid to Make Drastic Changes, Choose the right restaurant budget template. A Good Restaurant POS System can assist you in knowing your numbers.  

How to Budget a Restaurant

Good financial management skills are crucial for every business owner, especially for those in the restaurant sector. Restaurant budgeting is a need, not an option on the a la carte menu.

And besides, the sector can soon eat you up if you don’t polish your restaurant payment processing techniques.

What Is a Restaurant Budget?

A restaurant budget is a financial restriction you decide is healthy and sustainable for your company. Take caution not to mistake your restaurant budget with your predictive restaurant analysis, as this estimates how your sales will operate together within constraints established by your budget.

You must include all business expenses in your restaurant budget process, whether it is necessary to buy or rent equipment, rebuild your company after a disaster, stay current on restaurant technological trends, or for any other reason.

Why Do I Need a Restaurant Budget? 

A restaurant budget is necessary for precisely the same purpose you might create any budget: to make sure you don’t exhaust your money too much.

Without a budget for restaurants, you’re just driving without seeing anything. Even if you have a vision of where you want to go, your firm is more likely to fail before you get there without having a budget.

A restaurant budget can serve as a Navigator to direct you to your goal alongside keeping your eyes focused on the road.

What Are the Benefits of Restaurant Budgeting? 

• By creating a budget for your restaurant, you can be sure you know your financial objectives. A budget allows you to assess how you’re doing, identify any systems you already have that aren’t being used, and decide which procedures to implement to affect your bottom line.

• You become an effective management team by using restaurant budgeting instead. 

• Budgeting is essential to be lucrative in a restaurant on intent rather than by accident. You are a reactive management team.

Guide to Creating a Restaurant Budget  

Define your restaurant’s costs.

The first step in keeping your restaurant’s finances in order is to have a handle on your expenses; these costs, in particular, can fluctuate substantially. Several future expenses that your restaurant can incur regularly are listed below:

• Food Cost 
• Alcohol 
• Marketing / Advertising 
• Labor
• Supplies
• Expense of management 
• Utilities
• Insurance

Restaurant operators know that their monthly expenses constantly alter, especially when adjusting for seasonal fluctuations. Because of this, it’s crucial to analyze the actual costs incurred by your business and record where money is spent. 

Calculate your restaurant’s costs.

Tracking your restaurant’s costs is a crucial first step toward sound cash management procedures, whether using modern restaurant technology or keeping old-fashioned records on paper and pens.

Maintain complete records of the costs incurred, the amount paid, and the payment methods used. When reviewing your totals at the end of each month, the accurate cost calculations you’ve made will help you decide what modifications are necessary. 

Use restaurant sales forecasting.

Predicting future restaurant sales volumes is equally as crucial as analyzing your expenditures at the end of each month. Even though it’s said that hindsight is 20/20, you should still try your best to forecast the sales for the upcoming month. Why?

The chief reason for keeping track of your restaurant sales forecasting is that if you don’t

generate enough revenue to pay your fixed costs; your company won’t continue very long. 

Track your restaurant’s sales.

Using digital solutions is essential for tracking sales (and costs, for that matter) at your restaurant. Even though the software is available specifically for monitoring sales, choosing more all-encompassing solutions, such as restaurant POS systems, is usually preferable.

The top point-of-sale systems for restaurants provide KPI statistics that provide comprehensive metrics records, including sales by item, day of the week, month, and year. These figures can widen your options for budgeting for restaurants and may even enable you to develop the appropriate pricing approach. 

Measure your sales against your costs.

After weighing expenses against revenues, you should utilize the profit margin calculation to estimate how much your company is making.

Any business owner’s main objective is to be successful, so if your costs are higher than your earnings, you’ll immediately realize that immediate work has to be done. Of course, there might be times when your expenditures exceed your income; for instance, if you’re expanding your firm, there might be a month or two when your costs are higher than usual. 

Optimize your restaurant finance management.

Your restaurant budgeting strategy can be spiced up in two key ways:

• Boosting the income from your restaurant
• Reducing the costs at your restaurant.

You’ll have to attract more customers and raise the pricing on your menu to boost income. By encouraging repeat business from current clients or using innovative marketing strategies to draw in more new clients, you can improve the volume of business (e.g. Social Media Marketing).

If you don’t have experience creating a pricing strategy, boosting your prices might be complicated and risky.

Do your research!

To cut costs, you must examine your costs (see stages 1 and 2 above) and decide which ones you can modify or possibly do without entirely. This could entail locating vendors with lower prices, reducing the number of full-time employees (and replacing them with part-timers), and other measures.

Take caution not to act too quickly; it’s possible that doing so will force you to replace even an inefficient refrigerator to reduce your long-term costs.

You could exert twice as much work by lowering expenses while raising earnings. If that’s the case, applying for a loan through becoming will help alleviate some financial stress.

With the help of cutting-edge technology, Become can make the application process for business loans faster, simpler, and more likely to result in finance for small firms who have had difficulty obtaining credit elsewhere.

Maximize your restaurant’s profits.

Whenever your restaurant’s budget is in order, you can focus on identifying increasing ways to boost your earnings. It’s common to confuse gross and net profit; therefore, avoid doing so. Understanding how each statistic relates to your restaurant’s overall balance and economic well-being is critical.

Besides just boosting revenue, raising profitability also has several collateral advantages. For instance, lenders will want to see a steadily rising net profit from month to month if you apply for a loan through a bank or other lending methods.

Your loan application will look better, and your chances of approval will increase if your net profits are more significant.

Maintain healthy restaurant cash management.

If you want to keep your restaurant steady and lucrative, you must be constant in your restaurant’s cash disbursement efforts. Setting up regular monthly assessments of your budget so you can make any needed modifications is an easy method to keep on top of your restaurant spending strategy.

There should also be a more thorough annual review of your restaurant budget when you examine the overall performance of your company over the year and reevaluate your more significant financial objectives.

All you’ve understood thus far about managing restaurant cash has been helpful and significant. Still, the advantages will rapidly become restricted if you go through it once and never update your restaurant spending strategy. 

Pick a Method of Statistics Recording That Suits Your Needs.

Figures form the basis of your budget—particularly keeping track of specific statistics. Therefore, you must implement a system to track and arrange said numbers. This could be as straightforward as a sheet of paper or as intricate as a sophisticated accounting system.

Data can also be kept using a reasonably generic spreadsheet tool like Microsoft Excel to a specialized accounting and budgeting program designed specifically for restaurants.

Whatever approach you decide on, you’ll need a way to keep track of current costs, daily sales, future spending, and more, so make sure that the software you pick can manage everything.

One of its appealing features is that computerized bookkeeping is based on the ledgers and columnar pads of the past. The technique by which you record your revenue and expenses follows the same framework—because of this, using the digital version will be simple once you are used to the paper version.

Calculate Costs

Data can be kept using a reasonably generic spreadsheet tool like Microsoft Excel to a specialized accounting and budgeting program designed specifically for restaurants.

Whatever approach you decide on, you’ll need a way to keep track of current costs, daily sales, future spending, and more, so make sure that the software you pick can manage everything.

One of its appealing features is that computerized bookkeeping is based on the ledgers and columnar pads of the past.

The technique by which you record your revenue and expenses follows the same framework—because of this, using the digital version will be simple once you are used to the paper version.

You might also compute your totals every two weeks. If you pay your staff every two months, this works great. Recording your expenses according to the schedule that suits you the most would be best.

Sometimes it’s helpful to know how much money you need to bring daily to cover your costs, and you don’t always need that level of accuracy. Everything depends on how you plan to manage your restaurant money.

Estimate And Track Sales In Your Restaurant Budget

When creating your restaurant budget, you’ll need to project your weekly or monthly sales if you’re starting the restaurant business. You ought to be aware of what that figure is. If you don’t, you’ll need to do some research or, if available, look at previous results.

In the best-case scenario, your anticipated revenues will be higher than the costs (expenses) indicated in the stage above. The first thing you need to work on is whether or not sales are more significant than costs.

One of the many advantages of creating a restaurant budget is that, when done correctly, it will frequently reveal where most of your sales are. After looking at your stats, you might be spending a lot of money on Drinks.

If your income isn’t falling short of your sales, it can mean that alcohol is the primary source of your money, even though that could mean you’re spending too much on this aspect of your firm. This realization might provide ideas for further increasing sales. You could decide to increase the selection of hard liquor and beer.

You could emphasize your liquor goods or mention them in upcoming advertising initiatives. When you go inside your restaurant to understand what’s genuinely driving sales and expenditures, you may learn these and many other insights using the figures your budget yields.

Compare Your Sales And Your Costs

Here is where the strength of a restaurant budget starts to show. You can get a decent understanding of your company’s financial situation by comparing your costs for the month with your monthly sales.

When you compare your sales and cost figures, you can immediately tell if you’re on track and if your objective is profitability. 

You are informed that you might need to adjust something. We say “may” because high costs like a remodel, new furnishings, or updated kitchen appliances occasionally lead your monthly expenses to exceed your income.

Once in a while, this is acceptable—and ideally, that extra expense is covered by savings—but if your usual costs, such as food, alcohol, salary, and bills, are outpacing your income, it’s time to discover some strategies to reduce your spending.

Make Changes So That Sales Always Cover Costs

To make these changes, below are three choices you’ll be needing

• Greater revenue 
• Reduce expenditures 

You can put more effort into attracting new clients to your restaurant to boost revenue. Consider concentrating on promoting repeat business. You might even decide to marginally or drastically raise your prices. The increase in income will somewhat cover the discrepancy between your sales and costs.

You might look for less expensive food and drink sources to cut costs. You might hire more part-time workers while reducing the number of full-time staff you have. To reduce utility costs, you might alter your restaurant’s typical temperature. You can apply each of these modifications.

Even more aggressively, you might focus on boosting revenue and cutting expenses. Regardless of your decision, your aim should be to increase revenues enough to offset your costs. That is the most fundamental company operating premise. You won’t last long in business if you don’t rapidly make this a reality. 

Work To Increase Profits Use Software To Keep Wages Under Control

The difference between your sales and costs is your profit. You’re in the red when your costs are higher than your sales. You make a profit (are in the black) when your sales exceed your costs.

It’s time to start concentrating on strategies to differentiate those numbers further when your profits exceed your costs. That leads us back to the same choices you had to make when attempting to bring in enough money from sales to meet your costs: attract new clients, encourage repeat business, reduce costs, raise prices, and so on.

Keep in mind that a restaurant’s primary goal, aside from providing excellent cuisine and service, is to turn a profit. That initial goal is achieved by doing anything to increase your profits while keeping your costs constant.

Simplifying staff hiring and keeping track of their hours worked are two ways to keep your costs in check.

Use Budgeting Software 

Using the software is one of the best ways to control your restaurant budget while still striving to boost revenues. Payroll is likely to be one of your budget’s most significant expenses.

Staff scheduling is a constant source of stress for restaurant managers. It takes a lot of time and may cause you to lose focus on more crucial problems that directly impact your customers and staff.

Additionally, scheduling can be a highly complex process. It can be challenging to manage twenty kittens when you’re attempting to schedule even five workers.

Employee A has family obligations that prevent him from working nights. Because he has classes in the morning, employee B cannot start working before noon.

Despite having the next few days off to take her mother to the doctor, Employee C can work whenever she wants. Just three people are employed there. Consider scheduling with 10, 20, or even 50 workers. Making a timetable can quickly turn into a complicated nightmare.

You may focus more on maintaining your restaurant’s profitability by taking advantage of those frequently unnoticed time reductions, which can build up to considerable cost savings.

And Scheduling Software For The Best Results

Running a successful restaurant requires having a budget in place. The scheduling procedure must be streamlined, and wage costs must be checked.

It’s recommended to utilize both a budgeting/accounting program and a scheduling program because these two jobs are essential for the success of any organization.

When used in unison, these technologies can provide you with in-depth knowledge of the inner workings of your restaurant and substantial control over the expenses related to your staff.

FAQS –

How Much Should I Budget for the Restaurant? 

The average cost to open a restaurant in a leased location is $275,000 ($3,046 per seat). The price goes up to $425,000, or $3,734 per seat, if you want to buy the whole place outright. It’s important to keep in mind, however, that starting a restaurant comes with its own set of costs.

Keep in mind that there is no set cost to operate a restaurant since it depends on many factors including the size of the business, its location, and the choices you choose. Sandwich shops, pop-up restaurants, and other types of takeout restaurants may be opened for far less than the cost of constructing a 200-seat establishment in an upscale area. Some would-be restaurateurs try out their concepts as temporary “pop-up” restaurants before committing to permanent locations.

When Opening a Restaurant, How Do You Choose an Appropriate Budget?

• Document and classify everything.

• Observe your revenue figures.

• Record each expenditure.

• Make a revenue vs cost comparison.

• Don’t get too hesitant to make significant changes.

• Select a suitable restaurant budget framework.

What Is the 50 30 20 Budget Rule? 

According to the norm, you should devote up to 50% of your after-tax income to necessities and commitments that are essential to you. The remainder should be divided into 30% for anything else you want, 20% for savings, and 10% each for debt reduction and savings.

What Is an Operating Budget? 

The expenses and earnings from the firm’s ongoing operations are included in the operating budget. The operating budget focuses on the costs associated with running the business, such as the cost of items sold in the market, also referred to as the price of sold goods, and the revenue or profit.

An operating budget aids businesses in setting and achieving objectives. Managers can evaluate the results by comparing actual results to the operating budget each month or every three months. By examining the outcomes, businesses can enhance performance, adjust to changing circumstances, and alter their activities and strategies.

Why Is Budgeting Important for the Food Service Department? 

• With a budget, the manager can evaluate prior performance critically. Participate in the forecasting process with individuals in charge of future results. Pay attention to how a restaurant’s sales, costs, and cash flow intersect.
• By creating a budget, You may better grasp your financial situation, investments, and future needs. A budget may guide important company choices like cutting costs, expanding staff, or purchasing new equipment.

What Are the Benefits of the Budgeting Process? 

• You get to prioritize expenditures.
• You avoid possible arguments with family members
• You help create a financial plan
• And also promotes good management.

Conclusion – How to Budget a Restaurant in 15 Easy Minutes

Waiting until your restaurant’s financial affairs are in crisis mode is not a good idea! Get your restaurant finance management skills up to par today to avoid possible difficulties.

No matter how you slice it, each restaurant’s budgeting strategy will be unique. Therefore, learn more about your financial background and how it may affect how you predict sales volume.

Keep in mind that adaptability is essential for adhering to your budget. You’ll be able to locate cost leaks before they become red-line issues, recover sales before they cause permanent declines, and arrange personnel following your sales needs if you have the correct tools (and mentality).

Jeff Smith is a Restaurant Consultant with over 20 years of hospitality experience ranging from server to owner and general manager.  He focuses on Restaurant POS technology as well as restaurant marketing.  Make sure to check out our world famous restaurant resources page for a comprehensive offering of hand picked resources and tools to help your business.  You can also check out some of our other restaurant business articles.