How to Deal with Restaurant P&L Reviews

How to deal with Restaurant P&L Reviews

Fictitious numbers showing an example of a good restaurant P&L review form. This form is proprietary for a specific company and is not available for download. Click for a larger image.

As a Chef you will be held accountable for your budget numbers and usually will be required to attend regular restaurant P&L reviews (Profit and Loss) in which you will be expected to explain your numbers. Here are some tips on how to handle these meetings and the questions which will inevitably arise.

Study the Numbers!

First and foremost… Know your shit! For real, if you don’t know your numbers and why they are good or bad then you’re sunk. You need to know your numbers inside & out and have an explanation for everything. And it can’t be a bullshit explanation…you need to have believable,  plausible, legitimate responses to questions about the good and/or bad aspects of your numbers. If you can’t explain your numbers then you have already lost because you will appear weak, unknowledgeable, and inept.  So start by reading and knowing the concepts listed below.

There are no Problems, only Solutions

Never offer anything up as a problem. You do not have problems, you only have challenges. And before you present anything as a challenge, you need to have a possible solution as to how you’re going to deal with that challenge. You need to show that you’ve taken ownership, have a plan, and are moving forward to solve that challenge.

During your restaurant P&L reviews, if a question from a superior about your P&L takes you off balance, do not bullshit or blow smoke! It’s OK (occasionally) to say that you’re unsure or that you don’t know. But immediately follow that up with how you will investigate it to find a solution. It builds trust and honesty if you are able to truthfully admit when you do not have an answer. So long as that doesn’t happen too often, and so long as you always follow up so that in the near future you have an answer to that situation. If you arrogantly profess that you are “Mr. Know-it-all” then you will be discounted as an arrogant, insecure ass who is unteachable. Admit your shortcomings and seek to learn, and do not make the same mistake twice. Once you’ve been given knowledge you MUST act upon and implement that knowledge.

It’s important to note that lots of knowledgeable answers with an occasional “I don’t know” answer is a good thing. Lots of “I don’t know answers” with an occasional articulate answer is a bad thing. And spewing bullshit in either situation will always taint your reputation. If your superior is halfway smart they will know you’re bullshitting and then you will need to go through the arduous process of regaining their trust. That’s not a wise situation to put yourself in.

If you find that no matter what you do the numbers don’t work out then it’s either one of two things. Either the company is setting bullshit numbers which are unattainable, or you need some serious improvement on your management skills.

Common Topics in Restaurant P&L Reviews to Understand

Today’s Professional Chef needs to be much more rounded and business savvy than simply creating good food and managing your food cost. Here is a short-list of common P&L concepts which you need to understand. Each one has a brief description with a link for more in depth study.

How to Manage Food Cost Actuals

Managing your actual food cost is a multi-layered exercise in communication, discipline, and management standards practiced by you, your staff, and everyone who has any contact with the food and/or the billing/invoicing process. There are a host of reasons why your food cost may be good or bad. It could be incorrect recipes, bad portioning, theft, incorrect invoicing, incorrect inventory taking, a bad menu mix, or a plethora of other possibilities.
Further Reading: The Forty Thieves of Foodcost

Know the Best Way to Manage Period-end Inventory

If you are just taking inventory at the end of the period and turning it in without knowing all the other steps needed to assure it’s accuracy then your food cost is bound to be wrong. I ALWAYS find errors in the inventory process…every single time, no exception, ever. Read the following article about how to accurately take and verify your inventory.
Further Reading: Restaurant Inventory Control (a 4 part series)

Know your Sales Mix

Your Sales Mix is the analysis of your most popular and least popular menu items sold. It should be broken down by category such as appetizers, salads, entrees, sides/extras, desserts, etc. A good POS system should be able to generate this report for you.

But this Excel tool (Sales Mix pg link) for evaluating your Sales Mix goes further. It allows you to determine the best margin as well as the food cost of each item. And best of all, it will give you a Theoretical Food Cost based upon the actual items sold.
Further Reading: Sales Mix

Know your Theoretical Food Cost

a chef's attention must be divided between creativity and business senseA chef’s attention must be divided between creativity and business sense. If you have the Sales Mix tool working then you can calculate your theoretical food cost and compare this against your actual food cost. The theoretical food cost is the food cost you should have based solely upon the items sold on your menu. If you sold only lobster then it stands to reason that your food cost would be higher than normal. If you sold only grilled cheese sandwiches then you could expect your food cost to be lower than normal.

This is the menu mix in action. It’s important to note that theoretical and actual food cost will never be the same…actual will always be higher by roughly 2 – 4 points. This is because theoretical does not account for waste, over-portioning, theft, miss-fires, mistakes, re-fires, server errors, comps, marketing promotions, etc.
Further Reading: Sales Mix

Know your HOH Productivity Numbers

The most often used measurement for kitchen productivity is covers per hour = covers/total labor hours. This calculation tells you how many labor hours it takes to serve each cover. And of course this number varies widely based upon the type of operation you have, and also by the business levels your operation has.
Further Reading: Manage Restaurant Productivity

Restaurant P&L reviews vary by company and you may not need all of these statistics, but knowing them will certainly make you king of your castle! And of course, some companies may have additional budget review info which they expect from the Chef. If you have other recommendations of kitchen budget numbers leave a comment and an example!

 

  • Adam Diltz

    Hello, I really love this site. My question is with labor cost. My bosses want a 35% labor cost which is doable when sales are high and it is busy, it’s almost impossible in slower months with how the kitchen is set up. The owners are cool and since the numbers have never been lower since I took over, they don’t come down on me when it is high, but one thing I think is wrong is if my line cook takes a vacation and gets paid for it, it still calculated as paying for labor that period. Same with bonuses. If I get a bonus because of my numbers at the end of the year, it goes towards the labor cost for that period. (we do weekly reports) I think this is kind of ridiculous, am I wrong?, I think it should be on a separate line for perks like insurance or something? What are your thoughts?

    • @adamdiltz It is common for companies to include things like vacations, funeral leave, PTO time, bonuses, etc in the cost of labor. But you are correct that they will also usually include it as a separate line item under the labor cost section (in the picture at the top of the article I suspect they included these as part of the “Other pay expenses” or “Total Taxes and Other Benes” line)

      What I suggest is backing these costs out of your numbers and at your P&L tell them what your numbers would have been w/o these unusual expenses. Either write the numbers on the paper copy, or if you have access to the file then save it as a copy and make the notations there. Give a copy to the others in the meeting.

      I do this all the time w/ unexpected expenses. It helps show everyone how consistent or inconsistent the raw numbers are w/o the influence of additional costs.

      • Adam Diltz

        Oh yeah, that’s a great way to do it. Thank you so much

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