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      HomeProductsAccountingRestaurant Operating Costs: Best Practice To Effectively Calculate Your Operating Cost

      Restaurant Operating Costs: Best Practice To Effectively Calculate Your Operating Cost

      Do you have plans to open a restaurant business? One of the important things that you need to prepare for opening a restaurant is the initial cost and a suitable accounting system. Suppose you want to run a restaurant that is successful and sustainable. In that case, you must pay attention to the restaurant’s operating costs.

      By understanding all restaurant operating costs, you have taken the right steps to maintain the restaurant’s financial health. Another right step for restaurant sustainability is implementing the best accounting system. This system will help you manage the restaurant’s finances and operating costs efficiently.

      You need to know that restaurant operating costs are costs incurred by a restaurant to be able to carry out various daily activities. Expenses include operating expenses such as taxes, payroll, transportation, employee benefits, rent, and repairs.

      It would be best to record various restaurant operating costs regularly using an integrated accounting system. This system can quickly and accurately determine the company’s income through related activities.

      Why is it important to understand operation costs and how they behave in the restaurant operation? By recording your restaurant’s operational costs, you can see a company’s business forecast, whether running smoothly or not.

      In this article, you will find the different operating costs in a restaurant, the best accounting system, and how to calculate restaurant operating costs. Read more below!

      Key Takeaways

      • Before opening a restaurant, it’s crucial to comprehend the various operating costs involved, including taxes, payroll, rent, and repairs.
      • Calculating operating costs is essential for budgeting and forecasting business performance.
      • Restaurant operating costs are divided into fixed, variable, and mixed expenses. Fixed costs remain steady monthly, while variable costs fluctuate with output. Mixed expenses combine fixed and variable characteristics, adjusting based on production levels.
      • Implementing an effective accounting system is crucial for managing restaurant finances efficiently. It helps in producing accurate financial data and optimizing business operations.
      • HashMicro’s Accounting System is a vendor for an integrated accounting system, that offers benefits such as optimized efficiency, real-time data, improved accuracy, and increased profitability.

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      Table of Content:

        What are the Different Types of Operating Costs?

        Why is it important to understand operation costs and how they behave in the restaurant operation? Calculating operational costs is important while running a restaurant to find the right steps to support healthy company finances.

        Restaurant operating costs are divided into three categories: fixed restaurant operating costs, variable restaurant costs, and mixed restaurant expenses. The following is a complete explanation of each type of restaurant operating cost:

        Fixed restaurant operating costs

        Fixed costs remain largely constant from month to month because they are not related to sales. These costs include insurance, loan payments, rent, and licensing fees. You will find it easy to include these expenses in the company’s budget because fixed costs tend not to fluctuate.

        In addition, fixed costs usually rarely change despite an increase or decrease in the number of items you produce. However, fixed costs may change at any time in the future. Still, these changes usually occur over a fairly long period.

        Variable restaurant costs

        The things that are included in restaurant variable costs are food, hourly wages, and utilities. You may find it difficult to predict variable costs, especially when opening your restaurant because the output varies. You will also have difficulty budgeting variable costs because of this difficulty.

        In simple terms, variable costs are costs that depend on the output. Variable costs are constant amounts per unit that your company produces. If production and output increase, your variable costs will also increase. But you don’t have to worry because, after a few months, you can determine the results you expect each month.

        Restaurant mixed expenses

        Restaurant mixed expenses are also known as expenses that have a fixed cost component and a variable cost component. This type of cost is also known as semi-variable cost. Semi-variable costs are costs whose total changes disproportionately with changes in the output of the activity driver.

        In addition, the cost per unit changes inversely with changes in activity output. Some of these semi-variable costs change with volume or usage. On the other hand, some behave in a fixed manner for a certain period. Simply put, these costs resemble fixed costs at a given level of sales and change as sales or production increase.

        An example of a semi-variable cost is overtime pay. This pay does not exist or become a fixed cost below a certain production level. On the other hand, overtime pay becomes variable when it is above that production level. Three important characteristics characterize semi-variable costs, namely:

          • Total semi-variable costs fluctuate with activity.
          • The part of semi-variable costs that changes according to activity is a variable cost.
          • The share of variable costs changes in proportion to activity.
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        How to Calculate Your Restaurant’s Operating Costs

        how to calculate restaurant operating costs

        Restaurant operating costs cover many different things. This cost depends on the type of restaurant, location, and the profitability goals of your restaurant business. When you own and open a restaurant, you must understand how to calculate operating costs effectively. You also have to be careful about all restaurant operating costs.

        That way, you can save expenses while increasing the profits of your restaurant business. To achieve this, you must first know how to calculate restaurant operating costs. Your restaurant operating costs are the sum of all your fixed, variable, and mixed restaurant expenses. Here is an example:

        Nami opened a small seafood restaurant in one of the cities in Singapore. He wanted to know the operating costs of his restaurant. Nami has compiled a list of all expenses each month with the following details:

        Fixed cost

          • Rent: $5,000
          • Equipment: $1,000
          • Maintenance: $500
          • Marketing: $200
          • Tax: $1,500

        Total fixed costs: $8,200

        Variable and semi-variable costs

        You can calculate these two costs using the main cost formula. This formula calculates the total cost of labor and CoGS.

          • CoGS + total labor cost = main cost
          • CoGS: $8,000

        Total labor cost: $15,000

        Nami’s main cost is $8,000 + $15,000 = $23,000

        Total operating costs of the restaurant = $8,200 + $23,000 = $31,200

        You can conclude that Nami spends $31,200 per month on the operating costs of her restaurant. This indicates that sales from Nami’s restaurant business must at least reach the same amount as operating costs to break even.

        Also read: 5 Best Finance Software to Boost Your Business

        Conclusion

        Restaurant operating costs are costs incurred by a restaurant to be able to carry out various daily activities. Expenses include operating expenses such as taxes, payroll, transportation, employee benefits, rent, and repairs. There are three types of restaurant operating costs, namely fixed cost, variable cost, and restaurant mixed expense.

        If you want to calculate your restaurant’s operating cost, you need to sum up all your fixed, variable, and mixed restaurant expenses. In addition, you can use the best accounting system to help you manage your restaurant finances, including the operational costs.

        This system will help you produce accounting data accurately. One of the greatest accounting system vendors in Singapore is HashMicro. You can choose HashMicro’s fully featured accounting system to help you manage your restaurant operating costs automatically.

        Furthermore, there are so many benefits you can get, such as optimized efficiency, real-time data, improved accuracy, and increased profitability. This integrated accounting system has so many great features to help all of your finance work from journals to reports. Immediately switch to HashMicro and get the best offers and free demo here!

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