Costs in Restaurant Businesses: Particularities, Costing a Dish and Prorating Expenses

The restaurant industry is one of the most competitive and demanding. To be profitable, it's not enough to attract customers: it's essential. control costsPoor management of supplies or apportionment of expenses can make a best-selling dish unprofitable.

Particularities of the restaurant sector

1. Perishable supplies
   Food has a short shelf life. This requires strict control of purchasing, inventory, and product rotation.
2. High staff turnover
   Labor costs include not only salaries, but also ongoing training and recruitment.
3. Mixed cost structure
   • Variables: food, beverages, packaging.
   • Fixed: rent, licenses, administrative salaries.
4. Impact of waste
   Waste, cooking errors, and poorly served portions directly affect profitability.

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The costing of a dish

To correctly calculate the cost of a dish, three main elements are considered:

1. Direct ingredients: the exact breakdown by recipe (grams, liters, pieces).
2. Direct labor: staff time in preparation and service.
3. Prorated indirect expenses: rent, energy, water, cleaning, equipment depreciation.

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Case study: costing a gourmet burger

Let's suppose a restaurant that offers a gourmet burger.

Direct ingredients:

• 200 g beef → $35
• Artisan bread → $6
• Cheddar cheese → $5
• Lettuce, tomato, onion → $4
• Dressings → $3

Cost of ingredients: $53

Direct labor:

• Average preparation time: 10 minutes.
• Cook's salary: $120/hour → $20 per dish.

Subtotal (ingredients + labor): $73

Prorated indirect costs (per dish):

• Gas and electricity: $4
• Water and cleaning: $2
• Equipment depreciation: $3
• Rent of the premises: $8

Total indirect expenses: $17

Total cost of the burger:
$53 (ingredients) + $20 (labor) + $17 (indirect) = $90

If the selling price is $180, the gross profit is $90, that is, a 50% gross margin.

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Importance of prorating indirect expenses

If indirect costs are not distributed fairly among the dishes, there is a risk of:

• Underestimating the real cost and selling below what is necessary.
• Inflating costs and setting uncompetitive prices.

There are different methods:

• Prorated by dish sold.
• Allocation by consumption area (example: refrigeration electricity vs. cooking electricity).
• Activity-based costing (ABC).

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Conclusion

In the restaurant business, profitability depends as much on the quality and sales volume as well as careful cost management.
A very popular dish may not be profitable if all factors are not considered: inputs, labor, and allocation of indirect costs.

Constant cost analysis allows for smarter decision-making: adjusting prices, modifying recipes, reducing waste, and maintaining the restaurant's competitiveness.