This post by Ben Tedore
The students and the excellent full time faculty members at the Nevada Small Business Development Center, or Nevada SBDC for short, have been assisting clients in improving operations and providing helpful insight to ensure business success since 1985. Over the past few decades the Nevada SBDC has seen the expansion and contraction of a number of different industries, and has assisted a plethora of different businesses attempting to corner the market.
In recent years one of the most popular industries to get into has been the restaurant industry. The students at the Nevada SBDC see many clients attempting to strike gold in this industry by opening the next best, or in some cases the most innovative and different restaurant in town. However, there are a number of key factors necessary for success that many either overlook or are simply unaware of.
In Deloitte’s 2010 restaurant industry operations report, a number of helpful noteworthy statistics were found that could help clients or potential new entrants gage expenses and see where to cut costs while also informing the individual where the market is headed in the future so they can adjust to shocks. In the report Deloitte estimates the total US restaurant industry to be approximately $580 billion with expected growth in coming years. But, growth is not equal industry wide. Deloitte breaks down the industry further, projecting growth of sales for the limited service restaurants overall, but a net decline in sales for those in the full service business once adjusting for inflation. Of course these are averages and vary city to city and state to state. Industry average cost percentages are also covered in the report. On average expenses are as follows:
|Full Service Restaurants: Average Check Per Person||Limited Service Restaurants|
|Under $15||$15 to $24.99||$25 and over|
|Where it came from:|
|Food and Beverage Sales||100%||100%||100%||100%|
|Where it went:|
|Cost of food and Beverage Sales||32.2%||31.8%||31.9%||31.9%|
|Salaries and Wages||33.7%||33.2%||33.7%||29.4%|
|Restaurant Occupancy Costs||4.9%||5.1%||6.1%||7.7%|
|Income Before Taxes||3.0%||3.5%||1.8%||5.9%|
Clearly there will be some variance in these statistics. However, on average these are the numbers one should expect to see when opening or operating a restaurant. These figures also serve as useful benchmarks when deciding on wages and COGS (cost of goods sold). Of course there are a number of other variables that go into a successful business in this industry most of which are in the hands of the individual. But, here are some to consider before opening: Look at the traffic and the speed at which traffic goes by your desired location. If they are speeding by, although the traffic is high, the likelihood of them noticing your restaurant will be low. Also, consider the population demographic of the area you desire to open shop. Is it high income? Is it low income? Is the area residential or is it a business district? These can all play a role in the types of restaurants that will be successful. And will also help owners to set the optimal price per plate.
For more information regarding the restaurant industry, starting up a company of your own, or any of your other business needs feel free to check out the Nevada SBDC website at http://nsbdc.org or stop by the Reno, NV office in the Ansari Business Building room 411.
By Ryan Axt, Finance Intern