Does Your Team Know Their Numbers? Understanding Finance for Restaurant Managers.

How well does your team know their numbers?

This one’s far more serious, far less visible, and often ignored. But it affects every corner of your business.

We’re talking about financial understanding - or Understanding Finance for Restaurant Managers.

Most owners we speak to have a rough idea of their GP - though usually not what it’s running at today, just what it was targeted to be back when the menu was buHow well does your team know their numbers?ilt. Fewer still know their labour percentage from last week. And almost no one can say that their team members know these figures - let alone understand them.

That’s not a criticism. It’s just how the industry has evolved: focus on revenue, manage the chaos, and hope that the bank balance behaves.

Most restaurant owners that we speak to have a rough idea of their GP (not necessarily what they’re running at, but at least what they were targeting back when the menu was produced), fewer still know what their labour percentage was for the previous week, and almost none of them have team members that know these figures, and even less have team members that understand them.

We recently analysed somewhere in the region of 400 sets of Management Accounts from different clients over various periods of time, and we came to realise that on average, 70-72% of all revenue that comes through the till (excluding VAT), goes straight back out on costs that everyday members of staff either have some form of control over or a direct influence on. This includes things like:

·       stock

·       labour

·       gas & electricity

·       non-consumables

·       cleaning supplies

·       equipment

·       crockery

·       stationary

·       petty cash

A further 10% of costs can’t be controlled. These are things like rent and rates. And the final proportion of costs (between 5-10%) are usually directly controlled by the owners or upper management.

Do your team know this? Did you know this? Do you speak to them about this? Sure, lots of owners and operators talk about labour or wastage being too high, but they don’t spend the time to explain to their team how they can impact these costs, or why it’s important for them to play an active role in controlling them - it’s not their business, so why should they care?

We’ve found that in restaurants where the owners operate some form of “Open Book Management”, that their costs are generally under better control, and they have a higher net profit. But these types of business are few and far between. Most hospitality business owners panic over the thought of sharing so much information believing that it’ll lead to some form of resentment, backhanded comments, or the owner being called out for “making so much money” when this clearly isn’t the case.

Your team typically see what’s coming through the till on a daily basis- we’re good at communicating sales figures (primarily because we focus on revenue, but also because we can’t hide this figure), but your team have zero idea of what comes out the other way.

Last year, we polled employees across 30 of our clients and asked them:

1.       How much money do you think the business makes every week?

2.       How much profit do you think the business makes every week?

3.       How much do you think the director(s) get paid?

The answers to question 1 were fairly close to the actual gross figures (including VAT) - they were around 10% above or below the actual figure, but the answers to questions 2 and 3 were well off the mark. The majority of people asked thought that the business made a profit of around 20% of the figure that they gave in response to question 1, and that the director(s) were paying themselves between 50-100% more than they made (everyday team members gave figures towards the 100% mark whilst GMs and head chefs were closer to the 50% mark).

I know, and you know, that this is so far from the truth that it’s nuts.

So we tried something a little different. When we next held budget meetings with our clients we asked if they’d allow a select number of their team to sit in on the meeting. For some clients, certain information was redacted from the P&L and the budget, and for others they shared every detail.

There were 2 common themes that occurred throughout the meetings:

1.       They couldn’t believe how little was left after everything had been paid out.

2.       They couldn’t believe how little the owners were paying themselves in comparison to what they’d originally estimated that they were taking (some of them chuckled, and one person even said “How do you live off that? I earn more than that!”)

And this is the root of the problem: If your team doesn’t know where the money goes, they’ll fill in the blanks themselves. Usually in ways that damage trust, morale, and long-term buy-in.

If you don’t speak to your team about how the business is running, what it costs, and what it’s making, then they’re going to make their own assumptions, and they’re going to assume that you’re far better off than you actually are. They also won’t be inclined to help - as far as they know, the £10k that the business took last week has gone in your pocket. One of the reasons behind this, is that £10,000 a week (or £520,000 a year) is an incomprehensible number. It’s literally just numbers on a spreadsheet to them. Now, I’m not saying that they’re daft, not at all, it’s just that there’s no context available to them for these figures, and no benchmark. They don’t think about how out of that £10k, about £1.6k of it is going straight to the tax man- because you’ve never told them.

Our mission - MY mission - is to help build a thriving hospitality sector where independent businesses reward their owners (and teams) mentally, physically, and financially, and we’ve been striving to do this for almost 5 years. But as of the time of writing this post, we are the only accountancy practice in the UK that is dedicated to serving the hospitality industry, and our reach is small.

Why aren’t more businesses doing this?

Because it’s hard.Because most owners haven’t had this training themselves.Because it feels like opening Pandora’s box.

How do you train your team on something you’re not confident in yourself? How do you fit it in when you’re already working 60+ hours a week? Even if you had reports - what would you share? And would they even understand them?

These are the exact questions that led us to build something new.

Introducing: Open Book Hospitality

So, I’ve been trying to come up with ideas on how to help more people- to help boost one of the UK’s most vital industries, and this has led to the birth of Open Book Hospitality. It’s a short course that can be completed within a few hours - either all at once, or over the course of a few shifts. It’s built for all levels of front and back of house, and it is designed to give your team a solid understanding of:

·       What actually happens to the money once it hits the till

·       What Gross Profit, Labour %, and Net Profit really mean

·       Why the business might feel busy, but the bank balance doesn’t reflect it

·       What team members can do every day to improve outcomes - for the business and themselves

It’s not about spreadsheets or scary finance terms.

It’s about clarity, context, and control.

You want your team to care. But before they care, they need to understand.

This course is how they get there.