How to Sell a Café – The Three Stages of the Sale

How to Sell a Café – The Three Stages of the Sale

 

The Sale Process – Stage one – Planning

 
Selling a café or any hospitality business is not like selling a business in (most) other industries. I am sure that I don’t need to spell out the main difference, the subject of the “C” word is probably a whole post on its own.

 
Whilst the cash side of things can add confusion and complication during the process, especially if you are trying to explain the situation to a newcomer to the industry there are ways to make it easier on yourself.

 
The Sale Process has three distinct stages that when followed correctly make life much easier, in this post I will cover a few things to consider in Stage One – Planning
 

Stage One – Planning

 
If you skip this stage then you run the risk of coming across nasty surprises later on that can stall the sale, i.e. problems with your lease or problems that may mean that you end up with less from the sale than you expected.

 
I have had both of these things happen to me and trust me it can be pretty upsetting. When I sold my second shop I overlooked the fact that the sale triggered a capital gain. Basically the government ended up doing nearly as well from the sale as me although it had been me slogging it out building the business up.

 
To make this even worse my accountant later told me that we could have avoided most if not all of the tax with proper planning – A very expensive lesson! That was about fifteen years ago now and writing about it now is still upsetting me, don’t let this happen to you.

 
When you get the planning stage right you go into the sale knowing exactly what you need to sell for to move you on to the next stage of your life after clearing all of your liabilities.

 
Its easy overlook some of the fees involved in relation to the sale, things like the landlord’s legal fees, managing agent’s fees and so on.

 
Going into the sale with a clear plan makes sure that you are fully aware of everything that you are going to need to pay out and gives you the time to make sure you sell for the right price. Getting this stage right helps you to keep the sale on your terms.

 
Some of the key things to consider doing during the planning stage are:

 
✅ Check your lease – Make sure that there is nothing in your lease that could slow the sale down.

 
Finding things like the DA usage not matching the permitted lease use, differences between outgoings in the lease and the lease disclosure document can really slow things down at the later stages of the sale.

 
Savvy buyers will always focus on the lease early on so it’s a good idea to know the key points so that you can answer questions quickly and get the deal moving. Things like what level the annual increases are, is there a market review in between terms? How much is the bond etc.

 
✅ Speak with your solicitor – If you are not confident reading the lease then ask your solicitor. It’s a good idea to put them in the picture about your plans at this stage as well, we have a list of questions that we like to suggest our clients ask their solicitor.

 
✅Check the assignment clause in the lease, this will outline the terms and conditions about you coming off of the lease and the buyer going on. This clause will (usually) also outline that you are responsible for all of the associated costs of the assignment. We have a way of reducing this which we will cover in stage three (upcoming post) once the sales advice is given to the solicitors.

 
✅ Get your books up to date – If you are not already up to date with your numbers then this is a must, getting the price right (next stage – preparation) will depend a lot on the numbers so make sure they are right!

 
✅ Speak with your bookkeeper and accountant and let them know about your plans, get them to help you prepare all the financial info that buyers are likely to ask for.

 
✅ Once you have accurate up to date figures ask your accountant what they think the value of the business might be. Generally speaking this figure is usually a long way off the actual market value so don’t stress too much if its not in line with what you are expecting.

 
The reason for doing this is to get an idea of how a buyer’s accountant might appraise the business, this gives you the chance to pro-actively push the value and overcome any potential objection before the buyer takes the figures to their accountant.

 
✅ Get on the front foot with your tax – Make sure that you know what any tax liabilities might be and get some advice on what the split between apportionment and good will should be when you sell.
Based on your business and personal tax situation your accountant will be able to give you advice on how best to split the sale price % wise. Knowing this upfront will allow you to get this into the contract of sale early on and potentially reduce that amount of negotiation around this point.

 
✅Check and double check your outstanding liabilities when you sell. Make sure that your accountant gives you a clear idea of what you would need to pay out when you sell. Don’t overlook things like lease agreements and loans etc.

 
✅ Check your agreements – If you have equipment “on loan” like coffee machines, grinders, POS Systems, sparkling water systems etc are the agreements transferable or will you need to pay out a sum to break the contract?

 
I hope this gives you a bit more insight into some of the first things that you should be considering and doing when selling.

 

Stage #2 – Preparation

 
This stage is where we get everything prepared for dealing with inquiries and work out what the sale price of the business is going to be.

 
The preparation stage in my opinion is the biggest chance you have to make the sale as easy as it can be for yourself, this stage can also make a big difference in the time that you spend on the market.

 
You are probably aware that in the current market there are a lot of other cafes for sale, most buyers are typically looking at several businesses at the same time. If you are not ready to deal with inquiries or if you do not have the answers to the most common questions ready to go then you are risking losing your buyer to another business.

 
When it comes to valuing your business then it is a fine line, if you undervalue the business then you will stand the chance of walking away with $10K – $20K (or more) less than you deserve. Go too far the other way and you will find that you get little or no interest from the market.

 
The old way of pricing cafes and then adding some on to allow for fees and negotiation simply does not work in the way that it used to. Buyers have never had more information readily available and you need to price the business correctly right from the start.

 
If like most people you are concerned about keeping the sale as confidential as possible then the preparation stage can also help here. Its pretty simple really, if you are priced right you will get more inquiries. If you have all of the information that buyers are likely to ask for ready then you will be able to move them through the process quickly.

 
The combination of these two things being done properly is going to mean that you stand the best chance possible of reducing your time on market, this will help you to reduce the chance of staff, suppliers and customers finding out that you are selling.

 
In summary, when you get the preparation stage right you will be confident that you are priced right and that you have everything ready to be able to deal with buyer inquiries quickly and efficiently.

 

So what does the preparation stage involve?

 
• Document preparation

 
I find it quite amazing how different buyers look at cafes in different ways when considering the purchase.

 
Some people are completely focussed on the financials, some get wrapped up in the location, some the décor and the smart ones get obsessed with the lease.

 
You need to be prepared to deal with all of these areas and if you work through the previous stage as well as this one you will find that the process will also help you to have important information front of mind.

 
To make it easier for yourself to share information with buyers you can use a cloud storage system like Dropbox or Google Drive to store all of the information that buyers are likely to ask for.

 
Having everything in one place like this will mean you can easily share multiple files quickly and this will save you a lot of time.

 
As mentioned above different people focus on different things and that means that there is potentially a lot of information that you need to have at hand. Rather than list it all out here you will find a check list here https://www.gsebusinessconsultants.com.au/document-checklist-download

 
Some of the most important information to have ready is:

 
✅ A soft copy of the lease.
✅ A copy of the liquor license.
✅ An inventory of the fixtures and fittings
✅ A schedule of employees

 
The other items on the checklist you will also need to have ready to progress inquiries but the four above will allow you to answer some of the most commonly asked questions.
[TIP] We actually build a lot of the information from the fours points above into the business profile and/or adverts to answer the questions early on.

 
The other key benefit if gathering all of this information is that it is going to help you with the process of valuing the business.

 

What is your business worth?

 
As mentioned above this part of the process is crucial to get right so taking some time here to make sure that you have not missed anything will really pay off.

 
It is not really possible to go into all the detail of this process in this post, I am considering running an online workshop to go through this properly, if this is something that might interest you then please let me know in the comments. If there are enough people interested I will put something together.

 
The general “rule of thumb” with a (smaller) food business is that the value will be 1 -3 times the annual net profit of the business.
Whilst this sounds like a fairly basic method of valuation there are a number of factors to consider.

 
The actual net profit of the business will need to be adjusted for “add backs”, these are expenses that may appear in the P&L but may either be one off expenses or may not relate to the running of the business.

 
Examples might be:

 
• Motor vehicle expenses
• One off equipment or repair costs

 
Once you have accurately calculated your annual net profit then the amount that you multiply that figure by will be affected by the following factors (in no particular order)

 
• The current market.
• Your Lease terms.
• How established the business is.
• Your location.
• How many day/hours you trade.
• How much competition you have.
• Local infrastructure plans.
• Your involvement in the running of the business.
• The quality and condition of the fit out.
• The inventory of fixtures and fittings
• The future growth potential of the business.

 
Some of the points above will have more impact on others in relation to how much they will push you up or down that scale of the multiple.

 
The current market is a good example of this, if you look at trying to sell for a multiple at the level it was 3-4 years ago (or even less) then you will most likely be in for a nasty surprise. The current market value can be gauged by talking to brokers or industry professionals who are dealing with similar businesses.

 
A word of caution, as with the real estate market the practice of “buying listings” goes on in the brokerage world too. This is when a broker will effectively tell you what you want to hear in relation to selling price in order to get your listing. Be careful not to give away too much early on and ask for information about recent similar sales.

 
Your lease is also going to play a big part in how far you can push the multiple, if you have a long term with reasonable increases and a reasonable bond you can expect to push for a higher price. By contrast a lease with a demolition clause is going to significantly reduce the asking price.

 
This all comes back to the principle of return vs risk, buyers want to know that they are going to have enough time to get a good return on their investment. It typically works that the higher the perceived risk then the lower the price. With this in mind it seems like a good opportunity to revisit the last post and the first suggestion – check your lease!

 
As I am sure you will appreciate there is more to this than we can squeeze into a Facebook post but I hope this gives you a better idea of what you need to consider during the preparation stage.

 
Look out for the next post where we will cover the advertising, marketing and selling stage.

 
I am also in the process of recording a four part video series designed to give a it more information on the selling process so keep an eye out for that.

 
In the meantime if you have any questions about anything in this stage feel free to post them in the comments below and I will do my best to answer them for you.
Paul

 

Stage #3 – The Selling Stage

 
Once you have your business fully prepared for sale and you have worked through the appraisal process to make sure that you have priced the business right it is time to get the word out there that your business is available.

 

Writing the Advert Copy

 
This is where you decide how to describe your business to prospective buyers in the adverts that you will run business on for sale websites and social media or wherever else you choose to advertise.

 
The purpose of this advert is to get people to make an inquiry and request further information so that you can get the conversation about your business started.
With the advert copy the idea is to give enough information to people so that they can decide whether or not they would like to find out more. We also want to do this without giving away too much.

 
It is a good idea to try and keep the text fairly generic so that people are not able to work out that it is your business. You want to do all that you can to avoid people wandering in and asking you about the business being for sale in front of staff, customers or at difficult times of the day, it does happen!

 
[Tip] Whilst the ad copy needs to show the key features and selling points of the business don’t overthink or overcomplicate this, sometimes less is more. This advert is trying to sell an appointment or an inspection of the business, that meeting is where you will start really trying to sell the business.

 

Choose Where You are Going to Advertise.

 
There are many publications and websites where you can choose to advertise your business, prices vary from the low end (Gumtree) up to the top end (SEEK) and the results can also vary greatly.

 
Generally speaking we have found that the quality of the leads is in line with the cost of the platform i.e. Gumtree will bring in a lot of inquiries but many of them are can be timewasters whereas the more expensive options such as Commercial Real Estate and SEEK tend to give you lees quantity of good quality inquiries.

 
Despite the rise of the internet the cost of advertising in traditional print advertising still seems quite high. We have helped a couple of clients to run these ads but the results have been pretty poor in relation to the cost.

 
Social media, in particular targeted Facebook ads can produce good results for a relatively low spend. You will of course need to consider from a confidentiality point of view whether or not you want this information in your feed. One way around this is to use Facebook Ads manager to set up your post, this way you can choose to just run this just as an advert and it will not show in the feed.

 
[TIP] We use nine different websites to list our client’s businesses and the best results typically come from SEEK, Commercial Real Estate and Australian Businesses For Sale.

 

Qualify Inquiries and Get Rid of The Tyre Kickers Early On.

Regardless of where you decide to advertise you will want a system in place in filter the leads as they come in so that you are only talking to serious buyers.

 
Think about asking buyers to take a simple action such as signing a non disclosure document before giving out any information about your business.

 
You would be surprised how many buyers can’t be bothered to do this, with our clients businesses we follow up 5-6 times to chase people to return these. We use multiple methods such as email, phone, SMS and FB messenger.

 
If we do not get the signed form back after that we assume that they can’t be that serious and we then remove them from our list.

 
I don’t know about you but whenever I was seriously looking to buy a business I had no problem being asked to sign and return an NDA, in fact I expected it.
You can easily find examples of non disclosure agreements or confidentiality agreements online and then just edit them to suit your needs.
[TIP] You can read more about qualifying leads in this Blog Post https://www.gsebusinessconsultants.com.au/get-rid-of-the-tyre-kickers-early-on/

 

The Business Profile or Information Memorandum

The information memorandum or business profile as it is sometimes called is the document that you can to use to provide more detailed information about the business to qualified buyers (after the previous step).

 
These are people that have made initial contact through viewing the adverts and have completed a confidentiality agreement and whom you may have spoken to about the business.

 
You send out the information memorandum to give buyer details such as business name, location, sales, and profit etc. The idea is to provide enough information for them to decide whether or not they would like to arrange a viewing of the business.

 
The information memorandum also provides details about the sales process and reminds buyers about the importance of confidentiality when viewing the business.

 
After you have sent out the information memorandum it’s a good idea to make a follow-up call within 2-3 days to ask for feedback and see if they would like to have a look at the business either as a customer or out of hours.

 

The Inspection

 
If all has gone well with the previous steps then you should have a qualified buyer or buyers that are keen to come and have a look at the business and discuss the operations etc with you.

 
Whilst the inspection is an opportunity to answer all the questions that the buyers might have it pays to remember that this is also where you have the chance to further qualify the buyer. Try and make sure that you use this time wisely and gather as much information as you can about the buyer’s background and their financial position. You would be amazed how many people get to this stage (and beyond) and do not have the experience or financial capacity to either gain approval from the landlord or complete the deal.

 
Make sure that you keep things positive about the business and try to just answer the questions that you get concisely but without talking too much or giving more information than you need to.

 
Whilst you do not want to mislead people in anyway there is no point in offering information that could potentially put people off of your business. Your role now is to start selling so focus on the features and selling points and use the information that you have gathered from the buyer to help to draw them in emotionally.

 
Don’t give away too much about your personal situation, buyers will often try to find out your motivation for selling. Be careful not to give any indication that you are desperate to get out or that you have any problems as this can be used against you later on and lead to a lower offer.

 
A big part of the sales process is identifying what the buyer’s objections are and then overcoming them. Ideally you will have a good idea of what potential objections could be and you will have addressed some of these in the business profile or during early conversations.

 
The chances of somebody coming along, looking at the business and making a decent offer without some sort of objection is quite slim. I love it when people tell me that they are not interested in a business because it gives me the chance to then isolate and overcome their objection. If somebody tells you that they are not interested in your business don’t give up, find out what the issue or concern is and then present them with a solution.

 

The Offer

 
After a successful viewing and after thoroughly qualifying your buyer the next step is to push for an offer.

 
At this stage it pays to remain unemotional and try not to take anything personally. Buyers use a lot of different tactics and strategies to try and get a deal and try to convince you to accept a lower offer.

 
I find this much easier to deal with when it’s somebody else’s business as opposed to my own as I can remain totally impartial. It’s quite easy to get upset when somebody gives feedback about your business especially when it has cost you blood, sweat and tears. Try not rise to it though as it could cost you a drop in the price or even the deal.

 
If you have gone through the appraisal process thoroughly you will be confident that your business is priced right and with this in mind don’t feel that you have to negotiate on price.
The approach that we take is to price properly without adding in too much if anything at all for negotiation. The idea that you have to allow room for negotiation is quite dated and, in the current market if your business is perceived to be over the market value then you probably won’t even get any decent inquiries. You are far better off pricing correctly and getting some people to start talking to early on. “Testing the market” and listing with a view to dropping the price later on if you don’t get offers quickly enough are not effective these days.

 

Keeping Your Deal On Track

 
Once you have the price and terms agreed this is where the real work starts! Many people think that getting to this stage i.e. weeding out the tyre kickers and getting the offer are the hard part but the reality is this is where you have to work hardest to keep things moving.

 
In the early stages your buyer has been led by emotion, they have been imagining themselves in the business, thinking about the changes that they might make and now they are going to start justifying their decision logically.

 
At this stage the buyer will be going through more due diligence and most likely seeking second opinions form their advisors, friends and family.
Having all of the information that they are likely to ask for ready is going to help you to answer questions and overcome objections quickly. What you don’t want is to be asked for something that takes a while to find or prepare, any stalling or slowing of the deal at this stage can be fatal.

 
At this stage you will be instructing your solicitor to prepare the draft contract and you will also be starting the process of the lease assignment.
If you have followed the steps and advice above as well as in the previous two posts then you are probably well prepared for this stage, you will just need to be willing to chase all three solicitors, you must remain in control and keep pushing the deal forward.

 

Preparing for Settlement

 
As you get closer to the settlement date your solicitor will prepare most of the documents in relation to what the buyer must pay upon settlement, this will include any pore payments that you may have made such as rent etc.

 
Depending on what you have agreed about stock you will also need to prepare to do a stocktake. Whilst there are companies that you can get to do this I have always done it myself with the buyer present.

 
It’s a good idea to discuss with the buyer what they will/won’t require when they take over, if there are certain lines that they will not be continuing then this will give you a chance to run that stock right down.

 
[TIP] Remember that if the value of stock when counted is higher than the stock figure in the contract then the buyer is not legally obliged to take it. i.e. if the contract states the stock value to be $3000 and it ends up being $4500 then the buyer can choose just to take the $3000 worth of stock that they want and you will get stuck with the rest.

 
Whilst this post has really just scratched the surface of the sale process I hope that it has at least given you a few ideas and things to think about.

 
If you would like to learn more about preparing your cafe for sale then feel free to book in a call with me. On this 30 min call I will cover the following with you:

 
• What the current market value of your cafe might be.
• The steps you need to take to prepare for the sale.
• What the market is like at the moment.
• How to make sure that your cafe stands the best possible chance of selling.

 
There is no charge for this call and there is no obligation. At the end of the call if we think that we can help you we will let you know about how we work and, if we don’t think we can help we will give you some advice about alternative options.

 
Either way you will come off of the call with a much clearer idea about the potential value of your business and of what you need to do next to achieve a sale.

 
Click on the link below to book in a time that suits you best, once you have selected a time you will be taken to a form which has around 7-8 questions about your business that will help us to get a better understanding and save time on the call.

 
Book your call here
https://www.gsebusinessconsultants.com.au/apply

 

How to Apportion Goodwill, Fixtures and Fittings

How to Apportion Goodwill, Fixtures and Fittings

 

 

The split between goodwill fixtures and fittings is something that will be agreed as part of your sale negotiation, knowing your tax position and what will suit you best is going give you the best chance of getting the terms that you want.

If you have this figure worked out before you agree the sale then you can make sure that your solicitor adds this figure to the first draft of the contract.

In this video from our Six Steps to Sale Program I break down what the apportionment is and how to go about working out what yours should be.

 

 

How to Apportion Goodwill, Fixtures and Fittings

Video Transcript

Let’s talk about how to apportion Goodwill, Fixtures and Fittings when selling your cafe. Now, if this is a term you’re not familiar with, don’t worry. I’m going to go through and break down exactly what it is and what you need to do.

 

 

The apportionment of goodwill, fixtures and fittings is, basically, it’s a split between the value or the sale price of the business. It’s going to be broken into two parts, so, firstly, all the plant, fixtures and fittings, so that’s all of your kitchen equipment, all of the inventory, furniture and all that sort of thing, that forms one part of it and then, on the other side, it’s the goodwill that’s being applied to the business’ sale price.

 

 

It’s really good to be on the front foot with this and make sure that that you’ve taken some advice early on so that you know what your tax position is and what split your accountant suggests is going to benefit you most. It will always form part of the contract of sale, and it’s going to be the figure that’s used for tax purposes for you and for the purchaser. Its a really good idea as I mentioned just to make sure that you know what your tax position is and what your accountant suggests that you should do in regards to that split, so all you need to really worry about at this point is taking some advice, so talk to your accountant and make sure that you find out what they suggest about that split. It’s going to depend on your personal and business tax situation.

 

 

Now, normally speaking, when you’re the seller of the business, it’s going to be in your interest for that split to be higher on the goodwill side, and for the person purchasing, it’s usually better for them to have it higher on the fixtures and fittings so that they can then write down the depreciation at a higher level, so do take some advice on that. It’s not a one-thing-fits-all. It’s going to be very specific to your business and your personal tax situation, so make sure, as part of that, it’s on the checklist there for what you should discuss with your accountant, but make sure that that’s a figure that you’re aware of.

 

 

Make sure that when you do get to the contract stage of your sale that you’re going to advise your solicitor this early on, so it’s a great idea to put this into the first draft of the contract. Sometimes, this won’t even be questioned by the purchaser, so, as mentioned, good idea, be on the front foot, be proactive, make sure that you know what’s going to suit you best.

 

 

Having said that, you need to be prepared to negotiate. It is usually something that a savvy buyer with a good accountant and a good solicitor is going to probably pick up on what you’ve put in there and realise that that’s not to the best advantage of their client, the purchaser, so you may well need to negotiate on that, so be prepared to do that.

 

 

That’s a very brief look what the split between goodwill and fixtures and fittings is. It’s nothing that that you need to be too concerned about, but it’s something that you should be taking some professional advice on from your accountant just to make sure that you’re fully prepared and, when you do get to that stage, as I said, make sure that you communicate that split that you’re aiming for with your solicitor and get in the first draft of the contract early on. You may find there’s no negotiation about that at all and it’s accepted on your terms, which, obviously, for your tax purposes is going to be perfect.

 

 

Hopefully that all made sense. If you’ve got any questions, as always, get in touch in the usual channels, let me know. I’m more than happy to answer any queries you might have about this.

 

 

 

How to Calculate Your Food Cost Percentage

How to Calculate Your Food Cost Percentage

 

 

 

 

Video Transcript.

 

Following on from the menu costing spreadsheet that we sent out recently or you may have downloaded with regard to working out what your food cost percentage is, I’ve had a couple of questions from people about asking “how can we work out what our current food cost percentage is based off the P&L?”

 

So in this quick video I’m going to walk you through a very easy calculation to work out where your current food cost percentage is, and show you how you can then take that and work out what your current cost of goods is as well.

 

Two fairly important metrics that you should be looking at all the time, although there are quicker ways of doing it than going through the P&L, this is a good way of looking at it.

 

The thing to bear in mind with this is if there’s cash coming out of the business, you need to have a record of that. You need to know how much has come out in order to add it back into the figures that you’re taking from the P&L to give you a true figure. So if you don’t have a record of that, I suggest you start keeping one or keep track of it so you can really have a clear idea of exactly how the business is doing. Otherwise you’re kind of flying blind.

 

We do have another spreadsheet that we use for that so if that’s something that’s of interest to you, just post in the comments below and we’ll make sure that we get one of those out to you. And there is a video accompanying that as well, just to walk you through how you can track all of the expenses and all of the income, cash and otherwise, to make sure you know exactly where your cafe’s at at any one time with those key metrics.

 

 

So moving on then, looking at the food cost percentage from the P&L perspective. For the purpose of this we’re going to be using this column here, so the actual June 18 column. And down here, what we’re going to do basically is we’re going to go through and from this, to start with, we’re going to be looking at what was the income?

 

What’s the net income for the business for the period that we’re looking at? So we’re going to take every line here, so the main sales line here. In addition to those you can see on this particular P&L there’s income from Uber and Menulog and so on, so we’re going to include that. We’re going to add all of those up.

 

 

Once we’ve done that, we’re going to look at what was the food cost in relation to generating those sales. And you can see there, in the cost of sales column there, we’ve got cost of goods, food combined, and also cost of goods sold. So that doesn’t necessarily need to be on two lines. It’s just the way that these people have decided to run things through for their accounting purposes. But it could all be under one line.

 

 

Basically what you’re looking for here is what were the food costs involved in generating the income in the top line. So once you’ve got those numbers, it’s just really a case of taking that number.

 

How to Calculate Food Cost Percentage

 

So to work out what the total food costs were and then you’re going to divide that by the net sales, what the total net sales were, and that was from both of those rows previously. That will give you a percentage figure or a figure here of 0.3567. You then multiply that by 100. It’ll give you 35.67. And that will then show you that your food cost is at 36%. So hopefully that makes sense.

 

Basically you’re making sure you’ve got all of your food costs captured and all of your sales captured.

 

Once you’ve got those figures, you’re going to divide the food cost by the net sales. And then when you get that figure, just multiply it by 100. That figure then is your food cost percentage. So in this instance for the figures that we just looked at on the previous sheet there, so on the P&L here.

 

So you can see with the takings there, all I’ve done is take out the interest income of $837 to give us the $701,000 of income. And in the row below you can see I’ve excluded the commission expense for the deliveries, so I’m just looking at the food costs for this purpose. So that’s where those figures have come from. Fairly straightforward calculation.

 

How to work out food cost percentage

 

Now, if you want to work out what the cost of goods are, which is obviously a very important metric as well, then in addition to the food costs you need to add things like packaging and Uber, any expenses for delivery partners or anything else. Any other costs associated with providing that product, that food to the end customer.

 

Calculate your food cost percentage

 

So at this point you’re not going to include things like wages, labour, rent, anything else like that. It’s purely the cost of the food, any packaging and any delivery costs associated with it. You take the same net sales figure and you do the same calculation, so you’re going to divide that figure by the net sales and that will then give you a cost of goods percentage.

 

So hopefully that all makes sense. If you do have any questions, feel free just to drop them in the comments below. Always happy to try and help out and make sense of this if I can for you. So feel free to let me know if there’s anything you’re not sure about. Good luck, and let me know how you get on.

How to increase Cafe Profits - Menu Costings

How to increase Cafe Profits – Menu Costings

One of the biggest factors when working out the potential sale price of your café will be the profitability.

 

Whatever stage you are at whether you are on the market now or just wanting to make plans to sell further down the track then this is a good exercise to go through.

 

Periodically costing out your individual menu items and dishes puts your mind at rest that each item that you are selling is priced right and making the correct margin.

 

The process of going through your supplier invoices will also force you to check what you are paying for key ingredients and may help you pick up on price rises that you had not been aware of.

 

Costing out each item is also a good way to check current portion sizes and make sure that staff are all aware of correct amount of each ingredient that they should be using for each dish.

 

Being aware of you highest margin lines will also help you when it comes to knowing what you can offer as a promotion or special and which dishes you and your staff should be pushing the hardest.

 

This video shows how a simple spreadsheet like this can make the process quick and painless, it will also give you a reference to check back against when you make any changes to ingredients, suppliers or prices.

 

Don’t feel you need to cost out all of your dishes at once, just pace yourself and start with the highest selling lines.

 

If you have never done this or not done it for some time then I guarantee its going to be an eye opener!

 

I hope this helps, feel free to comment below or get in touch if you need any help.