Do you know your daily ‘bums on seats’ ratio?

(20 /03 /2014)

Over the years I have found one of the biggest oversights for a hospitality business is simply not understanding the average spend per customer needed to break even each and every day.  The following calculation allows you to understand if you are making a profit or giving away your hard earned cash!

Fixed cost/ the number of chairs in your dining room = $$ per person

Here’s an example to make it easier.  I have worked out my fixed costs expenses for a year and I have 70 seats in my restaurant:

Rent                                  $20,000
Utilities                             $10,000
Set up Loan                    $15,000
Light and Power           $  6,000
TOTAL                               $61,000 per year (if only this were true!!!)

Divide into daily            $61,000 / 365 = $167.00 per day

Divide into seats           $167.00 / 70 Seats = $2.38 per day*

*This assumes you are open 7 days a week – 1 service period. If you were only open 5 days a week and had 2 services periods you would  divide $61,000 / 260 days and then 140 seats.

On top of this you then have food costs and wages. For example:

Food Cost                         33%
Wages                               24%

Basically, you have 43% of your takings to pay for your fixed costs and still have a profit at the end. $2.38 doesn’t sound like much but if a seat or multiple seats are empty over the week it can blow out.

Simply put – fixed costs should come from ‘the cream on top’.  Therefore it is important to understand that each ‘seat’ needs to pay its own way.

Have you worked out your average sale before?  Is it close to or less than your ‘bums on seats’ ratio?  If you have highlighted that you are not making the required ‘seat’ sales then you need to look at ways of getting extra people through the doors.

Thus taking you back to the basics – why did they come in the first place, will they come again, how many repeat customers do you have, have you looked at your marketing strategy – or importantly do you have one? Operating a business isn’t rocket science, it is however a combination of hardwork and the right tools.  Understanding the basics will ensure you aren’t a statistic of the apparent ‘tough’ hospitality industry and it all starts with ‘bums on seats!’

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