Restaurant managers: Why it’s time to hone your math skills

By Marija Vukovic - Lecturer at César Ritz Colleges Switzerland

• Restaurant managers: Why it’s time to hone your math skills — Scott Graham, Unsplash

Here’s the harsh reality: one in three restaurants will fail within their first year of business. There are many reasons for this low success rate – too much competition, not enough experience, and particularly right now, economic downturn.

Yet, no one thinks they will be among the 33% closing their doors mere months after opening them. So what makes the difference between failure and success? How can an aspiring restaurateur or entrepreneur increase their odds of building a successful and sustainable restaurant?

Well-known restaurateur, Bruce Nelson, argues in his recent book – Restaurant Management: The Myth, the Magic, the Math – that most restaurants fail because they do not sufficiently do the math. Nelson says that throughout his 40-year career, he’s seen restaurants make many of the same fundamental financial mistakes. He suggests restaurant managers should start with some basic financial questions:

How will you decide the pricing of each item?

What is the right food to beverage cost percentage?

How will you figure out the gross earnings and profit margin?

The answer is simple, right? Just make sure you make more money than you spend. Not so fast, Nelson says. If you want your restaurant to succeed, you need to take the time to do the math and harness the data, or hire someone who can.

Nelson studied numerous restaurants’ financial statements and developed a formula that can help them predict and reach desired profits. It starts with knowing your break-even point, which is unique to each individual business model. Once you know it, only then should you move on to designing your menu and operations in a way that will turn a profit and achieve the experience you dream of for your customers. When you don’t know your break-even point, it’s tempting to chase solutions to the wrong problems and blame issues like rising food and labor costs instead.

As a mathematician, I love teaching this topic to my hospitality students at César Ritz Colleges Switzerland. In fact, these mathematical principles are taught from the very first course in our bachelor’s program because we want students to build a strong foundational knowledge of what it really takes to manage a successful hospitality business. Emphasis is placed on understanding the break-even theory and applying it in practical business situations.

I truly enjoy hearing the dreams of our students and want them to become successful. But no amount of inviting decor or accolades will replace the need to do the cold-hard math. We need to better prepare budding restaurateurs and entrepreneurs for the realities of what it takes to run a business. That’s what I’m striving to do.

For more information about Swiss Education Group, visit www.swisseducation.com