How Do You Know What to Change without a Restaurant Budget

First there were business restrictions from a pandemic, then there were product shortages, then there was the Great Resignation and now inflation. This means for the past two years now you've been battling higher labor costs and higher cost of goods sold along with a bunch of profit-robbing expenses such as gloves and third-party delivery apps. As an independent restaurant owner and the leader of your business, you need to make changes to make money. How do you know what to change without a restaurant budget? Stay with me, and I’ll explain why you must have a budget.

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Welcome to my YouTube Channel. I am David Scott Peters, a restaurant coach and speaker who teaches restaurant operators how to cut costs and increase profits with my trademark Restaurant Prosperity Formula. Known as THE expert in the restaurant industry, I apply my no-BS style to teach and motivate restaurant owners to take control of their businesses and finally realize their full potential. Thousands of restaurants have used my formula to transform their businesses. To learn more about me and my coaching program, visit http://www.davidscottpeters.com.

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Would it be an understatement if I were to say that it's never been harder to make money in the restaurant industry than it is today? If you've been following me for any length of time, you know that I believe with the rate that our industry has been raising prices over the last two-plus years to combat all the rising costs, we're starting to approach a scary point where your guests look on the plate don’t see the value in what they’re paying for.

So, what do you do? Do you continue to raise your prices? Do you start cutting labor? Do you start cutting expenses? How aggressively do you start cutting? Should you focus all your attention toward increasing sales volumes because sales cure all ills? How do you know what to change? What changes you should make without a restaurant budget?
The short answer is you don't. A budget is critical to your success. Let me share with you my approach to budgeting when I'm working with one of my coaching members.

Step one, we create a budget template. What we do is we grab your last 12 months profit loss statement and create a template that includes what your sales were, your sales mix, cost of goods sold, labor costs, fixed and variable expenses. Then we say if we operate the same way in the 12 months that we did the last 12 months, here's how much money you're going to make or lose. I want you to hold that budget template like a dead rodent and go, “EW!,” I want to do better. And that's where the budget comes in.

Step two, before we go into creating a plan, we verify your numbers line by line by line and say, is that accurate?

Number three, we start creating your plan for success. What systems are we going to put in place to achieve certain results? How fast will we achieve those results?

Number four, as we create this plan, we start looking at your sales mix.

Step five, let's look at your cost by category, by percent.

Step six, we're going to look at labor by position.

Step seven, we look at prime cost. My goal for you if you do $850,000 a year or more in sales is a 55% prime cost or lower. If I do less than $850,000, I'm looking for a 60% prime cost.

Step eight, look at your operating expenses line by line by line.

Creating a budget is creating your plan for success. If you were to ask my members what the most impactful thing they get out of my restaurant transformation intensive group coaching program, they would all tell you that the budget process has a tremendous impact on their life and their business. Some would even say it's life changing.
If you're looking to figure out how and what you should change in your operation to beat back all the financial challenges restaurant owners face today, you must have a budget.


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