On the Line / Accounting / How to Balance a Restaurant Budget

How to Balance a Restaurant Budget

After you set your restaurant budget, balancing month-to-month cash flow can be complex. We spoke with restaurateurs about how they keep their costs in check.

Restaurant budget diners on patio

There are few variables that remain consistent in the restaurant industry. Things change all the time: employees come and go, ingredients change with the seasons, and customer preferences seems to change daily.

But there are aspects of the business we can control. Money is one of those things.

After you set your restaurant budget, balancing month-to-month cash flow can be complex. Daily costs and new projects change your budget variance levels.

  • Minimum wage increases mean your budget for labor must increase.
  • Incremental costs of pay-per-click ads on Google and Facebook add up the cost of your marketing expenses.
  • Broken technology and long support calls mean your allotted budget for tech is higher.

To help, we drafted up this Restaurant Budget Variance Template so restaurant owners and managers can compare a planned budget to an actual budget and keep costs in control.

Download the Restaurant Budget Template

We spoke to restaurant folk about their biggest budget beefs, an in this article, we look at the key where areas restaurateurs tend to overspend compared to their projections (all of which are covered in the interactive template), as well as suggestions for keeping your budget in check moving forward.

Restaurant Marketing Budget

According to a new report from TripAdvisor, 85% of U.S. restaurants believe they should be doing more marketing than they usually do. Plus, 84% of restaurants plan on spending the same or more of their previous year's restaurant marketing budget, according to data collected by Toast.

In past years, businesses could allocate their marketing budget easily: flat rates for print ads and media placement made it simple to track and control spending.

Now, times are different. With the bulk of modern restaurants now advertising on search engines and social media, spending is completely contingent on how many people click a sponsored post.

To keep your restaurant marketing budget in sync with projections, keep the following in mind:

  • Set reasonable daily limits for your online advertising spend.
  • Monitor your online ad performance regularly.
  • Research what other restaurants spend for keyword/social media advertising.
  • Compare the performance of online ads, print ads, and other marketing material to see which should be invested in.

Restaurant Equipment & Repair Budget

If you've opened a restaurant, you know the cost of equipment well. The oven, the walk-in, the counters, the sinks, the other oven, the dishwasher...

As your restaurant matures and grows, you'll need to invest money into equipment repairs or even brand new equipment. Terms like "depreciation" and "return on investment" are essential in restaurant budgeting.

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Click here to download the free tool.

Because issues can arise without warning, it's not as simple to allocate funds for equipment and repairs. When I worked in a pizzeria, the oven shut down on a Friday night during Lent — not exactly an ideal situation.

Control your restaurant's equipment and repair budget with some of these tips:

  • Factor in depreciation and reasonable equipment lifespans so you can be prepared to buy new material when needed.
  • Contact local repair companies to get estimates for worst-case-scenario, last-minute repairs.
  • Buy supplies from reputable suppliers and check equipment reviews.

Restaurant Technology Budget

Restaurant tech: you can't work with it, you can't work without it.

But, actually, you can't work without it.

Restaurant tech is an investment in the success of your business. If you choose the right restaurant tech platform, it pays for itself. Still, it does require that initial investment. Plus, if you choose the wrong system, you could end up spending even more in hidden fees, replacement terminals, and service repairs.

To set and keep a reasonable budget for your restaurant tech, try sticking to the following:

  • Do your research! Check sites like Merchant Maverick and Capterra before buying restaurant technology.
  • Ditch the legacy system. It sucks having to put more and more money into a failing system.
  • Ignore the sunken cost. What's done is done, so if a system is losing you money, it probably will continue to do so.

Restaurant Theft, Damages, and Legal Emergency Budget

Any guess how much employee theft is estimated at for the restaurant industry?

Believe it or not, it could be as high as $6 billion. This includes everything from free meals to register skimming.

Not to mention, data threats have impacted restaurant like Chipotle and Wendy's, meaning the chances for theft have not exactly diminished. Restaurants are also sometimes forced to spend hefty legal fees if someone slips, chokes, burns themselves, has an allergy attack...you get the picture.

Long story short, you could either lose or be forced to front massive funds in the wake of thefts, legal fees, or property/equipment damages.

To reduce the impact of this setback should it occur, keep this in mind:

  • Put a fixed amount of revenue into an emergency savings account for just-in-case situations.
  • Adhere to all safety laws and guidelines regarding food storage, employee safety, and allergen warnings.

Restaurant Inspection & Services Budget

Handling the food of the countless individuals who come into your restaurant is a big deal. That's why you need certifications and inspections to show you're qualified to do it. As you know, this costs money.

You're running a business. This doesn't mean you're an expert in accounting, taxation, and/or the law. This is why it's common for restaurateurs to outsource their accounting and legal work. This, too, costs money.

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Click here to download this free tool.

To avoid going overboard on spending here, try these best practices:

  • Keep a record of required inspections/certifications you need, when they expire, and the cost.
  • Get quotes from accountants and lawyers up front for reasonable forecasting.
  • Allot an additional amount of funds in case you need extra work from professionals or consultants.
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Restaurant Employee Wages Budget

Bringing more workers on to a shift is usually a good thing. It means you have the demand for more help, and that's only justified when you have a busy shift ahead of you. But this bump in business can seemingly come back to haunt you when you notice your labor budget is above your projections.

When a higher labor budget is a result of more business, it's a good thing. However, if it's due to an increase in minimum wage or another circumstance beyond your control, this isn't always preferable on the books.

To control your employee wage budget, plan for the following:

  • Increases in minimum wage by keeping track of when — and by how much — the hike will be.
  • Allotting for the tip credit if your restaurant needs to make up the difference.

Controlling Your Restaurant Budget

With so many variables to restaurant expenses, controlling a restaurant budget isn't always easy. That's why tools like Toast's Restaurant Budget Variance Template make it easy for to track business expenses and keep a record of how in-check you are with your finances.

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