University of Mississippi eGrove American Institute of Certified Public Accountants Guides, Handbooks and Manuals (AICPA) Historical Collection 2000 CPA's guide to restaurant management strategies : accounting, cost controls, and analysis; Marsha Huber Follow this and additional works at: https://egrove.olemiss.edu/aicpa_guides Part of the Accounting Commons, and the Taxation Commons Recommended Citation Huber, Marsha, "CPA's guide to restaurant management strategies : accounting, cost controls, and analysis;" (2000). Guides, Handbooks and Manuals. 130. https://egrove.olemiss.edu/aicpa_guides/130 This Book is brought to you for free and open access by the American Institute of Certified Public Accountants (AICPA) Historical Collection at eGrove. It has been accepted for inclusion in Guides, Handbooks and Manuals by an authorized administrator of eGrove. For more information, please contact [email protected]. s G u i d e t o R e s t a u r a n t M a n a g e m e n t S A CPA's Guide to t r a t e g i e s : Restaurant A c c o u n t Management i n g , C o s t Strategies: C o n t r o l s , Accounting, Cost Controls, a n d A n a and Analysis l y s i s A I C P A Marsha Huber, CPA A m e r i c a n I n s t i t u t e A CPA's Guide to o f C e Restaurant r t i f i e d Management P u b l i c Strategies: A c c o u n Accounting, Cost Controls, t a n t s and Analysis Marsha Huber, CPA Notice to Readers A CPA’s Guide to Restaurant Management Strategies does not represent an official position of the American Institute of Certified Public Accountants, and it is distributed with the understanding that the author and publisher are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Copyright © 2000 by The American Institute of Certified Public Accountants, Inc. New York, NY 10036-8775 All rights reserved. For information about permission to copy any part of this work for redistribution or for inclusion in another document or manuscript, please call the AICPA Copyright Permissions Hotline at (201) 938-3245. A Permissions Request Form for emailing requests is available at www.aicpa.org by clicking on the copyright notice on any page. Otherwise, requests should be written and mailed to the Permissions Department, AICPA, Harborside Financial Center, 201 Plaza Three, Jersey City, NJ 07311-3881. 1234567890PP09876543210 ISBN 0-87051-337-0 FOREWORD In most neighborhoods you can look around and see at least one, and possibly more, empty storefronts or buildings that used to be restaurants. Or maybe there is one location that has housed a variety of restaurants, of different types, but with one thing in common: they all failed. Restaurants make up a $336 billion industry with over 880,000 eating establishments of different kinds. Over 9 million people work in this industry. Since the average profit margin for a restaurant is 4-6%, proper management is crucial to success. Key success factors in the foodservice industry are controlling costs, maximizing sales, and attracting and retaining customers. It's not enough to serve good food. This publication has the most up-to-date information on using available systems and accounting analysis to help the restaurants you are associated with to succeed, whether they are your employers or your clients. We would like to thank Marsha Huber, MBA, CPA of Huber Consulting in Westerville, Ohio for writing this publication. Linda Prentice Cohen, Publisher Professional Publications and Technology Products iii PREFACE This book consists of seven chapters. The first introduces you to the foodservice industry, explaining the types of restaurants and the organizational structure. Chapter 2 explains accounting rules for restaurants, and Chapter 3 teaches you to use the financial information to analyze restaurant operations. Chapters 4 and 5 explain how to control food and bar costs, and Chapter 6 discusses labor management. Finally, Chapter 7 lists many sources of information you can use to learn more about foodservice operations. The appendices include a bibliography and list of vendors of restaurant management products. v ACKNOWLEDGMENTS The author would like to especially thank her friend, Brian Jones, CPA of Columbus, Ohio, who edited every chapter and gave her numerous suggestions on how to improve the book. She would also like to thank the following companies: Valerian's Restaurants of Columbus, Ohio, for allowing her to participate in their management training program on the Sable Technologies point-of-sales system in San Mateo, California and the staff of Easybar Beverage Management Systems of Lake Oswego, Oregon for explaining bar management systems to her. The author is also grateful to Otterbein College and Otterbein's White Endowment Fund of Westerville, Ohio for supporting her in writing this book. vii TABLE OF CONTENTS CHAPTER 1 OVERVIEW OF RESTAURANT INDUSTRY........................................................1 INTRODUCTION.................................................................................................................................... 1 TYPES OF RESTAURANTS..................................................................................................................1 ORGANIZATIONAL STRUCTURE..................................................................................................... 3 CONSUMER TRENDS.......................................................................................................................... 6 OPERATIONAL EFFICIENCY............................................................................................................. 8 SUMMARY............................................................................................................................................. 8 CHAPTER 2 ACCOUNTING FOR RESTAURANTS________________________________ 13 INTRODUCTION..................................................................................................................................13 ACCOUNTING BASICS......................................................................................................................13 CHART OF ACCOUNTS......................................................................................................................15 BALANCE SHEET ACCOUNTS.........................................................................................................15 INCOME STATEMENT ACCOUNTS.................................................................................................16 FINANCIAL STATEMENTS...............................................................................................................19 THE STATEMENT OF CASH FLOWS.............................................................................................. 21 GUIDELINES FOR BETTER FINANCIAL REPORTING................................................................ 21 KEY FINANCIAL RATIOS................................................................................................................. 21 SUMMARY...........................................................................................................................................23 CHAPTER 3 SALES ANALYSIS AND REPORTING.... ............................................................37 INTRODUCTION..................................................................................................................................37 SALES REPORTING........................................................................................................................... 37 POS PRIMER.........................................................................................................................................41 SALES AND MENU ANALYSIS....................................................................................................... 54 PURCHASING A POS SYSTEM........................................................................................................ 56 COUPONING........................................................................................................................................57 SUMMARY...........................................................................................................................................58 CHAPTER 4 FOOD COST AND ENERGY COST CONTROLS.............................................. 69 INTRODUCTION................................................................................................................................. 69 FORECASTING AND PURCHASING............................................................................................... 69 RECEIVING AND MAINTAINING INVENTORY........................................................................... 71 FOOD COST CONTROLS - “EVERY PENNY COUNTS”.............................................................. 72 ENERGY MANAGEMENT................................................................................................................. 78 SUMMARY...........................................................................................................................................80 ix CHAPTER 5 BAR COST CONTROL........................................................................................... 83 INTRODUCTION..................................................................................................................................83 ORDERING...........................................................................................................................................83