The Real Cost of Owning and Running a Restaurant
One huge reason running a restaurant or a bar is extremely tough is that there are so many hidden costs that are really easy to miss when doing projections - which could be causing a restaurant to believe it's operating at a profit, but actually be bleeding cash.
A lot of people, when they think about restaurant business models, take into account the main expenses - labour, rent, raw materials - but forget other ones such as licences, delivery expenses (now replaced by commissions to online aggregators such as UberEats, Doordash, Zomato and Swiggy), compliances such as payroll taxes in the US and PF/ESI in India, insurance requirements, cleaning and hygiene, equipment upkeep, décor and many more small expenses which can add up to a whole lot.
Charlie Anthe, a restaurant owner in Seattle, has written a fantastic article (link provided at the end of this blog post) on the financial reality of restaurant ownership. We very highly recommend going through it, because he takes a deep dive and discusses every expense that he incurred running his restaurant. At the end of it, his net profit was tiny, even though his restaurant was a "successful" one (at least pre-Covid.)
Pro Tip: Using a task and process management software such as PeakScale to automate processes can help restaurants and bars (especially the multi-location ones) become more efficient and improve profitability.
You can read Charlie's article here.