Ten business facts that all hospitality staff should understand

Do your staff know how a business actually works? Chances are they weren’t taught this at the last job, so they will make up their own reasons to explain why you fuss about efficiency or an extra sales effort.

Regular briefing on business basics can grow employees into real ‘business partners’. But you may have to open the books a little more – hospitality is well known for its paranoia about figures!

Profit = sales minus costs. If costs are more than sales, we can only stay open as long as someone keeps finding money to make up the difference. Relate it back to how staff manage their pay – you can’t spend it if you don’t have it!

There are two types of expenses: Fixed and variable. The ingredients for making a pizza, cocktail or muffin are variable costs – mostly raw materials and labour. The more sales we make, the more staff and ingredients we need – those costs vary up and down. Rent and insurance are examples of fixed costs. Variable costs can be cut more easily than Fixed costs.

Food and liquor stock is just like cash. Most businesses keep about a week’s supply of food in stock, and several weeks of liquor. More than this and the boss should be getting worried – it’s easy to be overstocked (and easy for it to attract thieves).

Increasing sales makes more profit than cutting costs. But most people find it easier to cut back rather than grow, and sometimes we cut business muscle instead of fat. It needs smart leadership to handle both sides of the equation, and if you find someone who loves to sell, look after them!

There are only 100 cents in a dollar. Take 100 5c coins and ask staff to allocate them to rent, wages, cost of goods etc for your business. What did they get wrong – any surprises? If they can’t see how $1 is managed, they’ll struggle to figure out costs on a real business.

Staff is usually the biggest expense in hospitality. That’s why the boss watches the roster closely, and why productivity is so important. Show them the impact of penalty rates on the profitability of weekends and public holidays – they’ll be more motivated to save hours on these expensive days.

Extras add 30% or more to the total cost of staff. Examples are workers compensation, leave, uniforms, training and staff meals. For every $100 per week you’re paid, add at least another $30 - use someone’s pay slip as an example.

New equipment is paid for by sales and profits. That could be affordable Rent-Try-Buy funding from Silver Chef, payment by cash or another option. The best equipment has a fast ‘return on investment’ ie it pays for itself quickly by saving labour and food costs, or creating more sales. If the chef or the manager really wants a new shiny toy, show them how to do a simple Return on Investment calculation – they may actually convince you!

The cost of small items can be surprisingly high. Work out the cost of a strawberry, an olive, a scroop of ground coffee, a teaspoon or a napkin. How many are lost or wasted each week? Price each plate, glass, knife and spoon you use, and put one of each with the price up in the dishroom.

Staff learn better by watching rather than reading – look for business training videos on YouTube or websites, and share them on a PC or iPad. As they understand the importance of profits and good management, the positive results will flow through to your bottom line.