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Has Your Franchised Restaurant Become a Financial Nightmare?

Has Your Franchised Restaurant Become a Financial Nightmare?

Turn Your Restaurant Around Before You Need Chef Ramsay

You’ve probably seen world-renowned chef Gordon Ramsay helping struggling restaurants turn their businesses around on the hit television show Kitchen Nightmares.   Chef Ramsay often finds old food, inexperienced staff, unsanitary refrigerators, and even owners who don’t have a clue about their financial information.  Although Chef Ramsay can help restaurants change their operations, renovate their dining rooms, update their menus, and help the owners understand basic restaurant finances, you can begin taking control now rather than exposing your restaurant’s issues in front of a nationally-televised audience.

Just Because You’re Franchised Doesn’t Mean You Have Total Support

Franchised restaurants don’t have as much flexibility as non-franchised restaurants due to the need to comply with franchise guidelines.  However, they can all offer fresh food, train their staff, and clean their kitchen.  While high franchise fees offer some great benefits like proven systems, an operations manual, and established menu items, most franchisors provide little or no accounting or tax help.

Consider the following to improve your restaurant’s financial condition:

  • Know your ideal key financial ratios such as food cost as percentage of sales and inventory turnover.
  • Understand your ideal key performance indicators like sales per seat and sales per labor hour.
  • Count your high value inventory items daily.
  • Analyze weekly reports to discover things like a pattern of slow sale days, inventory waste or theft, and extra labor hours.
  • Offer incentives for managers to reduce food and labor costs, increase sales, and improve service and cleanliness standards.
  • Develop and use a weekly budget to project sales, control food and beverage costs, and schedule staff.
  • Analyze the results of coupon, television, and other advertising programs by determining the additional sales, customer counts, and average guest checks as well as identifying the additional expenses incurred.

After Taking Control, What Next?

After you’ve increased your restaurant’s sales and controlled costs, you still can’t relax.  You must continue to analyze your operations and financial reports using the above tools and add new tools to further improve your restaurant.  But you don’t have to do it alone.  A CPA firm with franchise experience can provide insights in improving cash flow and profits and in reducing taxable income.  In fact, studies have shown that the most successful businesses outsource what they don’t do well and focus on things that are important to their core business.  While an accounting firm may not use language as colorful as Chef Ramsay, their assistance may be just as valuable.

Michael Allen, CPA
Allen & Company, PC
(770) 428-6229 (T)
(770) 425-5481 (F)
michael.robert.allen (Skype)