Restaurant menu prices have risen by 7% to 9% each month over the past year, resulting in the cost of food to eat away at restaurant’s gross profit margins. Add in the high cost of labor, and direct operational costs have risen dramatically over the past year. And this is just for the cost of preparing and serving the food.
Managing and maintaining restaurant facilities has also become more expensive because of persisting labor and equipment shortages. This has led to some difficult choices when it comes to maintaining and repairing equipment. Because of this, many restaurant operators will simply look for the lowest cost for equipment and repair. But this isn’t telling the whole story.
Indirect costs are often overlooked and are not applied back to direct ticket costs because they are less tangible than hourly rates and trip charges. This makes them harder to calculate for the total cost of ownership. However, without evaluating these indirect costs, it is difficult to accurately calculate the financial impact on your business.
Indirect operational costs refer to the expenses that are not directly tied to producing a specific product or service. These costs are incurred to support the overall operation of the restaurant and are necessary for its smooth functioning. Examples of indirect operational costs in a restaurant may include rent, utilities, insurance, office supplies, marketing expenses, and equipment maintenance costs.
Unlike direct operational costs, which are directly traceable to a particular menu item or service, indirect operational costs are usually incurred across the entire operation of the restaurant. They are not directly tied to a specific product or service and are often necessary to keep the restaurant running efficiently. When an asset fails, the time spent finding vendors, the unplanned downtime of the restaurant, and the time spent managing the repair process are all indirect costs that add to the trip charge.
Indirect operational costs can have a significant impact on your restaurant's P&L statement. P&L statement, also known as an income statement, provides a snapshot of your restaurant's financial performance by showing revenues, expenses, and net profit or loss over a specific period of time.
Indirect operational costs are typically recorded as expenses on the P&L statement. These expenses reduce your restaurant's net profit, which in turn affects your overall profitability. For example, if your restaurant incurs high costs for rent, utilities, and marketing, it can significantly impact your net profit, even if your sales are high. Conversely, if you can effectively manage your indirect operational costs, it can lead to a higher net profit and improved profitability.
Managing indirect operational costs for maintenance is crucial to ensuring the financial health of your restaurant. Here are some tips to effectively manage these costs:
Total cost of ownership analysis provides facility maintenance teams and executives with a more accurate picture when measuring the effectiveness of their program. When looking at the total cost of ownership from a facilities maintenance perspective, it is essential to know and understand the indirect operational costs that affect your business.
Getting the most out of your facility management program will help to ensure that your locations maintain the comfort and cleanliness the customers expect in an increasingly competitive landscape. To ensure they keep receiving excellent service, make sure to look at the total cost of your facilities management solution and not just the cheapest initial quote.