Your Guide to Budgeting for Your Franchise Restaurant

There’s always a tension between your current budget and how you can maximize your restaurant’s potential. It can be difficult to grow your business within a fixed framework. But that’s where corporate budgeting for restaurants comes in. Working with an accounting team to develop a budget doesn’t just help you meet your short-term goals.

Part of creating a budget for restaurants is also to forecast what the upcoming accounting period will look like. Do you know what to expect from your finances next year? We all want to grow our businesses, but you should be able to tell by how much you expect to grow and base your decisions off of that.

Not all corporate budgets are built the same. Here are five steps to creating a great budget that’ll help you prepare for the future.

Startup vs. Established Budget

At what phase are you in the franchise restaurant process? Are you looking to buy your first franchise, or have you been established in the industry for years?

Based on how well-established your franchise restaurant is within your market, your corporate budget could look very different. Someone who is just starting out will have very little data to look back on in order to make predictions, and will also have to deal with fees, such as the cost of buying the rights to the franchise.

For our purposes, we will be looking at the budget of an established restauranteur. This will give us the full scope of how to analyze current expenses, look back on past sales in order to forecast future ones, and identify trends. If you’re looking for more information on creating a budget for when you’re just starting out, RestoHub is a great resource.

Analyze Your Current Expenses

Before we get started on budgeting for the future, it’s important to understand where you are now. Can you tell us how your sales are going this month compared to last month? Are you growing or just staying afloat?

In order to understand your current budget and how well you’re following it, you’ll need:

• Sales revenue over time (ideally, two years)
• How much your food supplies cost
• Alcohol spending (if you serve it)
• Payroll costs
• Occupancy costs, such as your rent and taxes
• Controlled expenses such as rent, insurance, etc.

Taking a deep dive into the data of your current finances can help you figure out where the future is headed. Without a monthly analysis of your financial status, you could find out that your restaurant business is actually heading into a big sales downslide. It’s also important to analyze your current budget to identify spending habits. For example, have you overspent?

In order for corporate budgeting for restaurants to be truly effective, you’ll need to be able to stick to a budget and keep a close eye on your finances. If you’re working with an outsourced accounting agency, you can take some of the work out of it by requesting daily or weekly report updates.

Identify Trends in Variable Costs

There are plenty of costs in the franchise restaurant business. Some are fixed, some are semi-variable, and, unfortunately, some are quite variable. Fixed costs include things like rent or insurance payments. Variable costs include repairs, marketing, advertising, taxes, and more. At the current moment, there is a lot of debate about minimum wage and rising labor costs. This could create a lot of variability in your labor costs in the coming years.

In order to get the most accurate view of where your variable costs are headed, it’s important to analyze the last few years and identify trends. You can’t just rely on news sources to tell you what the franchise restaurant market is like in the coming years. Yes, you shouldn’t discount it completely, but keep in mind that your franchise restaurant is unique. Your corporate budgeting for your restaurant should reflect that.

Forecast Future Sales

In order to forecast the future, you must first look at the past.

One of the most important parts of corporate budgeting for franchise restaurants is attempting to figure out what the future holds. To start, list out sales per month for the past two years and identify the percentage difference between the two. This should give you a long-term view of how your restaurant has grown over the past two years.

Identify growth trends by averaging the percentage of growth between the two years. You can reasonably assume that there’s a good chance your franchise restaurant will grow by that percent in the upcoming year. Forecast your future growth by increasing your previous year’s sales by your average growth percentage to get an idea of the next year.

Hold on—you’re not done yet.

Now that you have a solid idea of your budget and your future growth, it’s essential to put all the pieces together to have a complete vision. Follow the same pattern as before, but instead of calculating growth, calculate your average cost increase or decrease. Divide your actual monthly cost by your actual sales costs. This will give you your actual percentage of sales.

Now that you have a comprehensive plan for the past, the present, and the future, work with an outsourced accountant to identify where you can improve.

Global Shared Services specializes in franchise accounting. We understand the business, the challenges you face, and what you need to succeed. We’ll help you to scale your company with a finance and accounting team you can trust.

If you want to work with GSS, get in touch today