Kwick365, online ordering site by KwickPOS

Kwick365, online ordering site by KwickPOS

How to Calculate Restaurant Overhead Rate

1. Gather Overhead Expenses:

  • Rent or mortgage
  • Utilities (electricity, gas, water)
  • Insurance (property, liability, workers' compensation)
  • Property taxes
  • Equipment lease or purchase payments
  • Maintenance and repairs
  • Administrative expenses (office supplies, accounting fees)
  • Marketing and advertising
  • Employee benefits (health insurance, paid time off)
  • 2. Calculate Total Overhead Expenses:

    Add up all the overhead expenses listed above for a specific period, such as a month or year.

    3. Determine Sales Revenue:

    Calculate the total sales revenue generated by the restaurant during the same period. This includes all food and beverage sales, as well as any other revenue streams (e.g., merchandise sales).

    4. Calculate Overhead Rate:

    Divide the total overhead expenses by the total sales revenue. Multiply the result by 100 to express it as a percentage.

    Formula:

    Overhead Rate = (Total Overhead Expenses / Total Sales Revenue) x 100

    Example:

  • Total Overhead Expenses
    $20,000
  • Total Sales Revenue
    $100,000
  • Overhead Rate = (20,000 / 100,000) x 100 = 20%

    Interpretation:

    The overhead rate represents the percentage of sales revenue that is used to cover the restaurant's fixed and variable overhead expenses. A higher overhead rate indicates that a larger portion of sales revenue is being spent on overhead costs.

    Tips:

  • Track overhead expenses regularly to identify areas where costs can be reduced.
  • Benchmark your overhead rate against industry averages to assess your efficiency.
  • Use the overhead rate to set menu prices and determine profitability.
  • Consider seasonal fluctuations in sales revenue when calculating the overhead rate.
  • DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Kwick365 does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Kwick365 does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.

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