Turning a pub restaurant around in Surrey

The owners of a food led pub in Surrey called us in because although they had a healthy turnover of £800,000 per year they could not understand why they were not making a profit.

Our brief was to identify where the profit was being lost and advice the pub on ways of generating more profit and set up an accounting system so monthly management accounts could be produced to show how the business was performing.

Our Approach and Findings

Although the accounting records were well maintained the monthly accounts produced were misleading and inaccurate. We set up a computerised accounting system and trained the accounts staff on the new system. The next step was to produce accurate accounts for the first 3 months of the year with accurate monthly accounts thereafter.

The accounts highlighted the following issues:

  • The pub was actually making a small profit each month and not a loss.
  • Staff costs were way too high compared to turnover.
  • Food margins were lower than expected.
  • No monthly stock takes were conducted.

Meetings with the manager, head chef and owners of the business highlighted the other problem areas;

MENUS

  • Problem- Some items on the menu were expensive to produce and were not profitable enough to have on the menu.
  • Solution - We costed the whole menu with the chef and alterations were made as a result.

STAFFING

  • Problem -Not enough control over the numbers of staff in the kitchen and restaurant. As a result the business was over staffed which were directly eating at the profits.
  • Solution –Reviewed current staffing levels and helped management correct the numbers of staff used. The head chef and front of house manager are now responsible for creating a monthly staff rota so they can plan and cost the number of staff used.

Within the monthly reports we produce we give a report showing the staff costs compare to turnover. The managers are also now on a bonus scheme for achieving targets on staffing costs.

INCREASING TURNOVER

  • Problem- Although the restaurant was busy at weekends and most evenings it was clear trade was down at lunchtimes and very quiet in the mornings.
  • Solution-There was an opportunity in the mornings to open the restaurant to business groups and clubs and societies. e.g. Business for breakfast groups that meet up every week or clubs like bridge clubs. Promotions could be run at lunchtime to bring in more trade.

CONCLUSION

  • The pub has now implemented some of these changes and as a result has seen its profits increase by £70,000 to £80,000. We now provide the client with full monthly management accounts and have a meeting on the 13th of each month.

 

by Neil Beaven of NMB Accounting, Surrey


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