Successful Frameworks

I’ve served as CFO for several restaurant groups that didn’t have a reporting system when I started.

There was no way to understand the financial drivers of the business.

We initially had no idea what was driving store profitability: why some stores were doing well and others were not.

Many of these restaurant groups also lacked models that we could rely on for further profitable expansion. Because we didn’t know the profitability drivers at all, we didn’t know which would ensure that each new store would help us to further our profits.

What are some things you should track? Remember, this will vary by both industry and business. Here are a few to get you started:

• Daily sales
• Daily labor cost
• Average order value
• Gross profit by product
• Facilities cost
• Customers (repeat versus new)
• Daily breakeven point

These are some of the metrics that drove the budget and forecasting process, as well as the KPI dashboard used to track past performance.

For many of these clients, I helped introduce a formalized reporting system, which gave us the insight we needed.

That led to store closures in unprofitable neighborhoods, which may not look great in short-term revenue growth but significantly improved the business’s financial health in the long run.

We were also no longer shooting from the hip – opening stores without regard for potential profit and costs.

With frameworks in place, we could finally ensure that every major financial decision (like opening a store) carried financial logic and was being properly vetted.