Being able to successfully manage and grow a restaurant or bar requires business math. It is very surprising how many hospitality managers are not familiar with basic math that is required to profitably run a business. I cannot count the amount of times that I have asked a bar manager what margin or markup they work on and they have no clue. Understating the principles of business math can help you properly manage an enterprise and deliver results with numerical backing. I have laid out the three basic formulas that ever bar or restaurant operator should know in order to properly manager their establishment. The Margin, Markup and pour cost are vital to anyone dealing with food and beverage.
BUSINESS MATH FORMULAS
- Margin: A profit as a percentage of the selling price.
- Margin = PTC – PTR / PTC
- PTR = PTC x (1-Margin)
- PTC = PTR / (1-Margin)
- Markup: A profit as a percentage of the cost.
- Markup: PTC – PTR / PTR
- PTR / Cost = Selling Price / 1+Mark Up
- PTC = PTR x (1+Markup)
- Pour Cost: The percentage of the selling Price that is cost.
- Pour Cost: PTR / PTC
- PTR = Pour Cost x PTC Price
- PTC = Cost / Pour Cost
- PTR = Price to Retailer
- PTC = Price to Consumer
I don’t care what it cost, I care what it’s worth.