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Are you a restaurateur trying to optimize your profits? If so, it’s important to understand the impact of your COGS (Cost Of Goods Sold) on your restaurant’s overall revenue. But what percentage of revenue should you allocate for COGS? This is an essential question that all restaurant owners must answer in order to maximize their earnings.
In this blog post, we will explore the concept of COGS and why it is important, factors that can influence your cost of goods sold, benchmarks for the restaurant industry cogs and more. So if you want to learn how to effectively manage costs at your restaurant and make sure that every penny counts – read on!
What Is COGS And Why Is It Important?
COGS is the total cost of all products, services and materials used in the production of goods for sale. This includes raw materials, labor costs, manufacturing overhead costs and the cost of goods sold (such as food, drinks and other items purchased directly by your restaurant). Knowing the cost of these goods allows you to determine how much profit you will make from each sale. It also helps you estimate your break-even point – or at what level of sales volume your business starts showing a profit.
Factors That Impact Your COGS
There are several factors that impact your COGS. These include: type of product being sold; price per unit; operating expenses such as rent, wages and other overhead expenses; quality of the product; and the local market conditions. By understanding these factors, you can more accurately forecast your restaurant’s cost of goods sold and adjust it accordingly in order to remain profitable.
Benchmarks For Restaurant Industry Cogs
The National Restaurant Association (NRA) publishes benchmarks for COGS in the restaurant industry based on research conducted with over 7,000 establishments throughout North America. According to their survey, the average COGS is 28 percent of total sales revenue across all restaurants – but this figure varies depending on type of cuisine offered, region of the country and other factors. Additionally, most experts agree that a well-run restaurant should aim to keep their COGS at or below 30 percent of their sales revenue in order to remain profitable.
COGS should be a top priority for restaurant owners if they want to maximize their profits. Understanding the cost of goods sold and how it impacts your overall revenue is essential, as is staying abreast of factors that influence your COGS. Additionally, research industry benchmarks to help you determine what percentage of revenue should go towards COGS in order to remain profitable.