In the hospitality industry, chefs and managers are often the driving forces behind daily operations. They oversee staff, maintain quality, and ensure customers have a great experience. However, their impact doesn’t stop there. To truly succeed, chefs and managers need to understand the financial side of the business and how their decisions directly affect profitability.
Here’s why financial literacy is essential for these key players and how it drives better results.
1. Financial Literacy Translates Numbers Into Action
Understanding financial data empowers chefs and managers to make informed decisions that align with the venue’s profitability goals.
- Chefs: Knowing how food COGS (Cost of Goods Sold) affects margins helps them optimize portion sizes, manage stock, and reduce waste. Additionally, chefs who create rosters must understand wage percentages to ensure kitchen labor costs are aligned with food sales.
- Managers: Recognizing the importance of total wage percentages ensures efficient rostering for front-of-house (FOH) and management roles that contribute to overall revenue.
When numbers become meaningful, chefs and managers can take ownership of their role in improving the venue’s financial health.
2. Comparing Wages to Sales: A Key Insight
Chefs and managers must understand how wages tie directly to revenue streams.
- Kitchen Wages to Food Sales: Kitchen wages should be compared exclusively to food sales, as this is the revenue directly tied to their work. This focused comparison ensures that chefs see a clear link between their labor costs and their area of responsibility.
- Other Wages to Total Sales: FOH and management wages are compared to total sales, as these roles contribute to all aspects of the venue’s revenue, including both food and beverage sales.
By breaking down wages this way, chefs and managers gain a clearer understanding of their financial responsibilities and how to improve efficiency.
3. Aligning Daily Decisions With Profitability Goals
Every decision in a hospitality venue—big or small—affects the bottom line. Financial literacy helps chefs and managers see the bigger picture.
- Chefs: Adjust menus based on COGS, use theoretical food cost tracking, and balance higher wages with lower COGS when preparing items from scratch. They also create kitchen rosters that align labor costs with expected food sales.
- Managers: Monitor daily sales and wage percentages to adjust FOH staffing levels as needed.
By aligning decisions with profitability metrics, chefs and managers ensure day-to-day operations contribute to long-term success.
4. Driving Accountability Through Financial Coaching
Financial literacy isn’t innate; it’s learned through consistent coaching and practice. Weekly coaching sessions provide the structure chefs and managers need to build their skills.
- Understanding the Profitability Matrix: Breaking down revenue, COGS, wages, and overheads shows where improvements are needed.
- Setting KPIs: Chefs and managers can focus on achieving realistic targets, like maintaining wage percentages or improving food COGS.
- Reviewing Results: Analyzing weekly profitability reports ensures accountability and encourages ongoing improvement.
5. Making the Venue More Resilient to Market Changes
Financial literacy gives chefs and managers the tools to adapt to external pressures like rising costs, staffing challenges, or seasonal fluctuations.
- Chefs: Can adjust menu pricing or switch to alternative suppliers when ingredient costs increase.
- Managers: Can implement promotions or adjust FOH rosters to drive sales and manage wages during quiet periods.
This adaptability ensures the venue remains profitable, even in challenging circumstances.
6. Real-Life Example: Aligning Wages and Sales
A venue struggling with high kitchen labor costs and inconsistent food COGS turned things around with focused coaching.
- Chefs: Started creating kitchen rosters based on projected food sales, achieving a labor-to-sales ratio of 20%, down from 27%.
- Managers: Monitored total wage percentages daily, aligning FOH staffing with expected revenue.
By understanding the direct connection between wages and sales, the team improved efficiency and reduced costs, leading to a significant boost in operating profit.
7. Closing the Gap Between Operations and Finance
Chefs and managers are typically focused on the operational side of the business. By equipping them with financial knowledge, you bridge the gap between operations and finance.
- Chefs: Understand how the cost of a dish and kitchen labor impact the venue’s overall financial performance.
- Managers: See how rostering decisions for FOH staff and managers affect total profitability.
This connection transforms their roles, making them integral to both the customer experience and the venue’s financial success.
Financial Literacy Is a Must-Have Skill
Chefs and managers are not just operational leaders—they are key drivers of financial performance. By equipping them with the tools and knowledge to understand the numbers, you empower them to make decisions that align with profitability goals.
Whether it’s creating rosters, monitoring COGS, or managing daily sales, financially literate chefs and managers are better prepared to tackle challenges, seize opportunities, and ensure the success of the venue.
