Restaurant Week just arrived to showcase more than 300 Chicago area restaurants. Prix fixe menus of $22, $33 and $44 are offered for breakfast lunch and dinner. In honor of the festivities, here is our take on a prix fixe menu of best restaurant management practices. Rather than an appetizer, main course and dessert, we will discuss regulations, finances and taxes.
- Choice of Entity
All restaurants need to be organized in a legal entity. Limited liability companies (LLCs) would be the most common choice of entity these days. An LLC can be treated as a sole proprietorship, partnership or corporation. You have flexibility and legal protection with an LLC.
To weave your way through the web of various licenses required to operate in the City of Chicago, you either need a lawyer or consult with the City’s Department of Business Affairs & Consumer Protection (BACP). You have got building permits, liquor licenses and Department of Public Health inspections among the many things to manage.
- Financial Statements
With a restaurant, not all months are created equal, so you should not review your financials that way. Reviewing four-week financial statements versus monthly financial statements will provide you with greater consistency. Every month does not have the same amount of weekend nights so a monthly comparison could be misleading. The four-week statements will provide you with better insight into how your restaurant is trending.
- Menu Costing
Determine the cost of each ingredient and then you will have the cost of the menu item. Once you know the cost of the menu item, then you can determine its price. This will help you improve profitability and inventory control.
- Tip Credit
All restaurants receiving tips should be taking advantage of the tip credit. Unlike other industries, restaurants receive an income tax credit for the payroll taxes paid on tips received by their employees. It is a fairly simple incentive unique to restaurants and should not be forgotten as we enter tax season.
There are various methods of accelerating depreciation available these days. We have Section 179 expense, bonus depreciation and reduced useful lives. All of these need to be considered when completing your tax return.
Restaurant Week is a great time to explore new venues and menu items, so eat, drink, be merry and don’t forget your favorite CPA as we enter tax season. Try one of my neighborhood favorites, Via Lima.
For more information, contact Rob Swenson at firstname.lastname@example.org, or call him at 312.670.7444. Visit ORBA.com to learn more about our Restaurant Group.