Restaurant Operating Expenses: Types & Examples

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  • 0:02 Intro to Running Restaurants
  • 0:39 The Food in Restaurants
  • 1:13 The Staff in Restaurants
  • 2:03 The Venue of Restaurants
  • 2:32 The Overhead of Restaurants
  • 3:08 Lesson Summary
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Lesson Transcript
Instructor: Kaitlin Oglesby

Kaitlin has a BA in political science and experience teaching.

Ever thought of running a restaurant? Before you jump in, you may want to review this lesson on restaurant operating expenses. From food to table linens, this lesson introduces you to many of the expenses you'll encounter.

Intro to Running Restaurants

Have you ever sat down at a fancy restaurant and wondered how they can justify charging so much for their food? $14 for a salad is not unheard of, after all, and that's not even at a three-star establishment! That is not even acknowledging the markup for drinks, ranging from $3 for a glass of tea to hundreds of dollars for a bottle of wine. However, restaurants have a great deal of operating expenses, which are costs that they have to cover through the sale of food and beverages. In this lesson, we'll take a look at many of those expenses and see how they contribute to the restaurant's bottom line.

The Food in Restaurants

For many restaurants, food is the most costly operating expense. After all, the quality of food served at a typical restaurant, especially those that err towards fine dining, is a world away from what we typically find in our neighborhood grocery store. In fact, even if your supermarket does routinely have Chilean Sea Bass or grass-fed dry-aged Wagyu beef, they are among the most expensive items there. Restaurants have to pay top dollar for their food, or else they won't have any return business. In fact, a typical restaurant spends between 30% and 40% of its entire budget on food.

The Staff in Restaurants

Unless you've ordered steak tartare, that aforementioned steak does not just come out on your plate raw. Instead, someone cooks it. And someone cleans the plate and the pan. And someone manages the expenses. And someone provides publicity for the restaurant. See a trend?

Expenses of the staff, or the employees of the business, are often neck and neck with food as the most expensive line item in a restaurant's budget. This is particularly shocking, considering that your tips pay much of a server's salary, but think about it: cooks, dishwashers, managers, janitors, and more must be paid from somewhere, and that somewhere comes out of the cost of the entree. In fact, you can budget another 20% to 40% for staff expenses. It is even more costly if the place has some relation to a famous celebrity chef.

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