Brewpub Sales and Wage Expense Questions

[colinthehippie]

I have searched a bit for the answer to my first question, but searched less for the answer to the second. Any help anyone is willing to provide is much appreciated.

1. How are beer (and food) sales affected by seasons? Do sales increase or decrease in the summer (assuming your town is not a strong tourism draw)? What about spring, fall and winter? Just looking for general trends.
2. What is a reasonable labor expense for a brewpub as a percentage of sales? There is probably a range, and it is probably just like a restaurant.

Thanks in advance for any help.

[OGBrewer76]

I'm not sure if you have figured this out, but food and labor costs should not exceed 60%. AS a brewpub, you should be able to get these two, which combined is called the prime cost, down to 40%.

[colinthehippie]

I'm not sure if you have figured this out, but food and labor costs should not exceed 60%. AS a brewpub, you should be able to get these two, which combined is called the prime cost, down to 40%.

You say "As a brewpub," and I assume you're referring to additional revenues at higher margins for our house beers, right? Shoud the prime cost then also include COGS for beer?

[nateo]

Shoud the prime cost then also include COGS for beer?

Prime cost is prime cost and COGS is COGS. You should absolutely not mix them.

Prime cost is materials + labor, COGS is materials + labor + manufacturing overhead. (plus some other stuff sometimes but let's keep it simple)

[OGBrewer76]

You say "As a brewpub," and I assume you're referring to additional revenues at higher margins for our house beers, right? Should the prime cost then also include COGS for beer?

From a strictly restaurant operations stand point, food cost would constitute what your spending to make all your food for a month plus what your spending on your alcohol, irrespective of whether you are selling top shelf or not of any alcohol.

By crafting your own beer and selling it on site, you should be able to achieve lower Prime Costs than a typical restaurant.

[BeerBred]

As far as the seasonality, it would help to know where you are.

[colinthehippie]

As far as the seasonality, it would help to know where you are.

Amarillo, Texas which is in the panhandle of the state. We're on the high plains and have pretty warm summers and sometimes cold winters. Pretty much four seasons here.

[I Like Pints]

By crafting your own beer and selling it on site, you should be able to achieve lower Prime Costs than a typical restaurant.

While I understand that Beer is considered a food, I don't believe that Alcohol is included in food cost. At least, I've never included it in my PRIME... Keep in mind that PRIME cost is a managerial tool used to evaluate weekly food related purchasing/inventory issues as well as labor goals. Once you start entering Alcohol Sales vs. Grain Inv./Hop Inv./etc. the numbers would be so skewed as to make it just about worthless. Or difficult to discern actual problems at the very least.

Prime cost also differs depending on what type of Brewpub this is... Full service or Quick service. Full Service PRIME usually runs about %10 higher.

An excellent resource is http://www.restaurantowner.com/ . It's a subscription, but it's got enough information to make it easily worthwhile. Especially if you're new to the restaurant game .

[AdamBrew167]

I have searched a bit for the answer to my first question, but searched less for the answer to the second. Any help anyone is willing to provide is much appreciated.

1. How are beer (and food) sales affected by seasons? Do sales increase or decrease in the summer (assuming your town is not a strong tourism draw)? What about spring, fall and winter? Just looking for general trends.
2. What is a reasonable labor expense for a brewpub as a percentage of sales? There is probably a range, and it is probably just like a restaurant.

Thanks in advance for any help.

*Disclaimer: I am planning a brewpub, I have restaurant and very limited brewery experience. This is just my philosophy or understanding.

1. That is completely dependent on location. The best way to find out is through a market research; ask competitors, surveys, observance, etc. You can also find market research studies online, they can cost a few hundred dollars but definitely worth it. Google is a valuable resource, so is the NRA (national restaurant association).

2. Restaurant professionals say labor cost should never exceed 30% of sales. Obviously brewpubs are not traditional restaurants so this rule of thumb is inaccurate. I solved this problem by separating brewery and restaurant expenses in my operating statement. I have the restaurant "purchase" beer from the brewery at ~21% of beer sales. I found the 21% from the NRA as an industry average, a very reliable source. I do this to estimate labor, utilities, and other expenses more accurately for each side as well as ensuring prime costs and COG are reasonable. This makes the brewery look like a financial burden but the "official" financial statements do not separate the two. I do not know if this the best way or completely ridiculous but it makes sense to me.
As for the brewery, I would like to hear what an experience brewpub owner has to say. This is dependent on your brew set up; annual production, size, FVs, level of control and monitoring, packaging method, brewing luxuries, LOCATION, competition, other employment opportunities, blah blah blah. My plan starts with two employees; head brewer and assistant. My role, voluteers and interns will supplement their efforts. I plan to use serving tanks, minimal distribution, no bottling or canning the first year. Google says starting head brewers make $35-40k, assistants make $10-15/hr. Both are dependent on location and experience. I do not know of a formula for figuring out employee needs for production, you'll quickly learn once you start. Just make sure you have enough money if you under estimate!


https://onedrive.live.com/redir?resi...nt=file%2cxlsx **The link messes up sometimes. Just let me know to fix it!**

^^Here is my excel. Take a look, criticize or take notes. I do not suggest stealing it, I made this myself so you could completely wreck it if you try changing numbers that are associated with another cell. You'll probably get a "circular reference warning" and get frustrated. In your rage, you will throw your coffee across the room, accidentally scorching your unsuspecting golden retriever, inflicting 2nd degree burns, get arrested for animal cruelty which will ruin your chances of opening a brewpub because people don't like you anymore. Totally plausible, so I suggest not doing it. Unless you have a cat.

However, if you must, just use it as a format to follow. Create the formulas and references yourself. It is extremely helpful to understanding the relationship between financial statements. I do not think many people truly understand the relationship between P/L, Balance and Cash Flow. Also, the accuracy of my numbers are not guaranteed. Everything was derived from my own research; calling suppliers, reading forums and books, asking business owners and educated guesses. It is still a work-in-progress too so there are some expenses that are not accounted for. Finding all of these our for yourself hold just as much importance, if not more, than understanding the statements. Trust me, I am not a professional. It is a learning experience.

I hope I have helped. If anything I have said is wrong, please correct me. I would like to know.

-Adam

[nateo]

https://onedrive.live.com/redir?resi...nt=file%2cxlsx **The link messes up sometimes. Just let me know to fix it!**

^^Here is my excel. Take a look, criticize or take notes.

I have no idea how/why you put COGS before gross profit, but that's something I've seen dozens of people get wrong, on almost every business plan I've seen. I have no idea why that is. Just like in brewing, learning how to use terminology correctly will make your life easier.

There are a lot of line items below gross profit, in your operating expense category, that should be part of the COGS calculation. For instance, normal spoilage is part of COGS, abnormal spoilage would be its own separate loss item.

Your COGS formula should be based on this:

1) Beginning inventory of direct material + purchases = Direct material available for use
2) Direct material available for use - ending direct material inventory = direct material consumed
3) Total manufacturing cost = Direct material consumed + Direct labor used + Factory overhead
4) Cost of goods manufactured (COGM) = Total manufacturing cost + beginning work in process - ending work in process
5) COGS = COGM + beginning inventory of finished goods - ending inventory of finished goods.

[chiliman]

COGS always goes above Gross Profit. I've never seen a professional financial package or process do it otherwise. I don't understand what model you are applying above but it looks more like a manufacturing P&L process instead of a restaurant/brewery/brewpub process.

The model above is a good model to drive a pricing formula that accounts for all expenses to manufacture a product but industry standards for COGS is simply beginning inv + purchases - ending inv.


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[sok454]

Weird but the spreadsheet my lender sent me also had COGS above gross profit.

COGS always goes above Gross Profit. I've never seen a professional financial package or process do it otherwise. I don't understand what model you are applying above but it looks more like a manufacturing P&L process instead of a restaurant/brewery/brewpub process.

The model above is a good model to drive a pricing formula that accounts for all expenses to manufacture a product but industry standards for COGS is simply beginning inv + purchases - ending inv.


Sent from my iPhone using Tapatalk