Whether you’re building out your own chain of quick service restaurants (QSR) or you are a franchisee trying to expand, it’s important to build upon a solid foundation with a clear understanding of your financial position.
This starts with the fundamentals: Bookkeeping.
Though it may seem basic, or something that can be dealt with later, it’s best to get ahead of your bookkeeping and get the processes in place before it becomes a problem.
QSRs typically have high transaction volume and merchant processing fees are charged in different ways. The longer you wait to get the books done, the more the transactions accumulate and the harder it is to get things right.
In addition to having a lot of transactions, standardized reporting and operations between your different locations is key to understanding business performance in a variety of ways.
Here are some building blocks to set your growing business up for success.
Comparable and consistent data
Bookkeeping is the source of your financial data. The key to success is to work with a bookkeeper who understands your vision and has the ability to set up a system that scales with you.
When the books are set up and tracked in the way that supports your growth plans, you will be able to pull the ongoing insights you need and know what’s happening across your business.
For example, if all of your locations are set up as separate companies, you will need to track the books separately as each company will need to file its own tax return at year-end. In this case, your bookkeeper can standardize the chart of accounts across your companies so financials can be easily compiled and compared across companies on an ongoing basis.
If your locations are all set up under one company, then your bookkeeper can set up location or class tracking in Quickbooks Online (QBO) providing you with a clear picture on revenue and expenses by location as well as in a consolidated view across all locations.
With consistent data and reporting across locations, other ratios and calculations like revenue per seat, sales per square foot, and inventory turnover should be clear and easy to compare.
Generally speaking, if you are operating a few locations, you should see trends in your gross margin. Gross margin is calculated as your net sales revenue minus cost of goods sold (COGS). In a QSR business, the most significant part of COGS are typically food costs and non-management related direct salary costs.
While you might see some differences from one restaurant to another based on demographics and location, you are likely to see some consistency.
If gross margin is low, this could mean that there is more food waste at one location or that a location or team is performing better than another. This will allow you to understand the profitability of your different locations in the long run and find ways to improve the underperforming restaurants.
In an industry often run by part-time staff and high turnover, payroll can be complicated. Tipping jars are giving way to tips added through digital payments – like credit card, debit, app, or online – so distribution is often taking place through payroll. With a large portion of hourly staff, overtime considerations, and inevitably, there is always someone who forgets to clock in or out.
Managing payroll on a bi-weekly or semi-monthly basis can be a significant time commitment for QSR owners. With one location it may be manageable, but with many locations, it can become overwhelming.
Some owners will try to eliminate the burden by finding a partner to manage their payroll as it’s a business function that’s often outsourced. Big market players like Ceridian and ADP have great platforms and a strong reputation, but they only help with part of the problem.
Often, it’s better to go with a provider that you can have a closer relationship with. One that will work as your extended payroll team, keep your business compliant with payroll legislation and ensure that payroll is processed correctly in time for every payday.
Setting yourself up for success
If you don’t have a good bookkeeper supporting your QSR, don’t wait until year-end to get your foundation in place. Working with the right accounting service provider will free you up from your accounting back-office tasks while providing you with accurate monthly financial for better decision making.
At Enkel, we provide bookkeeping and payroll services to growing QSRs. From getting your books and accounting systems organized to due diligence support and financial analysis, our team of bookkeepers and controllers can help you with all your accounting needs.