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The direct operating expenses are partially related meaning they move in a general trend together, but are not 100% related. The cost of goods sold is that they are 100% related – a product and a sale.

Hell, even if it’s flat, you’re probably doing just fine. If it’s trending down, you’re doing great. If those numbers are trending up, it’s a problem that needs to be fixed. What matters most is if your numbers are trending down or up over any period of time. You don’t know the details of their business and it’s hard to compare something like food cost because you don’t know what they put into their food. I’ll say it a hundred times – compare your numbers to your own numbers and no one else’s. That will depend on the type of restaurant – fast food restaurants will go through far more paper products and to-go containers than a plate service restaurant.ĭon’t worry so much about comparing numbers to other restaurants. If you’re looking for a rule of thumb, 4-8% is the general industry standard for what your direct operating costs should be. If you have 200 customers in your restaurant, you know that you’ll double the amount of buns and patties you need, and you know that you’ll go through more toilet paper than if you only had 100 customers, but it’s certainly not a 1:1 ratio. If you have 100 customers come into your restaurant today and each of them order hamburgers, you’re going to go through 100 buns and 100 patties, but that doesn’t relate to an exact amount of toilet paper that you’ll use. The busier your restaurant is, the more of those types of things you’re going to go through even though it’s not 100% directly related.

Keep in mind, every restaurant does things a little differently – sometimes you might include the to-go container in the cost of goods sold. Here’s an example – toilet paper, hand soap, to-go containers and hand towels often fall into the direct operating expense category. They should almost be called “related operating expenses” and you can think of it that way if you need to. DIRECT OPERATING EXPENSESĭirect operating expenses aren’t necessarily directly related to sales. Sure, there’s always an exception, but for the most part, that’s how it goes. It’s directly related, meaning you can’t sell a hamburger without selling a bun and a burger. Every hamburger you sell it’s going to need a bun, slice of cheese, burger patty and toppings. Your cost of goods sold is a direct expense (not to be confused with a direct operating expense).

How much did you buy something for? How much are you selling it for? If you think of it like a recipe, it’s the sales price divided by the purchase (or production) price. these are literally the cost of a good that we’re selling. When we talk about food costs, beer costs, wine costs or liquor costs. Today, I’ll share with you the differences and a trick to track these expenses a little better. Do you know the difference between the cost of goods sold and direct operating expenses? They’re pretty similar, but there are some important differences and most restaurants get these two confused and end up tracking them in the wrong places.