Where your money goes, and where you get it back

Fixed costs, variable costs, and why the difference matters

Costs in a hospitality business fall into two buckets. Fixed costs do not move with your revenue. Your rent in a quiet February week matches the busiest Saturday in July. Variable costs do move: ingredients, hours worked, packaging, commission on orders.

That distinction is not an accounting nicety. Your fixed charges decide how much revenue you need before you earn anything. Your variable costs decide what is left on every order after that. Two levers, two kinds of decision.

Margins in this trade are thin. A few points on the cost side is the difference between a year you can invest out of and a year in which you only worked. This is not an annual job for your accountant.

Start simply. Take your last three bank statements and put every recurring payment into one of the two columns above. Half an hour of work, and you will know your cost structure better than most owners know theirs.

Labour: more than the number on the payslip

For almost every business this is the largest line, and the most underestimated. Owners work with the hourly wage rather than what an hour genuinely costs.

• Gross pay on the scales in the hospitality collective agreement, the cao Horeca
• Holiday pay, a statutory eight per cent of gross pay
• Pension contributions through Pensioenfonds Horeca & Catering
• Employer charges and social contributions
• Supplements for evenings, weekends and public holidays
• Continued pay during sickness
• Recruiting and training everyone you hire

There is a hidden version too, and it sits on no payslip. Idle time. Someone at the counter from five to seven while three guests come in costs as much as someone who cannot keep up. That is rostering, not working harder.

How to work out your labour cost percentage

Divide your total labour cost by your revenue and multiply by a hundred. Take a closed month or quarter, and use revenue excluding btw.

An example. On €48,000 of revenue in a month with €15,000 of total labour cost, you land just above thirty-one per cent. That figure on its own says very little. The same figure twelve months in a row says almost everything.

The guideline that circulates in articles like this one, twenty-eight to thirty-three per cent, comes from American sources. The Dutch cost structure differs: other wage scales, other employer charges, no tipping culture carrying part of the wage. Treat that band as a shape, not a target.

What you can do about it

• Take the phone out of your peak hour. An order through your own page answers itself.
• Roster off your own numbers. Your till knows what happens hour by hour. Your rota rarely does.
• Train people broadly. Someone who can both pack and take payment saves you half a shift.
• Give collection orders a fixed spot. Orders waiting under a name save you an evening of walking.
• Keep the people you have. Recruiting is booked nowhere as labour, but leaves the same account.

Purchasing: what a plate costs before anyone sits down

The second big line, and wider than the box your supplier drops off: spoilage, wrongly ordered batches, packaging, staff meals and everything that goes in the bin because it stood too long.

Purchasing scales almost neatly with revenue, but your margin per dish does not. More orders is therefore not automatically more profit. It depends on which dishes go over the counter more often.

How to work out your food cost

1. Opening stock plus the purchasing for the period minus closing stock. That is what you genuinely used.
2. Take your revenue for the same period, excluding btw.
3. Divide the first by the second and multiply by a hundred.

That btw correction sounds like a detail and is not. Food sits at the low rate of nine per cent, most alcoholic drinks at twenty-one. Work with amounts including btw and your percentage comes out flattering. An example: nine thousand euros of consumption on thirty thousand euros of revenue is thirty per cent.

What counts as healthy depends on your concept. A steakhouse sits higher than a pizzeria and can still earn more. So look at the euros of margin per dish, and above all at the margin on the dishes you sell most often.

What you can do about it

• Count stock at a fixed moment. Without a count, every intervention is guesswork.
• Work first in, first out. What came in first goes in the pan first.
• Negotiate with your supplier and put a second quote alongside every year.
• Standardise your portions. A scoop that differs by member of staff shows up in no report.
• Shorten your menu. Fewer dishes means less spoilage and a guest who chooses sooner.
• Let ingredients reappear. Two dishes sharing a base halve your leftovers.
• Sell sides. Chips, bread and soft drinks carry some of the highest margins on your menu.

Commission: the cost that never arrives as an invoice

This is the line owners know least well, and that is not carelessness. Commission is deducted before the money reaches your account. No invoice, no debit. Simply a smaller amount on your statement than the tickets add up to.

What you pay is in your own contract. Rates differ by platform, by agreement and by delivery arrangement, so look it up rather than estimate it. Alongside the commission there are payment fees, and if you deliver yourself the driver comes on top.

How to add it up in ten minutes

1. Download your payout statements for the last three months.
2. For each month, put the order values next to the amount actually paid out.
3. The difference is what the platform cost you. Divide by three.
4. Put that figure next to your labour cost for the same month.

The awkward part is not that platforms cost money. They deliver something too: you appear in front of people who do not know you yet. It is that you pay the same rate for the regular who knows your address by heart. You could have had that order for nothing.

An order that comes in directly costs exactly the same in your kitchen and leaves you more. You change nothing about your dishes, your hours or your rent. Only the route the order takes to reach you.

One thing I would not do: raise the delivery charge your guest pays to cover the commission. Guests do compare that number, and you would make the channel you want to grow the more expensive one.

Rent, energy and the bills from the council

Rent is the line you can do least about in the short term. So watch for the moment you can: renewal. Look in your contract for the indexation clause, because it decides how much your rent climbs each year on its own.

Alongside it run service charges, energy and council charges: the occupier's share of the ozb property tax, your commercial waste contract, the precario fee on your terrace and in some municipalities advertising tax. Small one by one, together a line you feel.

• Negotiate at renewal, not in the final quarter before the end date.
• Review your energy contract once a year, with a second quote next to it.
• Switch equipment on later. An oven running two hours early does that three hundred times a year.
• Replace things when they break. Efficient kit rarely pays back against kit that still works.
• Let out your space in the hours you are shut.
• Check your waste contract. Collecting half-empty bins is a bill for air.

Marketing: your cheapest audience has already ordered

Finding a new guest costs money. Getting a guest who ordered last month to order again costs almost nothing. Yet most marketing budgets go to the first group.

So start with the people you already have. A list of guests who have ordered before is the cheapest channel there is, and you only build it when orders come in through your own channel. You pay commission for the order and do not get the customer with it.

• Send a win-back message to guests who have not ordered for three months.
• Give away what costs you little. A soft drink, not your most expensive dish.
• Keep your Google Business Profile current, with a link to your ordering page.
• Ask for a review just after a good order.
• Work with local people who write about food. A meal is cheaper than advertising space.
• Set aside a fixed monthly amount. Without a ceiling, marketing always grows.

Judge every channel on one question: how many orders demonstrably came out of it? Not impressions, not followers, not likes. Orders. The rest is spending you cannot make a decision with next year.

The costs you forget until they arrive

Underneath the big lines sits a layer of small bills. On their own, none amounts to anything. Together they are often bigger than the energy bill.

Put them on one list once a year with the amount next to each. Half an hour of work, and you will almost always find two subscriptions nobody uses any more.

Repairs work differently. You cannot economise on them, only prepare. Setting a fixed amount aside every month is dull, and it is the difference between a broken dishwasher and a broken week.

Revenue minus costs, and nothing else

Most businesses that do not make it did not invest too little. They learned their true costs too late. The first is a choice; the second is a lack of visibility.

So turn it into one page. Five lines a month: revenue, labour, purchasing, fixed charges, and commission plus payment fees. The same five lines in the same order every month. After a quarter you see the trend, after a year you see your season.

And if you tackle only one thing, start with the commission. Not because it is always the biggest line, but because it is the only one you can lower without changing your dishes, your people or your rent. Your kitchen will not notice. Your margin will.