hospitalitynU

Profit volume relationship One cannot assume, however, that “good” cost-to-sales relationships automatically result in profit for a restaurant or that higher or lower cost percentages are necessarily desirable for a given restaurant. Indeed, it is possible that a higher food cost percent— obtainable by lowering menu prices or by increasing food costs, thus giving each customer more for his or her money—may result in sufficient additional customers to increase profitability in spite of the higher food cost percent. It is also possible that lower cost percentages (achieved by raising menu prices or lowering costs) may result in fewer customers and lower profits. Another possibility is that lower menu prices will lessen profit because there is an insufficient increase in the number of customers to offset the higher cost percentage. Nevertheless, it is obvious that the ratio of total costs—food, plus beverage, plus labor, plus all other costs—to total sales cannot exceed 100 percent ...