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Behind the numbers: Accounting for fast food

Fast food and spreadsheet

Accountants often analyze potential new ventures to increase company revenues and profits. It takes several ingredients to do this work: business savvy, the ability to work with different kinds of people, strong research abilities and critical thinking skills. 

>> Skip ahead: Solve a real business problem with basic accounting.

Here’s an example:

The situation
Joe’s Giant Burgers (JGB), a chain of fast food restaurants, is considering adding a breakfast menu. Right now, all of its locations open at 11 a.m. and serve customers during lunch, afternoon and evening hours. Adding a breakfast menu would mean opening earlier and paying higher costs for labor and utilities – but doing so could also fatten up revenues from selling more food.

The challenge
The company’s founder and CEO – aka “Big Joe” – has asked you to calculate whether it would be profitable to add breakfast to the menu. JGB has already conducted a pilot program – rolling out its gargantuan egg and sausage biscuit, Big Shot espresso and other new menu items – in a few stores, so the company has some data that could be used to project sales, as well as an idea of the various costs involved. But smart accountants know there are other questions the company needs to consider.

  • Will the new breakfast menu increase advertising and marketing expenses, which are part of the company’s overhead costs? How could they spread those costs out among all of its restaurant locations?
  • Will more wear and tear on existing kitchen equipment lead to higher costs for maintenance or more frequent replacements? Or would it be better for the company to buy new kitchen equipment? If so, what would the initial capital cost be? How would JGB depreciate that equipment, and how would this affect the company’s cash flow and tax liability?
  • JGB’s locations are all independently owned franchises. The need for employees to cover the breakfast shift would likely increase the total number of employees each franchisee has. Will franchisees be required to cover increased costs– such as providing health insurance, as required by the Affordable Care Act – for new employees?

To answer these questions, you’d need to have meetings and discussions with JGB executives, franchisees, consultants and employees. Only then could you factor in all of the financial considerations and create new estimated financial statements to present to Big Joe with your recommendations.

Want to know if you’ll be able to kick-start your day with a Big Shot espresso? You’ll have to become an accountant to find out.

It’s your turn!
Think you can tackle a business challenge on your own? Test yourself to see how you might handle a real accounting problem.


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