A 2016 STUDY BY DELOITTE AND the non-profit ReFED shows that the U.S. restaurant sector generates approximately 11 million tons of food waste annually, which amounts to more than $25 billion in disposal costs. By making eco-friendly or green choices and following sustainable practices, the restaurant industry can save money and increase profits.
Given a growing list of challenges—from an increasing minimum wage to new sick time requirements to new depreciation rules—COMMERCE asked a panel of accounting experts to discuss best practices for food businesses and the industry’s supply chain. Here are some strategies for success.
By Kelly O’Callaghan, CPA, CITP, CGMA, Partner, NJ Hospitality Industry Leader
Millennials are driving food service trends, causing many of our clients to reassess their business models. While fast food restaurants continue to be popular, millennials are now seeking food that is locally grown, healthy, customizable and affordable. This has given rise to trends like farm-to-table dining. Many restaurants are using social media to connect with Millennials and employing food trucks to bring their menu to the masses. Newly proposed regulations that clarify the 100 percent bonus depreciation will significantly impact restaurant and food service businesses. For federal tax purposes, they will be able to fully deduct eligible business assets placed in service after Sept. 27, 2017. These eligible assets, including tangible property, computer software and water utility property, will take the form of depreciation and not of expense deductions. The new rules will benefit taxpayers, although several issues still need to be clarified or worked through.
Levine Jacobs & Co., LLC
By Michael H. Karu, CPA, CFF, CGMA
In addition to minimum wage increases, businesses also are faced with the new law for sick pay. Under this law, all employers must offer up to five days of sick pay. It is calculated on one hour for every 30 hours worked, regardless if the employee is full or part time. For some businesses, neither will be much of an issue. For others, it becomes a major expense. For our clients in the food industry, we have been helping to create cost analyses to determine the necessary increases to their sales prices. The clients know that price increases will be necessary. However, if the increases are too substantial, sales may drop. Conversely, if the increases are too small, net profit will be impacted. Our job is to help our clients determine their best course of action.
By Louis J. Biscotti, CPA, MBA, CITP, National Food & Beverage Services Leader
With restaurant employee turnover rates at 73 percent, attracting and retaining quality staff is one of the most critical factors in successful restaurant operation. The battle of the minimum wage can be won by maintaining best practices in order to reduce turnover. Benchmarking profit and loss statements to best practices and maintaining timely and accurate records are two critical steps for any establishment with hourly employees. Performing an employment analysis will help food service companies identify weaknesses in employment practices and develop stronger business models. Using the right industry-specific technology related to food and beverage purchasing, inventory and menu control, turnover statistics, customer reward and loyalty systems and tracking consumer trends can also have a significant impact on profitability. A corporate assessment to evaluate financial controls, reporting and results, and performing an IT evaluation to identify operating weaknesses and necessary enhancements to systems and procedures, can help accomplish these goals.
Mazars USA LLP
By Howard Dorman, CPA, Partner
Restaurants and food service companies are always under pressure to re-engineer themselves. One current element affecting companies across the country is the rising minimum wage. Labor costs generally make up 25 percent to 35 percent of total operational costs, so the impact is material. We are seeing it in our own tri-state area—New York enacted a minimum wage increase recently and New Jersey is trying to do so. What are companies doing? Raising prices where they can; reducing staff; investing in technology to help control costs; utilizing a good POS system to view labor costs; and installing self-service kiosks. Look at the investment in technology at Terminal C at Newark Liberty International Airport in the food courts. A rising minimum wage will require food businesses to strategize and adapt.
Sobel & Co., LLC
By Chris Martin, CPA, Senior Manager, Food Sector
For more than a decade, we’ve offered our supermarket clients financial strategies combined with timely business perspectives, such as forecasts and projections. These tools and insights provide them with a keen understanding of their operations, cash flow needs and anticipated income tax liabilities. In addition, we help them construct budget models and then navigate through the actual bank financing process. We also integrate traditional financial analysis and monitoring with emerging issues to demonstrate the potential impact of new regulations, such as an increase in the minimum wage. The grocery landscape has changed dramatically in the past two years and, as such, we help guide our clients as they seek opportunities to maximize opportunities and minimize their controllable costs. New trends, including customer self-checkout and other means of automation, are rapidly evolving concepts that should be analyzed as exciting opportunities, not only from an operational perspective, but also from the financing side of things.