Ghost kitchens have experienced exponential growth over the last few years, giving the new restaurateur an affordable shot at success.
The term “ghost kitchen” generally refers to virtual restaurants designed exclusively for online ordering and delivery. As such, ghost kitchens aren’t like your typical restaurants – these particular haunts have no seating areas or wait staff. However, depending on their scale, they may employ a slew of cooks and operate a fleet of delivery couriers.
It’s no surprise that this segment of the restaurant industry is projected to experience continued growth. The ghost kitchen model improves operational efficiency as delivery orders can be managed offsite without disrupting the dine-in guest experience. Ghost kitchens also allow restaurant brands to test new geographies without investing in expensive real estate, and they involve fewer upfront costs.
The benefits are undeniable, but how do you successfully run accounting for a ghost kitchen?
Ghost Kitchen Bookkeeping: A Brief Guide
Let’s start with expenses.
Ghost kitchens offer several operational and financial advantages over financial restaurants. Still, there are some industry standards that carry over from the restaurant business. For one, restaurants work on immensely tight margins. For this reason, the first step is to set up the chart of accounts which is used to categorize money flowing in and out of your business.
A chart of accounts helps organize your financial transactions in categories that will give a clear insight into your ghost kitchen’s financial health. The categories typically include assets, liabilities, expenses, revenue, and owner’s equity. These categories can be further broken down into inventory and sales.
More importantly, you’ll need a POS (Point-of-Sale) system for cash management, inventory management, back-office reporting, and order management.
To understand how your business is performing, it’s important to keep track of several financials. These include:
- Cost of goods sold (COGS)
- Prime costs (COGS plus labor costs)
- Food cost
- Menu item profitability
- Break-even point – how much revenue you need to make to cover all your costs
- Gross profit and net profit
If you’re adding a ghost kitchen to your existing brick-and-mortar restaurant, you’ll have to track the costs and revenues from different accounts so as to understand how both avenues are performing.
Accounting Processes to Keep Track Of
There are three major processes you should know of.
1. Payroll
With fluctuating work hours, variable, and different types of pay, payroll can be a difficult endeavor. Furthermore, payroll is more than just employee wages as it covers everything from salaries through to benefits like annual leave, insurance, and taxes.
2. Accounts payable
Keeping your vendors happy will be important if you want them to continue to do business with you. The accounts payable represents the amount you owe suppliers and can help you keep track of payment schedules.
3. Accounts reconciliation
Accounts reconciliation is a process that verifies each transaction across your financials, the purpose of which is to ensure your closing balance matches. Reconciling all your accounts is key to your operational success, and this includes bank accounts, loans, lines of credit, payroll liabilities, and more.
On the more complicated side, ghost kitchen transactions pose numerous tax compliance questions as there’s no regulation as of yet that has directly addressed the duty of ghost kitchens. For instance, some food items are exempt from taxation, and special taxes can apply to beverages depending on the jurisdiction. So, the question is whether you tax at the rate for the ghost kitchen or the customer’s location if they’re located in another town. For this reason, you might need to bring in an accounting or bookkeeping professional.
There’s one adage that proves true in the restaurant business: know your strengths, outsource your weaknesses.
You need to understand when to bring in an accounting professional. The right accountant will solve a lot of pain points for your growing business, helping you scale your business according to your vision.