Random Thought #13 – The Biggest Expense in Business

Years ago a friend and mentor of mine asked me what my largest expense¬† was in my restaurants. I immediately said labor, he said “no”. I then said food cost, he said “you’re not even close.” He then pointed to an empty chair; “that’s by far your largest expense, nothing is more important than keeping the restaurant full.”

Also, many years ago I was in a meeting with a group of executives of a very large hotel chain, my partner and I had come up with a product that would save them a fair amount of money.¬† After the presentation most of the group started clapping. The chairman of the board said our product was great but they couldn’t use it at that time. When I asked why this was his explanation, “we have a goal to open 1500 hotels and right now we have over 300 to go, we can only concentrate on that right now. After we achieve that then we’ll concentrate on making money and will look at every area of the operation.”

To sum this up; without sales volume, doing everything else right doesn’t mean much.



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