Does Your Restaurant Need a CFO?

Thinking about taking your finance department to the next level? Is it time you hired a CFO for your restaurant group? Stop wondering, you have found your answer.

This added complexity of the hospitality profession also demands a huge price and hence the whole dilemma of many restaurant owners whether it is “worth it” to hire a CFO. 

This read should help you get some clarity or at the least, take you forward in your restaurant CFO decision-making process. Perhaps even help you realize the need for one if you already did not think of hiring one.

This article will discuss the following topics to comprehensively cover our topic: 

1. When should you bring on a financial leader (CFO)? 
2. What can he or she look like? 
3. What can he or she do for you?
4. If you are still undecided to go for a full-time CFO, what are your other options? 

So, let’s get started on the topic of restaurant CFO’s.

Read Also: 9 Ways to Improve Restaurant Operations

The Right Time to Pass the CFO Baton

You could be facing one or more of these example situations in your business, and that’s one of the first indicators that the business could use the influx of advanced financial knowledge of a senior restaurant’s financial position. 

• Your business faces risk and uncertainty and needs an understanding of if that risk is manageable or at the minimum, a plan to mitigate it.
• If you are planning a hyper-growth for your restaurant, think that you have 5-10 restaurant units or locations, and can realistically add 10-15 by the end of the year.
• You are concerned or unsure about some of the regulatory or compliance issues (think on the lines of liquor tax, varying rules in different states, sales tax, entity tax filings and the like). 
• Your current accounting reports and operating reports are not communicating a clear story, are not timely, are not usable or structured appropriately.
• Your finance department is not well experienced in many issues you are facing, or is not able to guide other connecting departments (e.g. sales, inventory, budget, planning and so on).
• You are continuously finding yourself in a cash scarcity, or even worse, mysterious cash disappearance situations. 
• Your purchases and COGS are fluctuating rapidly from one period to another and you are unable to explain the difference. 
• You want to value your restaurants, have plans for an IPO, debt restructuring, or fundraising from other sources.

Persona of an Ideal Restaurant CFO

Of course, you look at the skills, experience, qualifications of your new hire, but there are always some additional qualities that make him or her the perfect fit.

Here are some items you could look out for to find a good match for your restaurant CFO position. 

• The restaurant business is in many ways different from other industries. Your CFO must have the direct restaurant industry knowledge and/or experience, or at least in the hospitality business.
• Restaurants, as an industry, are unique. But even an individual restaurant is in many ways unique compared to its counterparts. Your CFO must be equipped to analyze your financial situation, make accurate analyses and projections.
• You will work with your CFO closely. You want to make sure that you understand each other’s leadership style, and also complement each other. For example, if you are not very structured, you want to make sure he fills in that gap by bringing more order to your system.
• Your ideal CFO should also facilitate the sharing of his expertise across other departments in the business. For instance, he could share his analytical approach or projection skills with the catering sales team to come up with more realistic goals with better pricing, more accurate predictions and so on.
• CFOs these days go beyond just the numbers. They are a key collaborator with other departments and hence should have an understanding of different functions of a restaurant too. This makes them more efficient in implementing the overall vision of your plans or strategy.
• A Restaurant CFO should be able to make decisions for you, so you want to get someone you could trust. For instance, when you plan to raise an IPO, he should be able to assess the market, your business and give a go-ahead, since timing is everything.
• A Restaurant CFO should also have the know-how of accounting software, IT skills, and understand the nuances of implementing related systems. It is highly possible that you already have software in place for your reporting or accounting activities, or might want to do in the future. The CFO should be comfortable with these software or should have the ability to learn easily, make decisions about the right tools, know how to handle data privacy and compliances regarding the financial information of your business when you deploy software.
• The CFO should have a strategic vision. Maybe your restaurant’s financials suggest that you have expansion potential, he should be able to come to those conclusions and turn them into actionable plans. He should be an initiator, a leader and not just a doer his assigned task.
• A great restaurant CFO should be a leader, helping manage the restaurants and corporate team, taking them to the next level. Your CFO should have the courage to pinpoint and take suitable actions and also take responsibility for such situations.

Finding the Restaurant CFO for You

You found some gaps you need help with, and went ahead and hired a CFO. Knowing the situations where he or she can step in and help will ensure a long term and mutually beneficial relationship. Most importantly, it will ensure you get a strong ROI on your investment in this executive.

So here are some more common items that restaurants need their CFO to deal with. 

Benchmarking

Benchmarking against industry peers is important. Their strategic decisions, marketing tactics, growth plans, tracking these among other metrics helps you understand many aspects of your restaurant’s performance.

These could be as simple as making decisions like when to open and close your store. Or as complex as opening a new revenue avenue, like breakfast across all your chains.

Especially when your restaurant is niche or has some unique innovative concept, it could become difficult to have an accurate benchmarking in place and your CFO could help you set up a relevant structure for the same.

Financial Relationships

A great restaurant CFO will establish and maintain the lines of communication with bankers, financial analysts (public companies), and shareholders in conjunction with the CEO or company president.

The CFO will administer banking arrangements, loan agreements, lines of credit (or other debt instruments), and maintain adequate sources of capital for the company’s current borrowings from commercial banks and other lending institutions. In addition, this role will invest the company’s funds and administer incentive stock option plans.

Record Control

The restaurant CFO is responsible for the financial aspects of all company transactions including real estate bids, contracts, and leases.

The CFO also provides insurance coverage, as required, ensures the maintenance of appropriate financial records, prepares required financial reports, ensures audits are completed in time and statutory book closing occurs.

One of the primary CFO responsibilities is ensuring company compliance with financial regulations and standards, like the IRS Tax Code, and GAAP.

Help With the Fundraising Process

Your restaurant could be looking at raising funds for a current or new venture.

Everything from deciding the best method (banks, IPO, VC, crowdfunding, debt, accredited investors) to valuation to assessing the market and so on, your CFO could be your guiding angel for the process.

Cash Flow

As a restaurant Chief Financial Officer, one of the aspects of the job is to control the cash flow position throughout the company, understand the sources and uses of cash, and maintain the integrity of funds, securities, and other valuable documents.

The CFO receives, has custody of, and disburses the company’s money and securities. A restaurant CFO’s responsibilities include the authority to establish accounting policies and procedures for credit and collections, purchasing, payment of bills, and other financial obligations.

Cash is king and the flow of cash, or cash flow, is the most important job a CFO has in any company.

Financial Planning & Analysis

You might already have your system in place for the accounting side of the business, but an extra set of eyes from industry trained professionals can help catch mistakes (completeness or accuracy), ensure compliance, create more efficiency, or even yield information that could help make strategic decisions.

Your CFO can not only review financial information but implement proper financial analysis, budgeting, budget variance reporting that can all lead to actionable next steps, driving the business forward.

Manage the Finance Team

You might have a strong finance team already, but no one to manage the department as a whole and overlook the entire financial side of your business from a leadership standpoint. This is again where the restaurant CFO could step in as a leader/manager and act as the main point of responsibility for the finance and accounting functions of your business.

Additionally, the CFO supports the company’s accounting and financial functions using job descriptions, policies, and procedures, and methods for automating document control.

Incentive/Retirement Plan

Both incentive plan and retirement plan for your employees have an impact on turnover, employee morale, and also has a tax impact. Planning the timeline, beneficiaries, amount, setting goals and objectives against these plans, right execution strategy – all of this requires planning – something your CFO could be a good sparring partner for.

Succession Planning

When you own a business, especially a successful business, succession planning is inevitable. It is way broader than who will be next. It encompasses concepts like leadership transitions, estate planning, tax impacts, insurances, legal agreements, financial strategy for it to name some main ones.

Your CFO should be able to help you with setting up a suitable plan for your business.

Historic Record Analysis

The restaurant CFO could help you monitor and analyze your historic records. Doing this yields insights into things like cost savings or new revenue opportunities. For instance, if they analyze your food costs over time, it could lead to being able to strategize procurement opportunities to help save costs in the future

I Am Still Confused, Now What?

It is possible that you are still undecided about hiring a CFO, or maybe cannot find the right restaurant CFO candidate. Further, it is also possible that at this point you cannot afford a full-time hire or just do not need someone full-time. In these cases, considering the following options can be good solution:

1. Special Projects CFO: For some special projects you need guidance on, for a short term new plan or even to test waters with your new CFO, a special projects restaurant CFO seems like a viable option.

2. Part-Time CFO: Perhaps your business does not require a full-time restaurant CFO, but could use an extra set of eyes on your processes or decision making. Hiring a part-time CFO could be a great fit for you.

3. Interim CFO: Again to test waters, or to just find a financial expert until you find the perfect fit, or for some special situations like immediate growth plans, these situations call for hiring an interim restaurant CFO.

The Final Profit and Loss on Hiring a Restaurant CFO

You want to bring in the right CFO and at the right time, it is a true balancing act. Done correctly it will propel your restaurant business to new heights, done poorly, it will be a costly burden. While this does require some planning and effort, being aware and understanding the timing can make a huge difference.

So, keep an eye out for the signs that are telling you it’s time to hire a restaurant CFO (some of them you learned today, others you will figure out as you go). Have some expectations so you know what you are dealing with (we gave you a persona of a good CFO, but we still recommend you add in your additional requirements).

Most importantly, as a savvy restaurant owner, get the most for your money (we highlighted many CFO situations that are common in a restaurant business and need a professional).