Saying yes or no to spend: refurbs, kit and openings

Owners and senior operators say yes to spend for good reasons and bad ones: a tired room, a rival's new fit-out, a salesperson with a shiny oven, a lease that "needs" another site. Feelings are allowed. But spending decisions need more than a gut feeling.

This is a simple payback test you can run on one page before anyone orders samples. It's not tax advice, not financing advice and not a substitute for your accountant. When the number is large or the structure is complicated, speak to an accountant.

Extra sales are not extra profit

A refurb that "should put £2,000 a week on the till" sounds exciting until you remember VAT, cost of sales and the labour to serve it. Wherever sales uplift appears below, it is net of VAT — VAT (standard rate 20% in the UK) is not profit.

Roughly, it works like this:

• You sell more food and drink → you pay for more food and drink (GP)
• You may need more hours on the floor (labour on the uplift)
• What's left is closer to the profit that pays back the project

For GP basics, see GP and margin, explained with a burger.

Simple payback

Payback (weeks) = project cost ÷ extra weekly profit.

Worked example (illustrative — not a recommendation):

A £40,000 refurb. Target: pay back in 1 year (52 weeks).

1. Extra weekly profit needed = £40,000 ÷ 52 = £769.23 → about £770 a week.

That £770 is profit, not sales.

Stated flow-through assumptions (illustrative — label them)

Assume, for this example only:

• GP 70% on the extra sales (cost of sales 30%)
• Extra labour at 25% of extra sales
• So contribution after GP and that labour = 70% − 25% = 45% of extra net sales

Then:

1. Extra weekly net sales needed = £770 ÷ 0.45 = £1,711.11 → about £1,711 a week net of VAT.
2. Including VAT at 20%: £1,711 × 1.2 = £2,053.20 → about £2,053 a week on the till (gross of VAT).

So "we need about two grand a week more through the till" is only true under these labelled assumptions. Change GP or labour and the sales hurdle moves. Write the assumptions on the sheet every time.

Sense-check the story

One-year payback is an illustrative target, not a benchmark. Some projects deserve longer; some should never start. Simple payback also ignores:

• financing cost
• depreciation
• trade lost while the site is closed for the work

Include the closure weeks in the cost. If you shut for three weeks and lose (illustrative) £15,000 of controllable profit, add that £15,000 to the £40,000 before you divide. Lost trade is real money.

Ask: is the uplift volume you need believable for this site, this catchment, this season? If you need about £1,711 net extra every week for 52 weeks to pay back in a year, and the room only seats 40, do the covers maths before you fall in love with the mood boards.

Openings and licensing time

A new site that will trade alcohol needs a premises licence or a variation before it trades. Build licensing time and fees into the cost and the timeline. Name the regime by nation — don't improvise advice:

• England and Wales: Licensing Act 2003
• Scotland: Licensing (Scotland) Act 2005
• Northern Ireland: Licensing (NI) Order 1996

No more detail here. Your solicitor or licensing consultant handles the application. You put it on the project plan so opening day isn't a surprise.

Kit-only projects (a new dishwasher, a booking system) still use the same payback calculation — cost ÷ extra weekly profit — with smaller numbers and usually no closure. The approach is the same.

Three-question spend check

Before you approve:

1. What extra weekly profit do we need? (cost ÷ weeks to target payback, with closure losses added to cost)
2. What net-of-VAT sales does that imply at our stated GP % and labour %? (show the sums)
3. What has to be true in the room for that uplift to happen — and who owns it?

If you can't answer all three in writing, the answer isn't yes yet.

No company names, no employer-confidential figures and no promises that a refurb "always" pays back. Take time before saying yes: the maths needs to stand up to scrutiny.