You wrote "I've long advocated a focused audit of the YC because of the strange Cost of Goods Sold numbers."

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The cost of goods sold numbers don't look out of line to me; they are perhaps a bit high but in my opinion are not a major problem.

In an attempt to assess the impact of the new YC on OP finances, I used numbers from OP published financial statements comparing the last four years of the old YC (2008-2011) with the three years after the opening of the new YC (2015-2017).

Note that data from 2012 and 2013 was excluded from the analysis due to the transition from the old to the new YC. November data was missing and was not included in the analysis but the impact of the missing month is likely minimal.

Analysis of the before and after data produced the following results:

Average monthly revenue is up 41%

Food revenue is up 39%

Beverage revenue is up 56%

Average monthly expenses are up 48%

Average monthly labor cost is up 47%

Monthly operating losses have increased by over $12K

56% of average annual revenue is earned during the 3 month period June, July, August

June, July, August Labor cost averaged 37% of revenue

December, January, February, March labor cost averaged 93% of revenue - way out of line

Revenue peaked the first year (2014-2015) after the new YC opening at $1.96 million

Revenue declined by 4.5% and 7.8% respectively over the following two years to $1.72 million in 2016-2017.

Comments regarding the YC operating statistics:

Revenue - The new YC greatly increased revenue over the old YC with average monthly revenue up 41% with both food and beverage sales showing dramatic increases. However, revenue has been steadily declining since the first year after opening.

Expenses - Average monthly expenses and labor costs as a % of revenue have increased faster than revenue resulting in increased average monthly losses.

Peak Season - 56% of revenue is earned during the three summer months. Labor cost during the same period averaged 37% of revenue which is high according to industry averages (35%) but not far out of line although 2% of revenue during that period is almost $57K. Too many employee hours are the likely cause although pay rates may also be a factor.  Cost of goods sold was not out of line.

Off Season - Failure to reduce staffing levels as revenue declines in the off season produced large losses. Excuses can be made but it simply reflects management failure to effectively plan operations which must be done on an hourly, daily, weekly and monthly basis in the restaurant/bar business.

Other Factors - It’s not possible to effectively and accurately measure the impact of menu changes, food quality and service issues but undoubtedly all are contributors to the steadily declining annual revenue. As revenue declines the bottom line impact of poor management practices is magnified. The 20% discount policy will likely significantly increase expenses. Whether or not it will result in net revenue gains (sales – discounts = net revenue) remains to be seen but a minimum of a 20% increase in sales would be necessary to break even. Given that OP books revenue at gross and discounts as an expense look for a large increase in Discounts and Promotions in the expense category. This financial statement line item is only reported on the annual statement. It should be reported at least monthly.