Food Cost Control

Butchering and the Inventory Impact

2009-11-09T10:21:00.003-05:00

Hi Joe,
My question would also be, how do account for it in inventory. Right now we are sitting on 400 lbs of this usable trim product for grinding stewing or otherwise. We will generate revenue from it, but wonder do we count it at a discounted price per pound or the original price per lb. that we paid for it when it was a whole muscle item?

Thanks for the quick and informed response. Greatly appreciated!!

Cheers,
Ross

Imagine you have a vendor, Fabricated Beef Products, who you swap whole pieces of meat for fabricated, portion control items. You never pay this vendor any money since you swap one large item for several smaller items. If you give them $1,000 worth of whole sirloin and they return sirloin steaks and ground beef, you would treat the transaction as a wash.

Credit the inventory value of the whole piece of meat. Then debit the inventory for the steaks and trim meat. If you decide to treat the trim as free, the steaks would carry the full cost of the whole piece of meat. On the other hand, if you place a value on the trim, discount the value of the whole piece by the trim credit and then value the steaks based on the net.

The key issue here is the value of the steaks. You probably would not spend the labor cost butchering the whole sirloin simply to achieve many pounds of ground beef. If you have a true value in your operation for the trim meat (I use revenue generating menu items for my test.), go ahead use a full credit based on comparable market prices for ground beef.

The total of the steaks and trim for a specific production batch would be exactly equal to the value of the whole sirloin used in the batch. In a nutshell, your steak cost goes higher as the credit for trim goes lower.

It seems you meet the criteria for valuing the trim based on the market cost of ground beef. Your inventory value of the steaks and trim should reflect the cost of the whole sirloin used to produce these items.

Butchering and Usable Trim

2009-11-08T16:47:00.003-05:00

Hi Joe,
Just a quick question we are having a debate about at out businesses.

We bring in our own whole sirloins of beef, trim them, and cut and portion them to our specs typically for sirloin steaks in a variety of portions 8 oz. and 10 oz. cuts.

So we have 3 items resulting from that process:
1. A usable salable product in the form of cut and portioned sirloin steaks as mentioned above.
2. We get actual waste that does not go into anything other than soups, stocks, reductions etc…
3. And we have a considerable amount of usable trim that we can manipulate into another food form and generate revenue with, i.e. burgers, chop steak, etc.

My question is we have a considerable amount of this usable salable trim in our freezer. The question is how we account for it in our inventory. At the price/ lb we paid for it upon delivery, a factored price after we it is trimmed and in the ready to use format in the freezer waiting to be utilized (essentially the same costing formula applied to the steaks we are portioning for immediate sale) or at a cost reduced price as it is no longer a part of the original piece of meat we would be using to generate sales with in the immediate as we do with the portioned steaks.

Your wealth of knowledge and assistance here would be greatly appreciated!! Get back if you can.

Kindest Regards,
Ross Munro

There are two schools of thought on this issue Ross. The first group charges the cost of the whole sirloin to the steaks. They consider all usable trim "free" and they use the total weight of steaks divided into the purchase cost of the whole sirloin to calculate the cost per usable pound. This philosophy is correct if the trim is used in employee meals, stock pots, etc.

The second school of thought credits the cost of usable trim. Typically, there are two primary trim bi-products: ground beef and stew meat. These people weigh the ground meat and cost the credit using the prevailing cost per pound for ground beef. They do the same for the stew meat. The net cost is then divided by the weight of the steaks to get a cost per usable pound.

I prefer the second method if the restaurant serves burgers, meatballs, meatloaf and entrees which utilize the stew meat. The bones may also be credited if you genuinely gain revenue from their use. If the chef had to buy beef bones for base menu items and did not need to purchase as many due to the butchering process, you can go ahead and follow suit with the bones.

Menu Planning and Strategy

2009-11-01T18:15:00.003-05:00

Our industry is experiencing a shift in the demand curve. Restaurant goers are downsizing from upscale to casual, casual to fast casual and fast casual to QSR and take-out. The regular patrons at many family owned restaurants are watching their checks and eliminating an appetizer or dessert course. If you have a lower priced entree on your menu, you may find the popularity on the increase.

Most of the menu analysis and menu engineering models were built during a time of solid annual growth for our industry. These models focus on high gross margin entrees loved by patrons. Blindly using these models to adjust menu prices may hurt your bottom line. These models are designed to eliminate low gross margin menu items if the popularity is low.

Rather than completely eliminating these dogs, you may want to repackage these items. Take them off your printed menu and try them as budget specials. You may find a winner or two.

The stars need to get your full attention. Are your guests still selecting the reliable cash cows? You may see the high gross margin items slipping in popularity. Chef Mario Batali (one of my favorite chefs) was quoted in a USA Today article: "There's less caviar, foie gras and truffles, but they're still there. They're just not on nine courses. They're on one course." This same article highlights other chefs who have decided to offer more price points for their patrons.

Expense accounts are being scrutinized at every major S&P 500 company. The current earnings season on Wall Street shows companies are slashing costs.

The wine lists are offering guests fewer trophy bottles as demand for the $200 plus bottle of wine has collapsed. Many restaurants religiously ordered their annual commitment from the same boutique vineyards without regard to consumption. Now, these wine cellars are loaded with these high cost bottles. Many have decided to end this practice and they are moving these bottles by the glass.

Are there ways to produce the same gross margins in this new era? Yes. You need more turns on busy nights. Offer early bird specials, table d'hote options, and popular add-ons for your popular menu items. Promote seasonal ingredients which typically offer lower cost of sales.

Customer knowledge (including dining out budgets) leads to effective menu planning efforts. Rather than completely revamping your current menu, you may find a few strategic revisions will help you meet your targets.

Beverage Included Buffets

2009-10-30T11:06:00.002-04:00

The lowest priced lunch buffet we visited on our tour was $6.95. This operator serves both BBQ pork (whole hog) and fried chicken with lots of sides and desserts. Drinks are not included and sweet tea is sold for $1.19 (unlimited). A quick look around the dining room showed about 75% of patrons enjoying a tea and the others ordering tap water (free).

There were a few competitors offering similar food choices for $7.45 with beverage included with the meal. On average, the $6.95 buffet plus beverage accounts for $7.85 in revenue and an extra $0.40 in gross margin.

For out-of-town guests, the big $6.95 sign beckons. By the time they see the buffet layout and are warmly greeted by the hostess, they will probably never ask about the extra charge for the tea.

I spoke with one of the general managers at the all-inclusive buffet. He told me most of his business is local and everyone wants the tea. They have offered the buffet with tea for decades. He believes the locals are aware of the real price for the buffet with tea at the $6.95 location. I'm sure he is correct.

Both restaurants were very busy in the middle of the week.

All You Can Eat Buffets

2009-10-25T13:06:00.002-04:00

We have all tried an all you can eat buffet. Whether you are in Las Vegas, a local hotel for Sunday Brunch, a Chinese restaurant or a buffet specialist, the format is the same. You are seated and asked for your drink order. Once the order is taken, you are invited to go ahead to the buffet.

Most buffets are setup in stations. Typically, there is one or more ethnic food stations (Italian, Mexican and Chinese are common), a roast meat station, seafood station, BBQ station, a large salad bar and a dessert station. Breakfast and brunch buffets will include an omelet station (with lots of toppings), breakfast meats, pancakes, waffles, bagels, toast, muffins, fresh fruit, smoked salmon, and cereals.

Operators who pay attention to baked goods have an edge since these items have a relatively low food cost. It is advisable to have a server help guests with the roast meats. Most buffet houses continually pick up plates when the guests leave the table for seconds.

Buffet operations require high fixed costs. Much of the food and production staffing is decided before the meal period. Operators need accurate forecasts to prevent costly over production.

There are two schools on how to close down a buffet. Some professionals believe the buffet should look fully stocked right up until the final guest is served. Other operators prefer to offer fewer pans as the clock nears closing time. You need to have a strategy for either philosophy. The worst buffet presentations are those where you see many pans with very little food and drying sauces and gravies.

At the very least, these pans should be removed or replenished (depending on the policy). I have requested a tour of the buffet before deciding to dine on occasion. About 1/3 of the time, I decide to leave due to the appearance of the food.

Packed Restaurants

2009-10-19T11:05:00.002-04:00

I'm just back from a long road trip through coastal North Carolina and South Carolina. Since it was past the peak season, hotel rooms were dirt cheap and I never hit one traffic jam. All you can eat BBQ places were enjoying full parking lots. At lunch time, these spots offer whole hog BBQ with fried chicken and loads of sides and desserts for $7.50. Some throw the ice tea in and others charge ($1.79 for unlimited tea). This has a terrific impact on food cost results.

I know there are lots of people who want to debate gross profit vs. food cost percentage. With regard to the tea included issue, it doesn't matter what camp you are in since the impact is huge. At one place, I paid $10 and another $8 for basically the same style food and service. I'm guessing the $10 (includes tax but no tip) spot is on target for a 33% cost of sales since they charge for the tea. If the same costs were incurred by the operation with no charge for tea, their cost % would be over 40%.

Both parking lots were jammed.

Down in Myrtle Beach, the dinner buffets offer all you can eat seafood spreads for $19.99. The calorie count was pretty high at lunch and I skipped the dinner buffets. A couple of the owners let me in to observe the buffets. One had a raw bar with lots of shrimp, oysters, crab claws and clams. They also had just about every style shrimp entree and lots of dishes with fin fish and vegetables. Drinks were extra at the places I visited.

The number one issue in Myrtle Beach is the selections. It seems a competitive advantage is held by restaurants offering more selections. One marquis: "Over 170 selections..." Another: "We have 120 selections..." The people who spoke with me said the customers liked to try a little bit of everything and they all like dessert.

Several operations highlighted their bakery offerings. I didn't actually see a baker but there was a prominent bakery at one place. They offered take-out bread, rolls and desserts.

The place with 170 offerings in the off-season scared me a little. They had a light crowd due to the heavy rain and it was a Wednesday night. Still they presented the 170 menu items (some with dairy) in the huge buffet area. Some operators run the cream soup and bisque over several nights bringing the food from cold to hot and back several times.

If I was in the market for a big meal, I probably would have tried the place with the raw bar and a mere 100 menu items. Their lot was about 50% full.

Nobody offered an all you can eat breakfast buffet. I'm sure many of the hotels offer breakfast. The places I visited mostly opened at 5 PM.

HFTP Question - Final Counts and Safety Factors

2009-09-28T20:10:00.003-04:00

In my recent session at the HFTP Annual Convention, I gave my opinion on the use of safety factors in food service operations. Generally, purchasing managers and chefs tend to order a little extra to prevent running out of stock. While a small amount of over stock is optimal, the typical operator has too much stock of many perishable items.

A symptom of over stocked protein is a rising dollar value in freezer inventory.

During the Q&A session, I was asked about optimistic banquet event order final counts. If your sales manager tends to over estimate the final count for banquet events, the probability of spoilage and waste increases. In addition to the freezer, you may find the food in the employee cafe is better than usual. Crab cakes and Chateaubriand should not be on the employee lunch menu.

An optimistic final count number negatively impacts purchasing and production activities since the kitchen will over produce these menu items. Service staffing is also too high.

When you combine the impact of high final counts with a tendency to over order for a safety factor, it is easy to see how costs will run high in this operation. Each department uses their own safety factor to cover the risk of running out. If each department uses a 10% adjustment, you could find the sales team adds 10% to the count, the chef adds 10% to the production forecast and the purchasing manager adds 10% to the chef's order. These adjustments have the biggest impact on high cost per pound, perishable protein items. Look for the impact in freezers, garbage cans, employee meals, soups, stock pots and employee trunks.

Suggestion from HFTP Annual Convention

2009-09-26T19:22:00.005-04:00

My recent presentation at the HFTP Annual Convention in Las Vegas included 3 Q&A spots. In the first Q&A break, there was a suggestion by an audience member regarding purchases and sales.

This food cost professional suggested dividing each day's food purchases by the food sales. I'm a big fan of using sales as a compass for food purchases. At the end of each month, one of the most highly scrutinized statistics is the food cost percentage. This daily check will help to prevent surprises.

Since many operators have between 10 to 14 days of cost of sales in their inventory, I also recommend tracking the most recent 14 days of purchases and sales. You may stock up on a few shelf stable items if market prices warrant. Using a 14 day ratio of purchases to sales will help prevent surprises while allowing for an occasional long term buy.

Simply create a 7 column spreadsheet with DATE, PURCHASES, SALES, % DAY, PURCH 14, SALES 14, % 14DAY. You enter the date, purchases and sales each day. Calculate the 14 day sums once you have enough data. Then you can calculate the daily ratio and the 14 day ratio each day. These ratios will provide you with a compass for controlling food cost.

FoodTrak Update

2009-09-22T13:26:00.002-04:00

I was in Las Vegas last week for the HFTP Annual Convention at Green Valley Ranch Resort. After my presentation, I was invited to dinner by Bill Schwartz, the founder and owner of System Concepts Inc. SCI is the developer of FoodTrak.

Bill invited me to a Version 4 Boot Camp in Scottsdale. The new version of FoodTrak is now web-based. There was always a web-based option but now all customers will enjoy this feature. The previous license fee for e-FoodTrak has been removed.

Operations with an ambitious wine list will find the recently added Wine Module a tremendous tool. This module has optional wine attribute data fields. Wines may be classified by brand, country, origin, region, sub-region, vineyard, vintage, type and varietal. In addition, a perpetual inventory report for wine is included in the new module.

Food Service Technology

2009-09-03T18:11:00.001-04:00

Dear Joe Dunbar,
Thank you very much, for updating the latest tech & happenings in Hospitality world.

Regards,
Abraham

You are welcome Abraham. I am currently taking a look at a very improved product in the $1,000 range. Stay tuned for my review.

Food Cost Formula Question

2009-09-03T17:54:00.002-04:00

Hello. I just read an article you wrote concerning food cost. I follow the same formula except for one change, I account for discounts. Should I not do this? Could it sway my food or beverage cost to a less accurate percentage? I would really appreciate your insight to this matter. Thank you

Lori
G.M.

Thanks for the question Lori. I prefer to run two calculations - with and without discounts - each period. Consistency is key.

If you run the numbers with and without discounts, you'll achieve several objectives: 1. You can gauge the impact of discounts on results. 2. I'm not sure the sales figure would have been possible if a discount wasn't offered but the fantasy number for sales (i.e. discounts included in sales and treated as a marketing expense) is always popular with the people trying to achieve a food cost close to ideal. 3. A sense of reality is available for folks trying to pay the bills. Netting discounts from your sales shows the true food cost.

If you would not have made the sales target without the discount, I would definitely focus on net sales. Use the second statistic for the production people. They have no control over sales discounts and follow standard portion sizes. They should know how close they came to the standard and they should also be made aware of the impact of discounts.

Flexible Pars

2009-08-24T22:55:00.000-04:00

For anyone who is considering the time investment for a comprehensive menu pricing/recipe costing tool (about 120 hours), I believe the payoff potential justifies the investment.

Think of the growing data warehouse on your POS server. You can put this data to use. By tracking trends on covers and guest order profiles, you can accurately predict production requirements. Go beyond simple portion analysis. The recipe model will estimate raw ingredient requirements. The better programs (for example, Food-Trak) will allow you to focus on menu driven raw ingredients.

Once you have a working recipe costing model in place, feed the model POS data. Try to upload a full year with daily files. The software will allow you to create order guides based on prior guest preference, average ingredient usage and a sales estimate. Catered events may be loaded into menu plans to complete the picture.

Rounding out the picture, you can feed the ingredient database par stock information for all shelf stable items. The result is a highly flexible ordering tool. This model will track par levels and adjust order guide quantities to reflect current sales estimates.

Flexible pars could help you eliminate over ordering of perishable items. Depending on your current spoilage and waste levels, your savings will average between 3 and 8% of purchases.

Question - Best Practices in Food Cost Control

2009-08-13T16:02:00.004-04:00

Good Morning,

I am the Assistant Controller for a luxury property in downtown San Diego. I have volunteered to lead a presentation discussing food cost control best practices. I read your article “Essential Food Cost Control” on Hotel F&B that you wrote in June 2007 and thought I would write you. Do you happen to have a good source for obtaining industry food cost best practices? I am hoping to show a few examples of how to best control food cost.

Thank you for your time.

Brandon
Assistant Director Of Finance

Thanks for the note Brandon. I encourage you to use whatever articles you wish from my blog. Please include proper attribution and there is no charge.

I would recommend two books:

Purchasing for Chefs: A Concise Guide
Andrew Feinstein
John Stefanelli

Wenzel's Menu Maker
George Wenzel

You may want to checkout the articles on Tom Wahl's site Hotel Trends using the Food & Beverage link on the left sidebar.

Cornell University has a Center for Hospitality Research with an excellent website. You may wish to register online - its free. You will find lots of hotel articles you can download.

The 4 V's and the Pareto Principle

2009-08-06T13:54:00.000-04:00

If you buy the notion of working smarter vs. harder, the 80/20 principle is certainly a great starting point. When a restaurateur searches for the 20% of his operation producing the 80% impact, I'd like to suggest a simple method. The 4 V's stand for volume, variance, volatility and value.

It is important to focus on high volume activities. Ranking your menu items by the percentage of total sales is a popular weekly report. Try the same analysis on your food purchases. If you monitor production of batch recipes, you could rank these by the highest volume. In every case, find the high volume items and activities.

Avoid spending lots of time on issues which do not produce a decent return for your efforts. If there is a low variance in usage, price, or any other business metric, look elsewhere. There are lots of high volume items with very little variance from your budgeted expectation. Maybe you consume lots of rolls but the usage report indicates the rolls were used properly. Find another item with a higher variance.

Price volatility is a major opportunity area. Locate all of your raw ingredients with volatile market prices. Any positive actions you take in purchasing these items will produce a benefit.

Most chefs have a handful of items stored in their offices. You may find truffle oil, saffron, cognac and other high value items. They recognize the relative value (in terms of cost per milliliter or gram) of these items.

If you focus on high volume items and activities with usage variances, price volatility or high relative value, the 80/20 principal will start improving your return on time invested.

Pareto Principle of Food Stock Control

2009-08-02T17:16:00.004-04:00

Inventory management is time consuming and takes our focus away from building sales and providing a great customer experience.

The Pareto Principal states that 80% of the effects come from 20% of the causes. In other words: 20% of your stock items make up %80 of your stock value. By focusing on the high value 20% we can minimize the time spent on stock control, but ensure this time is spent on the things that really matter.

To implement the Parento Principle go through a full stock take and select the high value stock items that you want to focus on. You can then summarize the remaining items into a nominal cost. Next time you do a stock take you only need to count the high value items and use the previously calculated nominal value to represent the other items. You can still calculate all the key metrics like Cost of Goods and Gross Profit, but minimize the time spent on stock control.

Paul Clarke (@foodmargin)

Q Factor

2009-07-22T00:10:00.002-04:00

Chefs love to see a recipe model come together in the final stages. Sole proprietor owners love this stage even more if possible. What's the lure? They see how much it costs to produce the actual menu items with all the trimmings.

The most frequently asked question at this stage goes something like "How do we tell the system our cover costs? Is there a way to enter a Q factor?"

I let them know they should enter all applicable costs to properly cost the menu. The follow up question is actually a lengthy discussion of complimentary items, starch choices depending on the entree choice, most popular options, etc.

I like to create a setup recipe which may be used over and over in every entree selection. My Q factor includes all complimentary items (rolls, butter, ketchup, mustard, soy sauce, salt & pepper, Tabasco sauce, etc.), salad portion, most popular dressing choice, most popular starch choice and the most popular side choice.

The POS system will keep track of the guest selections. If the most popular salad dressing is Blue Cheese and the POS modifier is Ranch, I like to make the recipe for the Ranch modifier equal to 1 portion of Ranch minus 1 portion of Blue Cheese. Since the Q factor already accounted for the Blue Cheese, the reduction of 1 Blue Cheese portion brings the count in line.

What's a typical Q factor in a high end dining room offering rolls, butter, salad, baked potato, more butter, and sour cream? About $3 if you use fresh baked rolls.

Great Article on Managing Food Costs

2009-07-19T15:52:00.002-04:00

Brad Nelson, Marriott's Corporate Chef, wrote a great post on his blog last summer when food costs were beginning to spiral high due to the energy crisis. His article focuses on the backyard grilling options for the frugal home cooks.

The chef uses less tender cuts of beef and garden fresh vegetables from his own garden. There's a great recipe for new potatoes which cook in a cast iron skillet over slow coals.

Basic Food Cost Analysis

2009-07-19T13:32:00.009-04:00

An investment of time and money in any recipe costing model has a payoff in food cost analysis. Most operators lack sufficient information to conduct a meaningful food cost analysis. Many operators receive a simple percentage which they are told is either too high or too low(occasionally, just right).

If the company's accounts payable system charges all cost of goods sold to the same account, there is no additional information available. So what do these companies focus on when trying to explain their food cost results? Their food cost analysis typically consists of a review of the ending inventory.

This food cost analysis works like this in most cases: 1. Scan the Excel file looking for large inventory totals. 2. Check these high impact numbers for unit cost information. 3. Once a major item is found with some price volatility, the entire analysis ends and management works on "solving the problem". Occasionally, this team may get around to using a top 10 analysis. This is a small step in the right direction.

Often, the food cost analysis completely ignores the true issue. Many food cost "problems" stem from an incorrect inventory value the previous period. No one remembers the over valuation from the previous period. The simple reason this is ignored is the euphoria caused by a great food cost percentage eliminated the need for any proper food cost analysis. This incorrect valuation went completely unnoticed until now.

When I'm called in to help with inconsistent food cost percentages, I find the top 10 items in terms of purchase volume. My work includes tests of everything involving these items. A thorough analysis of the top 10 items is the best place to start any meaningful food cost analysis. Eventually, you will want to increase the list to the Top 25.

Advanced recipe models automatically focus on 10 to 25 items (depending on the menu scope). Knowing the eventual solution will be found in these high impact items can be useful to the operator with limited information.

Treat each item like a stock in a portfolio. Each food cost component has an impact relative to the unit volume, price volatility and risk of spoilage. Focus on perishable, high volume items with volatile market prices. You'll find many solutions in this key item food cost analysis.

Finding Strength In A Weak Economy

2009-07-17T11:28:00.007-04:00

I sent this letter by WinFax Pro around 19 years ago to hundreds of restaurant owners:

Cost Reduction = Profit Improvement

Cost reduction is dirty business. Few managers want to trim fat by eliminating jobs. Cost reduction is not flashy (like sales increases or new openings).

A 10% reduction in costs can increase profit by 25 to 50%. I can help you concentrate the bulk of cost reduction efforts in the areas that affect profit the most. Completion of a short-term strategy can be accomplished in one month.

Where can the greatest savings be realized? Where should you concentrate your efforts? If you aren't aware of where the bulk of your money is going, you can't possibly know in what areas cost reduction will have the greatest impact.

Current economic conditions offer low interest rates and low inflation. This environment encourages borrowing to invest in cost saving solutions. If you could borrow money cheaply to buy a solution which would lower future costs and improve quality, now is your time.

Streamline your organization through a comprehensive cost reduction program. Build profits through cost reduction, as opposed to unit growth. I can help you eliminate short-term debt and replace it with fixed long-term debt, sell off or close down marginally profitable or red ink operations, free up working capital through inventory management.

Plate Cost Question

2009-07-15T15:41:00.002-04:00

Hello,

I have a question and may-be you can help me. When doing a plate cost for your menu items would you include paper products in with the food cost or would it just be the food products to get an accurate food cost.

Thanks,
Food Service Manager

There is no hard and fast rule regarding inclusion of paper products in a plate cost. I'd recommend you build in all costs when calculating a true gross margin.

Cost of sales should include food, beverages and all supplies which vary directly with a sale of an item. An accurate food cost would include only food purchases and you should only divide the costs by sales of food items.

Basic Recipe Costing - Part 3

2009-07-13T11:58:00.002-04:00

I started my consulting company in 1990 to help food service operators with financial troubles. Finding it difficult to get paid, I started looking for work with companies in better shape. I ran into a local consultant, Bob Kaiser, who said I should work with computers since I had a background in accounting and technology.

My first assignment was with one of Bob's clients. This company had two catering facilities and used Eatec software. The chef had zero success building recipes despite purchasing the The Professional Chef and the Food for Fifty (12th Edition) modules.

These add on modules were a huge time killer. I found myself gutting sophisticated recipes for chicken, beef and vegetable stocks and replacing the classic recipes with a package of soup base and a gallon of water. After hours of wasted time, I completely destroyed the chef's preliminary efforts and built the recipes from scratch.

I used the Professional Chef book's approach and started with Mise en Place and Stocks. Then I progressed to Soups and Sauces before starting work on entrees. After a week, I had all the major protein work done. The vegetables, starches, breakfast items, baked goods and desserts went much quicker.

During the project, my wife and I began to refer to this gig as "The $4,000 Mistake" since it consumed over 200 hours and 3 round trips (300 miles each trip) to finish.

The Food For Fifty book has a fantastic first chapter which is a must read for anyone trying this exercise for the first time. They focus on quantity food service and use the perspective of a caterer or institutional food service operator. Recipes all yield 50 portions. I took many of the chef's clippings from Bon Appetit and Gourmet and converted them to the 50 portion yield.

Before you start a project on a recipe costing program, you need to be very well organized. Create an outline. Take the most complex recipe and imagine you are building the database. You will find you need to stop work and create other sub-recipes first since you can't purchase many of the stocks, sauces, mixes and blends called for in the recipe. Each of these components requires a recipe.

These individual components called for by the complex recipes are the building blocks of a successful recipe model.

Taking Stock

2009-07-13T08:49:00.004-04:00

No one likes doing stocktakes. However, an accurate stock count is essential to producing meaningful management information.

Here are some tips on doing an accurate stocktake:

Have a hard copy of your stock list - A list grouping stock items by Category, then listing Stock Items in alphabetical order makes it relatively easy to look-up Stock Items as you count.

Do one storeroom at a time - If you have stock items that are stored in multiple locations (dry store, cool room and service fridges), don't run around the kitchen to find all instances. Count methodically through one store location at a time.

Count each storage location left to right, top to bottom - Start at the top left of each shelf, then work your way down to the bottom right. That way you wont miss anything.

Count with a friend - It is faster and easier if you count in pairs. One person can physically count the stock while the other records the counts. In addition to speeding up the process this also serves as a check, to make sure you don't miss anything.

Although counting stock may seem simple, it is surprising how many people I have seen get it wrong.

Paul Clarke (@foodmargin)

An Opportunity With A Tight Budget

2009-07-10T17:01:00.004-04:00

Good Day Mr Dunbar!

I'm seeking answers & asking for your help with food cost & menu engineering.

Info in hand: I put up my own cafeteria inside a factory; catering to 80+ people. I'm a BS Hotel& Restaurant Mgt graduate - 2005; can not remember much about Food Costing. The net only gives guides & lacks experience that's where I'll need your expertise sir.

They also allotted only 2 dollars for food allowance; the employee must eat at least 1 meal(breakfast,lunch or dinner) & 1 snack. How can I manage & even start w/ this.

Thank you in advance for the time & opportunity!

God Bless!

Gabo

If you are fully reimbursed for labor and all other expenses (including profit), it would be possible to offer a menu with lots of eggs, poultry, starches, seasonal vegetables and tea given the allotment. You won't be able to offer any higher cost protein items. The labor issue is key. You'll need to make soups and other labor intensive menu items to meet your goals.

Try to focus on quality as much as possible. Keep accurate records.

After 90 days, ask for a meeting with your client. Try to negotiate a change order. If they enjoy your menu and find you honest and fair, you may be able to suggest some other higher cost ingredients.

What Should Our Bar Cost Be?

2009-07-10T14:21:00.005-04:00

Hi Joe

What would you say my expectations for beverage cogs should be in a private club, not a member owned club?

Beer

Wine

Liquor

Thanks for your input, I’m trying to do an analysis and I need some solid guidelines on what it should be.

Sharon│Controller

Sharon,
A well controlled bar is a great source of profit. Many bar operators are out of control and the result over time is unnecessary selling price increases. Alcoholic beverages are highly regulated and the customers order specific brands. This makes for relatively stable costs (usually change quarterly) and no specification issues.

[Feel free to download this simple tool on my Food Cost Control Library site.]

I like to track a simple weighted average figure rather than a hypothetical benchmark. Depending on the level of service, occupancy costs and other factors beyond the cost of alcoholic beverages, your selling price will vary. Sales need to cover all costs and provide a profit (even if your goal is break even at the club, you should budget for risk and cover slightly more than your costs).

Using a weighted average, you should track a handful of key bar items: well vodka drink, premium vodka drink, domestic beer, imported (or micro-brew) beer, house wine and premium wine. Weight each item by the respective sales impact. Sales for all well pours for the well vodka, sales for all premium liquor for the premium vodka, sales for all domestic beers, sales for all premium beers, sales for all house wines and sales for all premium wines.

You simply enter the selling prices and cost of the alcoholic beverages. The Weight column should total 100% or use your total sales. The Ideal column equals the cost divided by the selling price. The Weighted column will supply the answer to your question. This column weights each Ideal figure based on the share of sales for the category.

Feel free to add more categories. The weights should always equal 100% of sales. Guard against going into too much detail. We are not trying to solve every issue with the formula. You will find the current bar cost percentage is higher than the formula result. Resist requests to complicate the formula. Leave all non-alcoholic items out of the pouring cost.

I have found numerous bar operations with major problems (theft, over-pouring, wasting draft beer, lost revenue, etc.) splitting the atom over lemon wedges, olives, and wine sent to the kitchen. Create a separate line item to track the non-alcoholic beverage activity and kitchen wine, liquor and beer.

Accounting Gets Closer To The Kitchen

2009-07-10T12:13:00.002-04:00

This month, I noticed an urgency in 3 restaurant chains which would be out of the question in the past. Top level financial officers have made the dive into inventory control including batch recipe models for work in progress inventory. Calling late at night, I found the CFO of a 35 unit chain in the office working feverishly to get the new database deployed. She was working on recipe costing and linking her recipes to the POS system.

Years ago, restaurant companies needed to be shoved into software systems to get better a handle on their cost of sales. Now, these solutions are ubiquitous. POS vendors throw them in for free to sweeten an offer. Solutions exist in every price range.

I spoke with the Executive Chef of a 6 unit group here in the DC Metro area. He was working on a solution with his brother who works in the accounting department. Each of their concepts has a unique menu and they have finished the first test. Results have exceeded their expectations. The actual food cost has now come down to less than 1% above ideal.

Recessions often force corporate staff to wear different hats.

As these financial people work closely with the chefs, purchasing agents and other key operations people, the reports have to improve. Communications are more focused and everyone has a feel for their counterpart's unique issues.