Food Cost Control

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

2009-07-13T11:58:00.001-04:00

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.

5 Tips for Receiving Stock

2009-07-09T18:18:00.006-04:00

1. Did you get what you paid for?

The first and most obvious tip is to check that you get everything you paid for. Often this is as simple as doing a quick count and checking items off against the delivery note or invoice.

While this seems obvious, take a look at your practices and you will be amazed at how often stock is received without checking it’s all there. Paying for stock you didn’t receive directly impacts your food margin.

2. Do a Quality Check

Make sure the stock you receive meets your expectations. Quality assessment can be made by visually inspection, feeling, smelling and/or tasting ingredients. Inspecting packaging for damages and checking “use-by” dates also ensure you get what you pay for.

Stock that is poor quality will impact the quality of the end product you present to your customer. Poor quality goods may also spoil faster, generating waste and eroding your profitability.

3. Reject Goods that don’t Measure-up

Rejecting stock that doesn’t measure-up communicates your quality expectations to your suppliers, setting the base-line for future transactions.

4. Minimize the time goods spend on the Loading Dock

Ensuring stock is put away promptly increases the life of perishables and reduces the likelihood of theft.

5. Did you get everything you ordered?

Often you need to know ASAP if an ingredient that was ordered didn’t arrive so that you can make alternative arrangements.

Paul Clarke (@foodmargin)

New York Times Features Butchers

2009-07-09T13:24:00.000-04:00

This week, the New York Times featured butchers in an article Young Idols With Cleavers Rule The Stage just when everyone thought butchering was a dying art. They interview young butchers from around the country working primarily in boutique butcher shops.

Basic Recipe Costing - Part 2

2009-07-09T10:28:00.002-04:00

After you have your item list broken down into purchase units (e.g. case) and inventory units (e.g. #10 can), you can begin to visualize the production process. For each ingredient, make a list of units commonly called in recipes. This will vary depending on how many different recipes use each item.

Three common portion methods for recipe ingredients are weight, volume and count. Meat items are often portioned by weight and count. When portioning by the piece, you may have more than one portion size. A strip steak could be sold in two or three portion sizes. For each portion size, imagine the entire strip will be used. You need to answer a simple question. How many steaks would you expect if you only cut the one size from the strip? Repeat the exercise for each portion size.

Use the average weight for popular random weight items. Generally, each case will always have the same number of large cuts (ribs, strips, loins, etc.). The total case weight will vary. Huge weight variances from the average will impact the number of portions per piece. It helps to keep accurate records of the butchering and fabrication process.

Yields may change from week to week. If you expected a 80% yield for a particular cut and you actually hit a 70% figure, your costs would run higher by over 11%. The variance is due to the poor yield alone. Add a price variance and some spoilage and the gross margin will begin to disappear. Portion control steaks provide operators with a consistent yield - one portion. When deciding to purchase portion control meat, you need to consider the hidden costs. Look at the whole picture including labor, equipment, risk of injury, and poor yield in your comparison.

Items portioned by volume or weight are straight forward. It is helpful to know the common conversion units for each method. Volume is expressed in gallons, quarts, pints, cups, liters, fluid ounces, milliliters, shots, tablespoons, teaspoons and fractions of each. Weight may be expressed in pounds, ounces, kilograms, grams, etc. A #10 can has about 6 pints (96 fluid ounces) and often about 6 pounds. Check all weight to volume relationships.

When developing standards, you may find your specifications are different than some of the excellent books. If you trim your produce quickly, the yield will probably be lower than the expectation. One way to reduce the variance is to portion produce items by the piece. A 24 head case of iceberg lettuce will yield 144 wedges if sliced in six pieces per head. Cutting the heads into larger wedges of four per head would yield only 96 portions.

Think of this step as the recipe model equivalent of the prep process. Having accurate recipe costs depends on accurate unit and yield data. The recipe costing programs will re-cost your recipes over and over as prices change. Spend the time initially to get this critical information correct for your operation. Don't worry about benchmarks for portion size. Use your unique portion sizes in determining the conversions between inventory count units and the units called for in recipes.

Food Cost Control Alliance

2009-07-09T00:02:00.002-04:00

I would like to introduce my colleague from Australia, Paul Clarke, who will be posting here on the Food Cost Control Blog. Paul has his own blog, Food Margin which offers a "dialog on food operation management" with an impressive start. Food Margin is one month old today.

Recipe Costing Technique - Plate Cost

2009-07-07T09:13:00.002-04:00

Hi Joe.
I hope im posting this in the correct blog.
In order to cover our waste, free bread, staff food, and complimentary items we are planning to add a plate cost to our new recipes to cover these costs. We understand that this will push our selling prices up. My question is as follows:
Do we add the plate cost to the recipe or do we simply raise the selling price by the respective plate cost?
Ray

From a strategic viewpoint, there are many options for menu price revisions. The correct overall solution would need to take other factors into consideration.

I prefer to add the plate cost as a fixed number(vs. a percentage)for each entree. This is a preference not an absolute. Some operations will be better off taking a different approach.

The fixed dollar method will also cover your costs regardless of the entree selling price. You'll receive the same cost coverage whether the selling price is $9.99 or $29.99. This is especially attractive now as consumers are choosing lower priced menu items.

Generally, any amount you add to a selling price as a fixed dollar amount is 100% variable from a cost accounting perspective. As you sell units (in our case entrees), the revenue (and variable cost coverage ) are in sync making your break even point more predictable.

Many companies provide complimentary items and do not provide for these costs in their selling prices. With consumers looking for value, you need to consider competitive threats when you evaluate any price increase decision.

Basic Recipe Costing - Part1

2009-07-01T16:18:00.008-04:00

You may have lots of cookbooks, proprietary recipes, books with food yield statistics, market data, shopping lists, inventory count sheets, supplier quotes, product mix reports, quarterly tracking reports and other documents. A professional recipe model should be designed to integrate all of this useful information. The person working on this project needs to wear many hats: purchasing agent, steward, prep cook, line cook, and chef.

Rather than using a cookbook approach, start with your shopping lists. Use your shopping lists to create a spreadsheet with all your ingredients. Make columns for the name, category, primary supplier, purchase unit, storage area and storage unit.

Since the unit you purchase is used on orders, this is our starting point. It's helpful to know your alternate sources for each ingredient. You may want to categorize each item by the storage method. For example, frozen, refrigerated, dry bulk, canned goods, frozen goods, baked goods, etc. Feel free to add these columns. Its impossible to get too much information for your ingredient list.

[We'll eventually need to know the usage units for each ingredient and portion information. This will be discussed in Part2 (later this month).]

Once the list begins to come together, envision the flow for each item from loading dock to the table. Most items are purchased by the case and are stored as purchased. Some items are immediately transformed into other items through fabrication. Visualize the process of moving from the purchased unit of measure to the storage unit of measure first.

You may simply remove six #10 cans from a case and place the cans in a rack. The purchase unit is case and the storage unit is a #10 can. Focus on the storage unit and the divisor (6 in our example). Breaking down every item you purchase into logical storage units is one of the most important steps in creating a professional recipe costing model.

Each #10 can is valued at 1/6 of the case cost. Don't worry about the actual cost of each can. Focus on the number of storage units in each purchase unit.

Our work will eventually involve many calculations using units of measure, various blends, yield formulas, conversions, reciprocals and standard portion data. The simple exercise of developing a purchase unit to storage unit model is the ideal starting point. Once you complete this exercise, future conversion work will be more intuitive.

Shift in the Demand Curve

2009-06-30T20:23:00.004-04:00

The local economy here in the Washington DC metro area seems to be bouncing on the bottom. Diners are watching the check average and patronizing restaurants with entrees below $20. Zagat's blog had an article on the closing of two high end dining options here in DC.

So where do you you go if your expense account is alive and well?

The same blog has news regarding the new J&G Steakhouse opening in early July.

Alternate Uses of Over Supply

2009-06-24T16:43:00.006-04:00

Many restaurants use their specials board to move over stocked protein items. The protein could be raw or previously cooked. Generally, a menu item is developed to utilize the over stock. For example, leftover roast may be diced and added to chili or soup. Fresh fish may be offered as the "Catch of the Day" and featured at an attractive price.

Many urban areas have charity organizations with the goal of reducing hunger among the homeless. They usually have trucks and will send a driver to pick up any donations. Some restaurants donate over stocked protein items which tend to lose flavor when frozen.

Certainly, many over stocked fresh items find their way to the freezers. Both raw and cooked items are frequently frozen. Some food loses flavor and texture when frozen and thawed. You may consider purchasing items in a frozen state. Commercial flash freezing retains more of the qualities.

My favorite uses of over supply is the stock pot in cold months and salads in warm months. We are now in summer. One of my clients serves a wonderful salad Nicoise using cold seared tuna. In addition to stocks and salads, you may be able to marinate some meats. Kabobs and BBQ often require several days in a marinade.

Photo from Simply Recipes.

Once your over supply of food spoils, the obvious destination is the nearest garbage bin. If the wasted food is disposed of in a heavy plastic garbage bag, it may eventually produce methane which is harmful to the environment. Compost piles may be an option if you are in the country. Some urban garden groups may be interested in your waste. Some fats and oils can be converted into a fuel which can be used in diesel engines.

Accurate forecasts help reduce the management energy spent trying to make the most of over stocked items. In a perfect world, there would be very little left over each night. Improved forecasts will reduce waste.

Macroeconomics of Food Waste

2009-06-17T11:35:00.003-04:00

The U.S. Environmental Protection Agency (EPA)tracks food waste in the United States. They list food waste as the "single-largest component of the waste stream by weight" in the country. Americans waste 25% of the food we prepare each year.

This waste amounts to 96 billion pounds annually.

Click the photo below to be directed to their website:

Restaurants are included in the statistics. You can lower your food cost and the costs to dispose of waste (both sewage and garbage removal costs) and help the environment.

Food donations, offering urban gardening groups waste for compost and recycling fry oil for diesel are some of the solutions we read about currently.

The New York Times, October 9, 2008, article "Farmer in Chief" has two amazing facts:

After cars, the food system uses more fossil fuel than any other sector of the economy — 19 percent.

A bushel of grain takes approximately a half gallon of oil to produce; grass can be grown with little more than sunshine.

Combining these facts, we could cut the use of oil used to grow food which will eventually be wasted if we never order the excess food in the first place.

Exposing Hidden Food Waste

2009-06-11T09:57:00.009-04:00

There are plenty of issues in every operation which could be corrected if only management was aware of their existence. Many operators avoid the effort required to create a detailed operations manual. Given the turnover level in our industry, this document should be mandatory. Imagine working as a line cook or expediter without any point of reference. You are hired and receive very little direction.

Immediately, you start work using your prior experience to guide you in your new position. Maybe you never cut steaks at your previous jobs since portion control cuts were used. Orders come in for strip steaks and you are told the meat is in a walkin cooler and the policy is to cut steaks from the boneless strip loin. Properly cutting steaks is not your forte. Instead of 11 steaks per strip, your efforts yield only 10 steaks. In a steak house this would be unlikely but possible. In a casual dining operation with a large menu, this is common.

Lack of training and standard portion control costs this operation 10% extra on each steak served.

Produce preparation is subject to tremendous yield swings. Even the industry sources disagree on produce yields. Whenever you prepare anything other than the entire piece of fruit or vegetable (e.g. head of lettuce or an apple), you have an impact on yield. On slow nights and in many low volume operations, produce prep takes place on an inpromptu basis. With no specific person or team tasked with produce prep, the exercise produces wide swings in yield.

French fries seem like a straight forward item to properly portion. One of my clients called me excited one day to retell a success story with our recently built usage variance model. The system uncovered a 30% overuse of fries. The issue involved poor training of a new hire. This cook would fry an entire bag of fries. He portioned the fries perfectly on each plate after the expediter showed him how the fries should look on the plate.

Early and late in the meal periods, his cooked fries would be routinely swept into the nearby garbage pail once they were cold. A quick training session fixed the issue. He was taught how to portion the fries before cooking during slower times.

[An anonymous reader left a comment on the Food Cost Basics post which pertains to waste.]

After 20 years of running Full Service Restaurants. Food cost can be attacked by two basic angles. 60% of all food cost is in the garbage can (waste). The rest is over portioned. Focusing your coaching and training on these two key areas will typically keep your food cost in check. However, in some types of restaurants, such as Steak houses, you have to focus on your budgeted number and it will be much higher, but keep in mind RTN or return to net. If you sell a 24 oz cowboy Ribeye for $20.00 and it cost you $10. You have a 50% food cost, but your making $10 on each one sold. For a comparison, take chicken wings, you might sell them for $10 and have a cost of $3. You have a 30% cost, but your making $3 less than the 50% cost, Ribeye. Food for thought.

Food Cost Tweets - Digest #2

2009-06-05T01:40:00.005-04:00

Local chain is offering $2.99 cheesesteaks. Deep revenue drops on popular items destroy the % analysis model for costs and profit.

Keep entree prices below $25! San Diego Union Tribune Article

Develop food cost controls you can depend on during peak volume (both seasonal and day of week).

Accurate forecasting on busy nights is the key to success. Keep ordering and production tight (especially if you close on Monday).

Your forecasting efforts will be poor if the dispersion in sales data is high (measured by range, variance and standard deviation).

By TwitterButtons.com

Use similar data points for forecasts of covers. Pick the same time period in previous years and adjust for current year trends.

Forecasting accuracy depends on the variation in cover counts. When buying food, try to find a time period to minimize variation.

Use caution with any long term coupon campaign. Slashing sales (especially on entrees) has a major negative impact on profitability.

Don't order or produce too much food! It gets rehashed using additional labor and energy. Are you in business to sell leftovers?

If you run a very consistent food cost % during a period of high price volatility, management is cooking the books.

When costing menu items, make sure to allow for condiment usage (both portion control and bulk).

Often a high food cost % indicates lost revenue. Your % is high because the divisor is too low. Look for late night voids.

An accurate weekend forecast is the cornerstone of restaurant management. Its impossible to meet objectives if your vision is poor.

When considering whether to purchase portion control (PC) meats and fish, look beyond cost per pound. Labor and flexibility matter.

Safety factors are a misnomer in food cost control. Ordering, producing and portioning excesses endanger your operation.

If you are constantly running "blowout" specials, you have a forecasting issue. Review your POS data for covers and top sellers.

Improve your approach to food cost analysis by switching your focus to purchases instead of inventory valuation.

Most food theft occurs during deliveries. The second time to watch is near closing time. Nibbling and shift changes come third.

Make the Friday night specials the most profitable. Cost out the recipes for these specials and keep the portion control tight.

An ideal stock level is one day's consumption. Most restaurants food stock equals 10 to 14 days. How many days have you stocked?

Profitable Forecasts

2009-05-29T10:34:00.006-04:00

Everyone now discusses the current trends with tremendous confidence. The consumer has traveled downstream from upscale to value. Some restaurants are offering smaller portion sizes for lower price points. Value menus remain hot. These trends were not so easy to spot 8 months ago.

I took a walk on King Street in Old Town Alexandria last evening at 7:45 PM. The restaurants farthest from the Potomoc River were slowest. I noted a French restaurant Le Gaulois had closed. Most of the restaurants with entree prices above $25 were nearly empty.

On the other hand, many other restaurants were packed. No seats were empty at Eamonn's a Dublin Chipper. Coffee houses, pastry shops, pubs and focused menu concepts were generally busy.

Would Le Gaulois been saved if they had run weekly forecasts and compared actual results with expectations? They may have seen a drop in covers on normally busy nights and tried a table d'hote option. It would have taken courage but they might have tried a different menu style last fall.

When you look at their 10 Best and Southern Living reviews, its tough to see the storm ahead:

This Old Town favorite offers country French cuisine as comforting as it is delicious. Top menu choices include bouillabaisse, cassoulet, and a hearty pot-au-feu, a pleasing combination of beef, vegetables, and savory spices. The appealing place includes a lovely garden patio and a rustic, French interior. The wine list is full of little-known French offerings, along with local wines, and desserts are as you'd expect, with rich French pastries, mousses, and tarts. (© 10Best)

Request a table out in the courtyard garden full of green trees and blossoming fresh flowers at this restaurant in Old Town Alexandria. The cassoulets are consistent at this French restaurant, but we say splurge for the seafood (especially the scallops), the chef's specialty. (from Southern Living)

The hours of operation and average entree price complete the story:

Hours:
Mon-Thu 11:30am-10:30pm, Fri-Sat 11:30am-11:30pm, Sun 11:30am-9:30pm
Pricing:
Average Main Course Price: $27.00

The clientele shifted from a splurge attitude to a value attitude in our area. People began tightening their spending habits last fall. We see the impact in this top rated restaurant closing the door.

Inventory Dilemma

2009-05-23T20:05:00.003-04:00

Hi there,
Interesting blog you have there. I hope you have time to give me some advice. I’m the controller of a medium sized hospitality company. We operate several fast food places with lots of inventory (around 700 unique items per location). Inventory takes forever to count, and of course, the longer it takes, the less motivation on the part of the employees to count it, leading to probably inaccuracies in the numbers.

Here’s the dilemma: the owners don’t trust the inventory, or the possibility that the inventory will EVER be counted right, so they have decided to select a truncated list of items to count based on various criteria. One of the owners tells me that this is common industry practice – even though I don’t have a lot of experience in the hospitality industry, I don’t see how only counting some items could yield worthwhile numbers, but at the same time I could see the benefit of not counting certain things. It seems to me they only want to save labor dollars, to be honest. Do you have any experience you could share?

Regards,
Andrew
Controller

Andrew,

Thanks for the excellent question. As long as the short list is counted frequently and usage compared to sales, I agree. Do these key item counts weekly with a full count monthly.

Three suggestions: 1. Most QSR operations have far fewer than 70 unique items. QSR implies focused menu. If a QSR operation stocks too many unique items, it is a warning sign. 2. Analyze sales and determine which menu items need to go (unpopular) and which items are making the money (popular). Trim the losers and promote the winners. 3. You may have a thief. Many people who can't get an accurate inventory, with all the tremendous tools available, do not want to get an accurate inventory.

Why Did This Week Suck?

2009-05-08T00:47:00.004-04:00

In the movie "A Few Good Men", Tom Cruise's character Danny shouts out "I want the truth!" and Jack Nicholson's character Colonel Jessup shouts back "You can't handle the truth!" just before the Colonel offers the entire truth. While sitting in on management meetings at some of my client's offices, I'm tempted to mimic Danny and ask for the truth.

The truth gets swept into the closet at too many of these meetings.

With regard to food cost results, I have seen some major screw ups over the years. Here's the top 2:

1. Manager ordered his staff to cook 200 whole rotisserie chickens (typical demand is 40 per night) since he felt they might spoil. He offered the birds at a $1 discount.

Instead of freezing the raw birds, the staff followed orders and prepped 5 times the usual marinade, prepped the chickens and slow cooked them all day long on the rotisserie. They sold an extra 10 chickens. The additional unit sales weren't enough to offset the discount of $50. What did they do with the other 150 birds?

They never did sell well the next day when they were offered cold for $2 off. More ingredients were wasted when the staff whipped up a mess of chicken salad. Try to imagine the additional labor, the marinade ingredients, the gas used to cook the chickens, the mayo and veggies used in the salad.

Instead of stopping the insanity early and eating the $250 on day one, the mistake was allowed to dominate the week. The manager never survived this debacle.

2. A fast moving multi-tasker put 10 cases of baby back ribs over medium heat and went outside to check on a delivery. Since the restaurant was not open for breakfast, no one was in the kitchen for the next hour. The delivery didn't go as planned and several phone calls were required to communicate with the vendor's main office.

By the time the employee made it back to the kitchen, he realized his mistake. The ribs were all ruined (burned on the one side). The owner came in 2 hours later and asked why the kitchen smelled like something was on fire. He was told how the 300 pounds of ribs were burned and discarded.

This was an honest mistake. The ribs were immediately discarded and the employee never wasted another rib again.

These huge errors were well documented due to the shear size of the hit. It would have been impossible to change a couple of Excel entries to heal these wounds. As crazy as it seems, I found the 2 meetings following these events to be fantastic.

Everyone discussed real issues and developed safeguards to prevent a replay.

Check Out The Hospitality Finance Blog

2009-05-08T00:40:00.003-04:00

I took down my well crafted Yahoo Finance Pipe with a filtered news feed for the hospitality industry. Eric Hertha's Hospitality Finance Blog will keep you up-to-date on any and all reports for public companies in our segment.

Restaurant Flash Report Format

2009-05-07T23:43:00.003-04:00

Hi Joe,

Thanks for your newsletters, its of great help to me in the industry.

I would request if you could help me find/make a format of Cost Controller's "Daily Flash Report" in excel, with all possible data it should contain.

Thanking you for your support,

Harish

Good request Harish! Thanks for the compliment.

The daily flash report has to have all the essential information. Our business is quite straightforward from a reporting viewpoint. Sales, food and beverage cost and direct labor dominate the profit and loss statement. The daily report should include sales by meal period, total food received, total beverage received, number of workers and total hours for management, kitchen and service.

In addition to this essential information, I like to include notes and explanations including unusual events (from a financial perspective). Perhaps the weather was very poor or a key staff member called in sick. You may have lost power or had 3 tour buses pull in at the same time.

Food Cost Tweets (#FCTip) Digest #1

2009-05-07T00:50:00.005-04:00

If you like Twitter, please follow my Tweets @JoeDunbar. The Food Cost Control Blog posts now are posted on Twitter. I'm using Ping.fm to post a daily food cost tip. These tips are prefaced by #FCTip. These are the first 21 food cost tips:

If you use a 10% safety factor when ordering perishable food, try 9% for a few weeks. If it works, keep slicing until you hit 5%.

Is waste a problem? Designate a special waste basket for spoiled food. Weigh this basket daily. Record the weights on a chart.

By TwitterButtons.com

Your food cost % tends to have a direct relationship to the number of perishable items offered. The more items, the higher the %.

I have rarely observed an ambitious brunch layout with a food cost below 40%. However, focused breakfast menus routinely hit 25%.

Get every dollar of sales. Make sure after dinner coffee, tea and desserts are entered in the POS. Comps need to approved.

Your menu is a portfolio. Each item's profit =count X (price-cost). Focus on the quality, price and cost for all top sellers.

Many operations have too much sales volume volatility to utilize par levels for perishable protein items. Don't go on auto-pilot.

Don't just look at the cost per pound when buying bulk meat. The yield is just as important. Think in terms of portions per $100.

Food cost volatility is a warning sign of a major problem. If your food cost percentage jumps up and down, count frequently.

Eliminate "blowout specials" and freezer burned mistakes by using ingredients from your base menu for your daily specials.

Invest in accurate scales. You need a large scales by the loading dock and one or more small scales for portion control.

If you like cam systems, put a cam by your back door and garbage area. Review the tape from an hour before close to 2 hours later.

For most dinner houses, Friday night is prime time. Great portion control on Friday will put big dollars in the bank.

The 80/20 principle works with food cost variances. A tiny number of ingredients produce a huge % of your variance.

Often coffee is included in both food revenue and food expenses. Make sure your servers enter each cup of coffee in the POS.

To control waste and spoilage, weigh garbage bags every day for a month. Assign a value of $1 per pound and try to lower the waste.

Many restaurants allow chronic problems to go on for months. Look for waste and misuse in your major production activities.

When your food cost % looks TOO good to be true, it probably is wrong. Look for huge fluctuations by category or location.

Each week, use your budgeted food cost % times your forecast of food sales as a compass for keeping your purchases in line.

Recap your inventory values by storage location and spend more time and effort in the areas with the highest values.

The more frequently you count perishable stock, the lower your food cost % results.

By TwitterButtons.com

Food Cost Techniques - Counts

2009-04-28T21:23:00.002-04:00

Most food service people are out in their storage areas each and every day. If they stopped to keep a record of their observations, they would have an incredible tool for solving the usage riddles each week. The normal tendency is to check the stock level of the highest volume items frequently. These same items make up a major portion of the cost of goods sold.

Production teams communicate with clipboard lists. The current shift needs to leave a sufficient stock of batch recipe items for the next shift. These clipboard sheets document the movement of major production items. Don't let the data go to waste.

So how do you make the data come alive? Match it with sales activity. Test your forecasts against the actual demand. Did you over produce? under produce? or were you in the zone? Keeping records will help you get in the zone and stay in the zone.

The keys to turning your walk around spot counts into an effective tool are record keeping, feedback and adjustments.

Food Cost Tips and Tweets

2009-04-23T23:56:00.003-04:00

I started a daily food cost tip tweet on Twitter a week ago. All readers are welcome to join Twitter and follow my tweets.

By TwitterButtons.com

These tweets all start with #FCTip: which you can enter on Twitter's search to see the earlier days. Earlier today, I discovered Ping dot FM which allows the same micro-blogs to be posted here on the Food Cost Control blog, on Twitter, my FaceBook page, LinkedIn and Plaxo.