Food Cost Control

Collusion and Food Cost Control

2012-01-19T08:05:00.001-05:00

Dear Joe,

Its quite late for me to find your blog, I have been in the hotel industry for almost twenty years, and from your posts I found all the similar questions and basically I have answered similarly to any hotel management that I have worked for, about the importance of controlling the purchase, but there come problems when The Purchasing guys happened to be the best friend of Financial Controller or the Golden Boy of The Hotel General Manager, then all those theories that any Cost Controllers in the world follow, suddenly dissappear in the broad daylights.

For Example I have made a kind of Price Changes Index Calculation ( by the daily purchase price update from the suppliers invoices data ) to obtain that the purchase prices for all the goods highly fluctuative to catch the culprits when they play with the purchase prices , of course by getting the help from the suppliers to play this kind of game, it will be useless for me to make this kind of calculation.

My question is, Have you ever found this kind of situation, and if you have, what tools dou you use to bring this situation into attention.

Thank you very much, I am expecting your response.

Best Regards,

Zuhar

Thanks for your email Zuhar! You very clearly isolated a pervasive problem with the cost control function. Lack of follow through on recommendations is the number one issue in many organizations. Outright collusion is a problem with too many operations.

My gut tells me over half the operators just don't take action when profit killing problems are brought to their attention. The tendency is to show "patience" and wait for the next period's report. By reporting daily, you are forcing their hand. This process of timely follow up will often expose a crooked executive.

As a food and beverage controller, you may find career survival forces you to soft sell your suggestions. Often, the person in this position has no access to the people who could take action. If they go up the chain of command without a by your leave, they risk a loss of their income.

In the long run, the numbers will tell the story for everyone to see when they recognize the dishonesty has put the organization in jeopardy of non-existence.

When I was young, I left a job at a hotel due to very poor cash controls and constant theft. At the time, I simply landed another job in my off hours and left. Many people in hotels do not have this luxury.

Ski resorts tend to have timely reporting systems in place since their season is relatively short and weather patterns can have a major impact on profits. I once encountered a management team at a ski resort with major denial issues. The food and beverage controller documented significant unexplained inventory losses at every meeting and no action was ever taken. The top executives were lining their home stock with top bottles of wine. The wine steward had a great resume with many accolades. He was ordering terrific labels and the wine went straight to the parking lot where it filled the trunk of the manager's car.

Years ago, I read an article which stated 20% of workers are dishonest, 20% are completely honest and the other 60% tend to follow the lead of the dominant players. You could find yourself on the outside looking in if your organization has turned 80% dishonest.

Outlook for 2012

2012-01-10T11:08:00.002-05:00

It is a presidential election year and, unlike 2008, I expect a stronger economy in 2012. Specifically, operators who are value customer focused will see increases in covers and sales. These value oriented customers will pay a small premium for quality while avoiding extravagance.

Commodity markets will see continued volatility due to severe weather patterns, the linking of grain prices to oil prices, and a overall increase in consumption.

The constraints on menu item prices will ease to a greater degree than 2011. Operators will begin to pass inflation increases along to customers.

I expect employment to improve as Americans become more pragmatic and fill positions they have shunned in the past. Many industries are still breaking even or showing a loss. The workforce will need to grow with a stronger economy. I see a year end unemployment rate below 8%.

Food Cost Formula Questions

2012-01-10T10:51:00.002-05:00

Regardless of your business model, the food cost calculation is the same:

Food Cost = Beginning Inventory + Purchases - Ending Inventory

If you look closely at the formula, you will find your cost is closely related to purchases. The purchase cycle involves purchase orders, competitive bids, packing lists, invoices, par stock levels, shopping lists, etc. Only invoices should be included in the purchases each month.

Finding the inventory value is simple and complex. The simple part involves an accurate count. We have two levels of complexity in our industry. The perishable nature of food guarantees a declining value as product ages. The most costly event in a kitchen involves freezing a protein item with a high cost per pound. It's better to buy it frozen at the start if portion control is a challenge in your operation.

The second level of complexity involves the preliminary preparation of meat, seafood and produce. Trimming and butchering activities need to be standardized. Using a standard yield %, it is possible to assign the correct value to prepped items. For example, a prime steak purchased for $10/pound may have a yield of 80%. The cost per servable pound is $12.50. This is the cost to use on the inventory sheet in calculating the extension.

A Review of the Outlook for 2011

2012-01-08T18:30:00.001-05:00

I missed the year end unemployment rate by a half percent:

I expect 2011 will usher in a new wave of job creation. This wave will take the unemployment rate down below 8% by year end. Some of the job growth will take place in the Rust Belt.

Dining does continue to favor casual (and fast casual) concepts:

Restaurant dining has become less formal in recent years. I expect this trend to continue with greater speed. Diners want to get out more often than the past few years and they want to be recognized by the management.

My prediction regarding the decline in non-alcoholic beverage spending was spot on:

McDonald's starts the year with $1 for all sizes of coffee and soft drinks. The price pressure on non-alcoholic drinks will continue. Expect your guests to scrutinize their checks looking for prices on specials and drinks. If you price your soft drinks modestly and include the pricing on your menus, the move to complimentary tap water may start to shift back to revenue generating drink options.

Oil prices did increase 14% and the markets were volatile:

With any economic uptick, we can expect market prices to increase. We ended 2010 with higher prices for gas and grains. These markets will be volatile with an upside bias.

Source: CNN Money

The sales at top concepts did increase in 2011.

I expect the comparable unit sales statistics to be positive in 2011. The strong concepts will see 5% plus growth.

Food Cost Software Follow Up

2011-12-27T15:18:00.000-05:00

We had a huge response to the food cost software newsletter. I'd like to respond to everyone who wrote to me by category:

Why purchase a sophisticated (complicated) software tool?

The answer for this question depends not just on the complexity of your business but also on your use of the word SIMPLE. Often in technology you will find it is very expensive to get a simple solution. The iPad is a great example. Apple spent many hours in development to get a light weight, fast, easy to use solution.

In accounting software (food cost control is based on a cost accounting model), you need to define the reports you want to receive first. Then you need to imagine how complicated your operating environment is for an outsider to learn. Pretend you are hiring someone who needs to know everything you know regarding food production.

If you have a 100% from scratch menu, you may want a sophisticated package. As long as you prepare the same items each day, you would see a benefit. If you go to the market everyday to shop around, I wouldn't bother. You need a fast recipe card system to quickly get a feel for what you need to charge.

Every organization with multiple concepts and/or multiple profit centers, may be disappointed in the long run if they go with a cheap solution. Profit center accounting is demanding and requires a solid structure designed to handle the comparison and history reports.

I have never used this type of software before. Should I spend thousands of dollars to get the reports I need?

Unfortunately, food cost control software tends to become shelfware (not used) for many companies. They build the original database and get excited about the recipe costing capability. Many stop cold at this point. These light users may return once a year to update menu prices.

The decision to invest heavily in cost control software depends on your willingness to constantly enter details of invoices each day. On a POS system, the wait staff is performing your data entry work as they send orders to the kitchen and bar. There is no data entry staff in your back office performing up-to-the-minute updates. If you want a perpetual inventory system to control theft in real time, the purchase data needs to be as fresh as the POS data.

I am telling you there is a need to hire or train a cost control person or team. Once you begin to see a much better return on the labor cost and time spent on cost control by switching to a comprehensive solution, the investment may make sense.

Are the low cost solutions the most simple to use?

No.

Are the high cost solutions the most difficult to setup?

Yes.

If you were in my position, would you buy a food cost control solution?

Yes. 100% sure.

To wrap up this follow up, I did receive emails from people using various solutions with a common concern. It seems customer support is poor for many of these solutions. I can tell by the tone of these emails the sales team over sold the prospect. Most of the complaints were from people who found the project was anything but SIMPLE.

Marilyn Chapman's Positive View

2011-12-27T14:55:00.000-05:00

After 3 rather tepid years the Holiday Catering Season came back full throttle in fourth quarter 2011 leading us all to ask, "Is Special Events Catering a new economic indicator"?

Full service parties blossomed after several years of cancellations and attempts at "Do it Yourself" Events.   The clients' comments were repeatedly "we are just to busy to do this ourselves!" This indicated a renewed desire to entertain. a confidence in the economic future and an acknowledgment that professional catering is a valuable, cost effective service.

Sell out weekends in October, November and December resembled the seasons before the Recession with lavish menus and larger guest counts.   We hired staff for the first time in several years and had to use Social Media to get enough help.

Maybe most significant - New Year's Eve is sold out!

I would love to hear from other regions to know if this is a pattern.

-- 
Marilyn Chapman
Wedding Event Coordinator

Delectables Fine Catering, Inc.
"The Bay Area's Most Prestigious Caterer"
969 Virginia Avenue, Inc.
Palm Harbor, FL  34683

E-mail: info@delectablescatering.com

http://www.delectablescatering.com

Phone: 727-781-1200
Fax: 727-789-3401

Become a friend of our Facebook. www.facebook.com/delectablescatering to view dozens of photos!

Pleasures of the Table

2011-12-23T20:31:00.001-05:00

If you live in the Mid-Atlantic (or are planning a visit) and you enjoy a fantastic meal, you may wish to check out David Smelson's Pleasures of the Table blog. He is a Micros POS wizard and he loves to go to lots of different restaurants.

Support A Young Filmaker

2011-12-13T00:09:00.002-05:00

Kickstarter.com is the number 1 place for artists to request funding on the web. Checkout this short movie:

http://www.kickstarter.com/projects/davidveet/monsters-1

RestaurantChains.NET Launches NEW Service

2011-12-04T17:30:00.001-05:00

The RestaurantChains.NET site is offering free access to their new Restaurant Unit Locator service. The service allows you to choose multi-unit concepts and map the locations.

The selection process uses a sophisticated query engine with many popular search criteria.

Reader Questions - Food Cost Software

2011-11-27T13:16:00.001-05:00

I received lots of follow up emails regarding food cost control software options this month. At the current time, there are many good choices available to restaurant operators.

Single unit operators with small menus can take advantage of the many low priced options.

Although I have only worked with a few of these systems, I have heard of good results from people who use CostGuard, Optimum Control and ChefTec.

If you work in a complex operation (casino, major sports arena, ski resort, large beach resort, four season mountain resort, restaurant with a major catering component, etc.), you generally will look at battle tested, server based systems since you need many people on the same database. I am biased toward the FoodTrak solution due to many years working closely with clients.

Many of the companies who decided to work with me over the years took a look at Eatec. My first database implementation project ever was an Eatec recipe costing system I setup for a caterer in Lewisburg, PA. I know the Las Vegas casinos have a bias toward Stratton Warren. I do not have any experience with this system.

Although FoodTrak handles many complex tasks, two of my clients moved from even more complicated solutions (CBORD MMS and Eatec) because they did not need many of the reports. It's important to know your top priority report needs before going on these websites to get information.

When I moved from Canada to New York in 1990, I found American operators had not settled on a back office accounting solution. My background included auditing jobs before I became a controller and later the CFO in a remote site feeding company. We used AccPac Plus in Canada because the product was widely supported by consultants and chartered accountants in every province. In the US back in 1990, there were many accounting products and a few systems specifically designed to handle recipe costing and inventory control. QuickBooks had not been invented at this time. Today, every system seems to have a QuickBooks interface.

I began working with FoodTrak in 1992 after I had been unsuccessful in persuading 3 companies to use AccpacPlus. All 3 had chosen FoodTrak. They each had a different accounting package (DacEasy, One Write Plus and Cougar Mountain). FoodTrak had (and still does today) lots of interfaces.

Today, many operators are willing to put their entire accounting system on the Compeat solution. No doubt, the many experiments with interfaces and software updates just wore out the IT departments. Windows has so many different versions to support. You'll find many IT departments who insist on staying with older versions of their software for dependability issues.

From a hands on viewpoint, I have worked with Eatec, FoodTrak, ReMACS, Foodtech, iPRO, CBORD, Optimum Control, CostGuard and EZChefSoftware (listed in chronological order). Every system has strengths and weaknesses. I find the number one issue today is survival. There are so many solutions it's tough to decide who will be here in 2020.

ReMACS was merged into Radiant prior to their merger with Aloha. Aloha had merged with MenuLink just before the Radiant merger. So unless you know a rock solid ReMACS DOS consultant in your town, you won't get support. Foodtech was merged into Micros who used some of the reporting as inspiration for their own back office suite. They then became the inventory solution for Aloha for a short time. Today, I never hear of this system.

Agilysis purchased both Eatec and Stratton Warren.

Will your solution be merged into another company? Will support be available in the future?

The inability to answer these basic questions leaves me in a unique position. Although I love working with many inventory control solutions, at this time I have decided not to endorse any company.

I have an implementation plan which will help any operator with any system. Most companies fail to achieve success with food cost control software due to a poor initial implementation plan. They simply do not invest the time and resources necessary to succeed. Regardless of your choice, you need to spend the time it takes to do an excellent job on the setup.

Food Cost Control Software Question

2011-11-09T11:09:00.002-05:00

Dear Joe,

I have finally decided to stop working so hard to breakeven and take the time and effort to properly cost out all of our recipes and then do it all over again for the catering division.

Years ago I looked into FoodTrak and ChefTek (?) and wonder what you would recommend for a small operation (less than 1.5 million in sales). I am also looking to take over another location and implement our menu and "brand" but surely don't want to do that until I have properly costed out and determined the best menu with the most effective profitability.

Please help!

Leslie

I would choose Chef Tec if my annual sales were less than $1.5 Million. FoodTrak is a superior system but it is designed for complex operations with many simultaneous users (think of an active ski resort). Generally, single person food cost control operators use Excel as the default. Before you spend a dime, make sure you are going to continue to use the software beyond the initial recipe cost cards.

As FoodTrak moved from a budget level DOS solution to a pricier Windows solution, profit center level reporting was added in early 2000. The software became relatively high priced for low volume operations. Complex operations found a home and the new FoodTrak customer community expanded into sports venues, resorts, clubs and contract catering companies.

Although I have never used Chef Tec, my understanding is the software was designed specifically for operations with no standard recipe cards. Chefs and food and beverage controllers could purchase the software for a fair price and achieve their limited objectives. The popular price allowed the company to add features and they have become the logical choice for small restaurants.

As ReMACS and Foodtrak left the door open in the late 1990s, many POS systems and 3rd party developers stepped through and created a fragmented marketplace. Recently, some developers decided to study the actual system usage and found many companies only used the software to cost their current menu. They only use the software after this chore is completed when they look at future menu changes. EZChefSoftware (uses Excel macros) and MenuMax (web-based solution) come to mind when I think of menu pricing projects.

Theoretical Food Cost Question

2011-10-21T13:39:00.000-04:00

Hi,
Do you have a simple explanation (formula) for Ideal (Theoretical) Food Cost?

Have a great day,

Tabitha

Director of Training and Development

Restaurant Chain with 120 Locations

Thanks for the question Tabitha!

The simple side of the ideal cost calculation involves multiplying the cost to sell a menu item by the number sold in a given period. This analysis may be accomplished for the entire menu, a specific category or a specific menu item. The result of the formula is divided by the sales to arrive at a theoretical food cost percentage.

Ideal Food Cost Per Menu Item = Menu Item Cost X Number Sold

Sales Per Menu Item = Selling Price X Number Sold

Gross Profit Per Menu Item = Sales Per Menu Item - Ideal Food Cost Per Menu Item

Ideal Food Cost Percentage = Ideal Food Cost Per Menu Item / Sales Per Menu Item

The complexity behind this simple formula involves proper weighting of category and summary statistics. By following the formulas above, you will avoid most of the improper weighting problems since the number sold is a key component in the equations.

Some companies never successfully develop an ideal usage model due to the considerable time involved in developing proper recipe cards. The "Menu Item Cost" for each item needs to be calculated using standard recipes and cost data. Depending on the menu size and complexity, this task may very well take months. It is possible to progressively build the recipe model which will guarantee benefits before the final recipe cost card is complete.

Review your sales data and identify the menu items with the highest dollar sales and the menu items with the highest number sold. Some menu items will fall into both groups. These are referred to as Stars. Stars are popular menu items which generate a high percentage of your dollar sales. These items should be analyzed first.

The menu items which are very popular but do not make the list of top items in terms of dollar sales are referred to as Plowhorses. These items should be analyzed next. By their nature, there is a premium on tight cost control since the number ordered is relatively high but the dollars of revenue are low.

Finally, you can complete the recipe model by developing recipe cost cards for all the unpopular items. I like to do these recipes last. Start with the menu category with the highest dollar sales and proceed in order until you are finished.

Once you have the recipe costs complete, you will probably want to run the ideal food cost percentage for the entire menu. You will find out what your food cost should be since the Menu Item Cost data is now available for the entire menu.

Most people wait for the entire menu to be complete. I prefer to incrementally build the model. You'll get actionable reports as you go beginning with the high impact menu items and categories.

Food Cost Template Question

2011-09-25T23:21:00.001-04:00

Good afternoon

I was wondering!
I am soliciting for a new job in a wonderful Hotel in Amsterdam as a purchasing manager

But i need some templates in English, such as daily food cost control and other foodcost control templates.
Also i am looking for good templates of purchase orders, RFI, RFP etc etc in English.
Can you help me with this? Thanks in advance

Yours sincerely
Cor N.

Thanks for the email Cor. I would checkout Ken Burgin's Profitable Hospitality website:

www.profitablehospitality.com

Food Cost Q&A September 2011

2011-09-25T23:02:00.002-04:00

Hello Chef,

This is Chef Dixit, how are you?

I know you are obviously fine.

Chef I need your help. I want few reports like how to maintain costing report, what is the hotel cost and what is the resort food cost?

If you don't mind sir, please send sir, I want to learn something different to improve my knowledge.

Thank you

Thanks for the email Chef Dixit. I am doing well. Thanks for asking me.

I see a department level report as the solution to your needs. If your property utilizes a central kitchen, you need to allocate usage to the various food and beverage outlets. There are several ways to allocate costs to each department.

With central kitchens, you have to decide if the time and expense of costing food shipped out to each department is justified by the cost improvement. For example, a 3% reduction in cost on a $1,000,000 is $30,000. If you could lower your cost by 10%, the effort will definitely have a positive payoff. Completely costing every recipe produced in a complex operation will allow you to accurately allocate costs.

Make sure the benefit allows this much tighter method.

Food Cost Control Framework Part 2

2011-08-31T13:00:00.002-04:00

The table below recaps the information required for all items with an Impact rating of A (A, B, C scale). At the bare minimum, you will want to know the correct specifications. The table can also include multiple purchasing specifications if you use more than one supplier. Some suppliers sell meat by the box with the weights written on the side. Other suppliers sell by the piece with the weights on the packages. It is very important to understand your options and then make an effort to restrict your purchases on these key items.

You won't want the specifications to be loose since these items (by their nature) have a very big impact on your food cost results.

The consistency issue is number one with regard to your key items. Your customers make the trip to your restaurant specifically to order these popular items. They expect a consistent portion size and quality level. You can't expect a highly consistent end product if you buy different quality or specification each time you order.

The portion size information will help you forecast the number of cases or boxes to purchases. I have seen certain pieces of meat used to cut steaks with a high yield variance. In one example, the yield was 62% for the high and 54% for the low. The average yield was 60%. If you receive an entire box of meat with a low yield, you could require an extra piece of meat. This is rare but possible. Definitely mention the poor yield results to your supplier. You may be entitled to a credit.

We will be exploring the purchasing model in the Part 3 section.

Theoretical Food Cost In Dispute

2011-08-12T09:17:00.001-04:00

Joe,

I own a QSR pizza franchise in Ontario, Canada. According to the franchisor, my standard food costs should be 39 - 40%. My food costs based on the franchisors standard recipe is 1 - 3% below this standard consistently. What is an acceptable margin for error in arriving at this calculation? As you know, there are many variables which affect the food cost. One of which is we have a medium one topping pizza which sells for $4.99 which has a food cost of 55%. This is obviously a good seller and raises the standard. How can I interpret these results? On average, we process over 1200 orders per week with a time guarantee or its free. Every pizza is made by hand, no pre-measurements of any toppings with the exception of cheese cups and in my opinion not very accurate when you are in a hurry. Personally, I feel I am over using and that their standard is far too high. I feel their calculation is designed to increase their own profitability because all of our inventory is purchased from them. The profit margin has disappeared. How can I tackle this issue? I look forward to your response and I thank you in advance.

Mirella

Thanks for your question Mirella!

Let's take a look at the issues:

Franchisors View:
1. Consistent portion size across the entire company.
2. Profit motive has a link to franchisee purchasing behavior in your organization.

Franchisees View:
1. Profit motive is highly correlated with a consistently low food cost.
2. Portion control is a critical factor in achieving a consistently low food cost.

Taking the franchisor's side briefly, I would be unhappy if my franchisees had agreed to buy dough balls, pizza sauce and cheese from my commissary and they decided to purchase these items from alternative sources. There would be consistency issues on each of these critical components. They need to monitor ratios to prevent this activity.

It is evident from your letter you are watching your costs very carefully. The franchisor's ratios may have built in inefficiency numbers. If you run your operation more efficiently than the norm, you would beat their ratios.

I favor pre-portioning for cheese and dough balls. In addition, all pizza bakers should use standard ladles for the pizza sauce. The reason I favor pre-portioning is due to the peak period factor. A tremendous percentage of sales volume is achieved during peak periods. Sloppy portion control during these high volume periods can be very costly.

You have a second motive in pre-portioning the cheese. The accurate portion control records may be used to support your case against the franchisors actions.

The portion work should be done during down time.

Food Cost Control Framework Part 1

2011-07-27T11:31:00.001-04:00

The essential table required to begin a professional food cost control system is the item list. This table needs to have the same information you see on the order guides from any national distributor, storage information and vendor information. In addition, I add several columns to help classify the manner items are purchased including frequency, bid (buy from lowest bidder) and impact. Impact data can be simplified into the classic A B C model.

The A items are high volume and high cost per pound or volume, the B items are either high volume or cost but not both, and the C items are low volume and cost. You will see a higher return on your invested time spent controlling A items.

A typical food item would have the fields below for each record:

Name: BEEF TENDERLOIN PSMO CHC 12-5#UP

Category: MEAT
Purchase Unit: CASE
Pack/Size: 12/5#UP
Catch Weight: YES
Weight/Case (AVG): 72.0
Cost/Pound: $8.00
Storage Method: REFRIGERATED
Inventory Location: WALKIN COOLER 1
Frequency: 7
Primary Supplier: Premium Meat Company
Bid: NO
Alternate Suppliers:
Impact: A

This records tells us we have a high impact meat item which is ordered by the case and invoiced based on catch weight. We use a single supplier and we order weekly. Based on our contract, we now pay $8 per pound. The tenderloin is stored in the main walkin cooler.

These essential fields help us with the food cost control in several ways. Beef tenderloin is a high volume item for this restaurant and the $8/pound is a relatively high cost.

This data is sufficient for general information. We would want to add fields to help out the staff working on ordering the meat. Demand forecast data is preferable to a par stock level for your A items. If you expected to serve 2,000 covers and on average 25% of patrons choose beef tenderloin, you need 500 portions of filet mignon for the week ahead. Depending on the size of the steaks, this case will yield either 72 steaks or 60 steaks. Our data shows 60% of patrons will choose the smaller steak (72/case) and 40% will choose the larger steak (60/case). We'll need 3 1/3 cases for the larger steaks and 4 1/6 cases for the smaller steaks. Since we can't order fractions of a case without a split penalty, we would order 8 cases.

Seasonal operators should not rely on par stock averages to purchase any A items or high volume B items in their inventory. Accurate forecasts are essential. Fortunately, the counts in your busy season will be higher and more reliable.

We will develop a data table to recap the information required to analyze A items in the next article - Food Cost Control Framework - Part 2.

Higher Food Costs Can Lead To Higher Profits

2011-07-21T16:22:00.000-04:00

As commodity prices have leveled recently, we have consumers modifying their food purchases due to much higher prices for many staples. The financial press has featured plenty of articles on the high prices for gold, oil, corn and other key commodities. Many restaurant chains have increased their menu prices to offset the higher cost of goods sold.

In the short term, savvy restaurant managers can boost profit through strategic menu engineering analysis. Imagine your food purchases are 5% higher for the same sales level. If you raise selling prices by 5%, you can cover the higher cost of sales and increase profits by holding overhead and labor costs low. With a check average of $18 and a 33% food cost, your cost of sales is $6 and your gross profit is $12. Raising the $18 by 5%, you would expect a check average of $18.90. The cost of sales would go to $6.30 in the same 5% rise. Your gross profit would increase by $0.60.

In terms of the original $18 check average, this $0.60 is an additional 3.3% of gross margin.

Flash Report Question

2011-07-21T09:49:00.000-04:00

Thanks to Felix for his recent email.

Hi! Joe,

I read your comments concerning the weekly flash report in foodcostwiz.com and indeed it was a great information on financial perspective.
I'd be more happy if you could post me the weekly flash report format to cross check the one I'm doing.

Appreciate it Joe.

Thank you.--
A pessimist sees the difficulty in every opportunity, an optimist sees the opportunity in every difficulty.

Every flash report should meet the number one need - timely information.

Critical operations data should be summarized including the following items:

Forecasted Sales (by category)
Actual Sales (by category)
Scheduled Labor (by department)
Actual Labor (by department)
Purchase Targets (by category - based on forecasted sales)
Purchase Recap (by category)
Overhead Estimate

You can profile the report in columns comparing the actual results to your plan figures. A variance column with appropriate explanations is a plus.

Don't waste time reporting every single accounting transaction. A breakdown of cash, credit card charges, house account charges, etc. will help management forecast cash flow. Labor costs are a prime cost item and you will find excellent tools to manage this activity.

Above all else, make sure the report is published on a timely basis.

Corn Continues To Fall With a 10% Mid-Day Move

2011-06-30T13:50:00.000-04:00

Source: Morningstar.com

We end the month of June, the second quarter of 2011 and the first half of 2011 on a very positive note. At mid-day, corn futures were off 10% today. Speculators have bid corn prices up steadily since this time last year. As global crises provided upward pressure in oil prices, the prices of corn (used in domestic U.S. ethanol) have moved higher. Some of these positions unraveled today as a report cited greater planted acreage.

Earlier this month, corn futures peaked. The correction could wipe out the entire gain in prices for the year if the sell-off continues.

If restaurants leave menu prices alone, the lower corn prices should produce fatter gross margins.

The move lower has also produced a drop in wheat prices. These welcome price drops provide a bit of positive momentum as the industry continues the consolidation begun 3 years ago.

Mid-Year Review 2011

2011-06-28T09:32:00.000-04:00

We started the year in rally mode, hit the breaks in spring and enter the third quarter with the first signs of a correction in gas and corn prices. We expect our employment improvement forecast in the Outlook for 2011 will be achieved despite the seasonal bumps in the road.

The Dow Jones Restaurant Industry Index is up 10% since January 1st.

Source: Marketwatch.com

Corn prices, which have risen steadily for a year, corrected recently and this helped the restaurant index regain momentum. We should be above 700 by year end.

Source: Marketwatch.com

If you haven't raised your menu prices to cover the costs, you will continue to experience downward pressure on gross profit. We'd need oil prices below $75 to become optimistic. This is possible but not a lock by any means.

As we see a renewed search for productivity gains, tech companies serving the industry should find the phones ringing in the second half of 2011. The iPad has helped to create some buzz with menu and ordering apps joining wine list tools in the App Store.

Source: www.topappreviews101.com

Seasonal summer resorts should benefit from pent up demand for real vacations. With geopolitical unrest abroad, the old fashioned American road trip could get a deep discount as gas prices fall post-Memorial Day.

Social Media Connections

2011-06-24T09:55:00.000-04:00

I'd like to thank everyone who has sent me invitations to link with them on a variety of social media sites. Due to time restrictions, I am only able to stay active in a small selection of sites. Over time, I find my time is best spent on LinkedIn and the blog. I will be writing articles for 3 industry sites.

Although I initially enjoyed Facebook, the high number of Facebook related game site traffic pushed me away. I recently deactivated my Facebook account. I will update my status on the blog if I decide to return.

My time on Twitter is now way less than when I first discovered the micro-blog service. I still enjoy reading tweets using an email delivery service called Nutshell. As I become a better user of Nutshell, I will increase my retweet activity.

When Ning went to a pay-to-play model, we kept the Foodservice Club for a year. If we decide to recreate the club, we will most likely build a Facebook page.

The excellent site Hotel Trends has developed groups which have added a forum for their readers. They remain my favorite site for industry news. A close second is Foodservice.com which has market reports. If you need intensive market reporting and analysis, you can't beat American Restaurant Association which requires a paid subscription.

You can study the ups and downs of over 4,000 restaurant chains on Restaurantchains.net which produces lots of Top 10, Top 50, etc. style reports. They also offer a paid subscription service with advanced queries.

Although I have registered for many other sites, I have decided to remain inactive on most.

Great Week For Our Industry

2011-06-19T18:22:00.000-04:00

Prices for crude oil settled at a 4 month low this week. As many of you know, the sales pickup stalled when crude oil prices began spiking earlier this year. Moving in lock step with crude oil, corn futures began to dive from recent heights.

Source: CME Group

Lower prices for corn and crude oil as we hit the busy summer season is welcome news for restaurants, hotels and caterers. Patrons will be able to fill their tanks for less money. Your invoice prices for meat and grain products will be lower. There's enough volatility in the markets to cover any recent menu price increases.

We could use a few more weeks like this end of spring gift.

The Profitable Butcher - Part 3

2011-06-02T00:49:00.000-04:00

With the recent rapid increase in meat prices, operators are discussing the merits of smaller portions. If they serve an 8 ounce steak, they may be considering a 7.5 ounce portion. For operations with large portions, the change may be from 16 ounces to 15 ounces.

A change from 8 to 7.5 ounces is a 6.25% reduction. Everyone is familiar with the coffee cans at the local market. It is rare to find a one pound can. Actual weights are often less than one pound. Sometimes, the size of the can stays the same but the net weight changes.

Would your customers notice their serving is only 93.75% as big as last time?

They may not notice a small change in the serving and they may not care. If you notice the plates coming from the dining room have uneaten meat or fish, your current portion size may be too large. Consider a slight drop in size. The profit potential is significant.

Take a look at the big picture. If you use 800 pounds per week at $6 per pound, a drop from 8 to 7.5 ounces will save $300 (around $15,000 per year).

This strategy should not be combined with an immediate and significant price increase. Raising the price and decreasing the portion size doubles the risk of your customers objecting to your strategy.

[For my loyal readers, the bakery I wrote about when flour prices went through the roof is now under new management. They made the changes too obvious.

The size of the loaves decreased by 20% for the same price which was perceptible. They eventually raised the cost per loaf by 15%. Traffic suffered and they never regained their gross margin.]

The Profitable Butcher - Part 2

2011-06-02T00:16:00.001-04:00

Tracking butcher yields is essential if you decide to trim your meat and fish rather than buying portion cuts. Too often, managers treat the process with a lackadaisical attitude.

"We use the trim in ravioli. They're free." "This week's meat was fatty." "Our butcher doesn't slice the steaks evenly." "We only pay $6 per pound and the portion control cuts would cost $7." "Nothing is wasted. We make all of our stocks from scratch."

The common theme is a lack of clarity. You can't afford to butcher meat in your operation if you do not closely track the process. Butcher yields can fluctuate widely. The differences in yields need to be monitored closely.

I know an operator who carefully tracks each batch. The starting weight and number of pieces of meat are recorded. The log contains the cost per pound paid to the meat supplier. After trimming the meat and slicing the steaks, the butcher records the number of steaks, usable trim and waste. All costs flow from the starting weight and cost per pound.

This person has a well documented 3-ring binder with each butcher batch sorted by date. I went through the history and found the overall yield was very close to the restaurant's standard. More importantly, the yield from batch to batch varied by plus or minus 5%. This is a 10% spread.

Most operators do not keep these records. The time to record the batch is minimal and the gain in information is tremendous. Understanding your standard yield is key to tracking usage and gross profit.