CONTROLLING FOOD COSTS

How to get the most of your money

TIPS ON LOWERING FOOD COSTS Raise prices to adjust to new food costs. Cost out menu & price items accordingly. Control portion sizes. Minimize & track waste. Spot-check prep staff ensure pre-cut portions

weigh what they are supposed to. Link the chefs pay to a pre-set food cost %. Set

up an incentive deal for the chef. Set up purchase order system. Negotiate prices with vendors for bulk buying.

Take vendor discounts when offered. Organize storage room & keep inventory to a

min. Purchase based on a budget.

STANDARDIZED RECIPES A standard yield: expected

qty. of food that results from a standard recipe. Stated in the total quantity of food the recipe produces, such as 3 gallons of clam chowder & by the number of portions it produces, such as 48–8 oz. bowls.

A standard portion: consistent qty. of product served to each person each time it is served.

Portion control tools: scoops, ladles, a standard serving bowl, or count promotes consistency and customer satisfaction, and aids in insuring a business’ profit.

DETERMINING STANDARD FOOD COSTS1. Cost per Unit

Method2. Yield Test3. Cooking Loss

Test4. Standard Recipe

Using 1 or up to all of these will help you determine your plate cost.

EDIBLE PORTION Edible portion is the form in

which the product is served. Little/nothing needs to be done to prepare a product in EP form.

Ex: purchasing prepared cheese, cake that needs only slicing; a case of 6 oz. chicken breasts needing only to be cooked; or a case of 24–10 oz. bottles of sparkling soda need only to be opened = ex.of EP.

Foods portion cost of a prepared item purchased in its EP form need to use the Cost/Unit Method.

COST/UNIT METHOD

Formula: PURCHASE UNIT COST # OF PORTION =

STANDARD PORTION COST

Example: The chef purchases a prepared cheesecake for $8.00. Using the12-slice portion, the Standard Portion Cost is calculated as follows: Purchase Unit Cost Number of Portions Standard Portion Cost

$18.00 / 12 = $____Practice Part 1

THE YIELD TEST Yield test: process of raw product

purchased in “AP” form -broken down into EP & waste.

Purpose = is to determine the yield, the cost/lb, and the cost/per portion of a product purchased in an “AP” form. You break down the product into useable product & non-usable waste

Ex. Food/beverage items: A case of green beans), poultry (a turkey), seafood or meat (10 lb. beef tenderloin), canned (#10 can chopped tomatoes), bottled (14 oz. artichoke hearts), & frozen items (5 gal. ice cream) prepared prior to purchasing. Many products are not 100% usable & include some waste.

YIELD TESTStep 1:

Step 2: Calculate the Edible Yield %

Step 3: Number of Portions

Edible Cost per Portion Step 5:

AS PURCHASED COST / EDIBLE WEIGHT = EDIBLE COST/LB.Green Beans: $38.00 / 22 lb. = $1.73/lb.

Step 4: Edible Cost per lb.

RECIPE COSTING By knowing the

entire cost of the recipe, the business can determine the standard portion cost and adequate selling price, in order to insure that all costs in preparing the recipe are covered and profit is realized.

RECIPE COSTING STEPS Step 1: Fill in the required information:

name of the recipe, standard yield, standard portion of ingredients including garnishes from the standard recipes. Post the AP price in the cost/unit column.

Step 2: Calculate the Individual Ingredient Cost. Ingredient qty. x price = individual ingredient cost.

Step 3: Determine Yield %: Look up in chpt.11 or book of yields if there is trim plug in edible yield % in form.

RECIPE COSTING WORKSHEET

Recipe: Chicken Tetrazzini Yield: 48servings Serving Size: 1/24 (12" x 20" x 2" pan)

Total Cost: $96.17Abbreviations used: lb – pound; qt = quart; oz = ounce; c = cup; gal = gallon; tsp = teaspoon

Ingredient(1)

Amount(2)

Purchase Unit(3)

Cost Per Purchase Unit

(4)

No. of Purchase Units

(5)

IngredientCost(6)

(A) Spaghetti 6 lb. (lb) $1.03 6 $ 6.18

(B) Margarine 2 lb. (lb) .89 2 1.78

(C) Celery 2 qt. Bunch .99 1.5 1.49

(D) Onions 2 qt. (lb) 1.69 2.2 3.72

(E) Flour 1 lb., 4 oz. (lb) 2.10 1.25 2.63

(F) Salt 2.5 oz. (lb) .88 .16 .14

(G) Pepper 1 tsp (lb) --- --- ---

(H) Chicken Stock 2 gal., 2 c ---- --- --- ---

(I) Chicken 12 lb., 8 oz. (lb) 2.35 26 61.10

(J) Mushrooms 2 c (lb) 4.95 .33 1.64

(K) Green Pepper 3 c (lb) 3.05 1.2 3.66

(L) Bread Crumbs 2 qt. (lb) 1.90 1.75 3.33

(M) Sharp Cheese, shredded

2 qt. (lb) 5.25 2.0 10.50

CALCULATING THE COST OF ONE SERVING

cost) serving(per servings) of no. -yield (recipe cost) recipe (total$2.00 48 96.17

See practice packet question

MENU CONSIDERATION

SGo Big or Go Home strategy vs.

100% utilization & uncover popularity

MOST EXPENSIVE OFFERINGS WORLDWIDEhttp://www.knipschildt.net/la-madeline-au-truffle.html

Chocopologie: by Fritz KnipschildABOUT THE TRUFFLED TRUFFLE: $250

Weight: 42 gramsIngredients: dark chocolate, classic ganache and a French Perigord truffleThe ganache is made using 71% single bean Ecuadorian dark chocolate mixed with fresh cream that has been infused with vanilla pods and pure Italian truffle oil.

The ganache is then shaped around the French Perigord truffle (the truffle alone costs up to $1,000 per lb/454 g), then dipped in 71 % single bean Ecuadorian chocolate & rolled in cocoa powder.

MOST EXPENSIVE CLUB SANDWICH

Von Essen $225http://www.worldrecordacademy.com/food/most_expensive_club_sandwich_Hong_Kong_Hotel_breaks_world_record_213466.html

EXPENSIVE INGREDIENT SOURCELa Bonnotte type of potatoes are special and hence come with high price of $560 per Kilogram. This potato is considered to have unique taste.

Limited availability: Available May 1st – May 10th only harvested by hand and would have been extinct in world I & II if not for vested people interesting in keeping it.

REAL $ & FOOD PRICING

CALCULATING PLATE COST

Entrée: Fresh White Fish DinnerCosting Date: 8/03/20xx

Item Menu Item Cost Per Serving

Entrée Fresh White Fish $ 4.23

Potato Three Choices Daily 0.37

Vegetable Four Choices Daily 0.42

Salad Tossed Green, Caesar, Spinach 1.12

Dressing 5 Choices Daily 0.37

Garnish Lemon Wheels 0.02

Bread Loaf 0.27

Butter Butter/Margarine 0.06

Condiment(s) 0.03

Total Entrée and Accompaniments Cost $6.89

EVALUATE CURRENT PROFITABILITY When you know which menu items are the highest

grossing items (meaning they result in the most profit before any other expenses are considered) then you know which items to promote.

What is the highest grossing fish on the menu? To many operators, gross profit that matters most. To maximize your profit, consider raising the price

of the other fish entrées slightly, or simply train your serving team to upsell the highest grossing item.

Fish Food Cost

Selling Price

Food Cost %

Gross Profit

Halibut $2.75 $12.79 21.5% $10.04King Crab Legs

$7.50 $20.79 36.4% $13.29

Salmon $6.42 $18.99 35.6% $11.57

MENU PRICING FACTORS Value Perception

Perception is reality

Pricing PsychologyPrice endings of .99 more suited to qsr menus.0 and 5 endings more suited for full service menusThe use of $ or -

VALUE PERCEPTIONCHEAP OR EXPENSIVE?

VS.

PRICING PSYCHOLOGY

FULL SERVICE QUICK SERVICE

PRICING STRATEGIES Food Cost

Method Base Selling

Price Contribution

Margin Method

FOOD COST METHOD Ideal food cost percentage varies, typically 25 -30 %. Ex: Lemon Rosemary Chicken entrée should be priced at

$14.16. Must know the cost of all ingredients in recipe from the half cup of lemon juice to the pinch of fresh rosemary.

Account for side items that come with the entrée. $14.16 = not typical menu item price, consider lower to

$13.99; if you cannot think of an inexpensive way, increase perceived value of the plate enough to raise the price from $14.16 to $14.50.

CALCULATING BASE SELLING PRICE Step 1: Determine the selling price

multiplier by dividing the budgeted food cost percentage into 100% ($1.00).

Step 2: Determine the menu item’s base selling price by multiplying the estimated food cost by the selling price multiplier.

multiplier price selling 2.70 .37

1.00 percentagecost food Budgeted

1

dessert) price selling (base )multiplier price (selling )cheesecakefor cost (food$13.47 2.70 x $4.99

HOW MANY ORDERS TO SELLA 9lb AP Beef Tenderloin is trimmed; 8 oz are lost. How many E.P. oz filet mignons can be cut from the tenderloin?

9 lbs x 16 = 144 oz144 – 8 oz = 136 oz 136/6 oz = 22.66 ea

How many servings?22, 6 oz

HOW GOOD IS YOUR FABRICATION What is the yield % of a

22 lb turkey lost 8 lbs after fabrication and shrinkage?

EP Weight/ AP Weight x 100 = EP %

14 lbs/ 22 lbs x 100 = 63.6%

WHAT ARE YOUR COSTS PER SERVING SIZE ORDER? One loaf of bread was purchased for $2.89. There are 20 slices of bread in the package, but the 2 end pieces cannot be used. What is the cost of the bread for an order?

Step 1: Determine loss Step 2: Determine cost per

slice Step 3: Unit cost x serving

size = cost per order

Step 1: 20 slices – 2 = 18 slicesStep 2: $2.89/18 = $.16 eaStep 3: $.16 x 2 = $.32

DO PER LB COSTS CHANGE WHEN ACCOUNTING FOR COOKING LOSSA 9 lb (E.P. means = trimmed) leg of lamb costs $4.85/lb and you want to roast it. When the roast is removed from the oven, only 2/3 of the original is left. How much does an 8 oz. serving cost?

Step 1: AP weight 9 x $4.85 = $43.65Step 2: 2/3 = .666 x 9 lbs = 6 lbs EPQ Step 3: $43.65 / 6 = $7.275Step 4: $7.28 lb / 16 = $.455 ozStep 5: $.46 oz / 8 oz = $3.68 per serving

CONTRIBUTION MARGIN (GROSS PROFIT) METHOD

Works for a la carte menu items as well as grouped items: soup, entrée, salad, etc.

Uses operation-wide data to determine a $ amount that must be added to each major menu item’s food cost.

Can use the same contribution margin for all items or use categories.

2 versions of the formula:

Combination:

PriceMenu Margin on Contributi Cost Food

PriceMenu Customers of # Total

profit)Target cost nonfood (TotalCost Food

#1

#2

Practice Part 4

MARKUPS AFFECT SELLING PRICES

Different menu items are typically marked up by different amounts.

In general, the lower the menu item cost, the higher the markup (and the lower the food cost percentage).

MENU ENGINEERING (CONTRIBUTION ANALYSIS) Method of menu evaluation or analysis

Considers menu product mixConsiders contribution margin (selling price

minus menu item food cost)Considers popularity (number of items sold)

MENU ENGINEERINGMenu Item

# Sold

Pop Index %

Food Cost

Selling Price

Item CM

Total Cost

Total Sales

Menu CM

Strip Steak 145 23.4 $7.50 $23.65 $16.15

Ginger Shrimp

116 18.7 $5.20 $18.00 $12.80

Duck Breast 21 3.3 $7.30 $21.50 $14.20

Lamb Chops 11 1.8 $6.90 $22.00 $15.10

Pork Loin 45 7.3 $6.30 $20.50 $14.20

Dark Chocolate Brownie

50 8.2 $3.80 $16.50 $12.70

Peanut Butter Parfait

120 19.4 $6.35 $20.85 $14.50

Pear Foie Gras Crisp for 2

111 17.9 $7.75 $24.75 $17.00

619 100%Average 77.3

812.5%

LOW OR HIGH PROFITABILITYMenu Item

Pop Category CM Category Menu Item

ClassStrip SteakGinger ShrimpDuck BreastLamb ChopsPork LoinDark Choc. BrowniePeanut Butter ParfaitPear, Foie Gras Crisp for 2

CATEGORIZE PERFORMANCE

Contribution Margin

Popu

lari

ty

HighLow

H/L H/H

L/L L/H

High

PRE-FIX MENUTYPES1. All fixed price, all the time

2. Prix fixe and a la carte

3. Prix fixe lunches

4. Prix fixe specials

5. Restaurant weeks

PRE-FIX ALL THE TIME High reputation chefs/destination restaurants. Much clearer forecast of the price per head. Diner already knows he or she will lay down a significant

amount of money before the night's end. Examples: Chicago's Alinea, Yountville, California's

The French Laundry, and New York's Eleven Madison Park all serve exclusively fixed-price menus.

Clientele are essentially seeking out the skill of a chef and the experience of a restaurant, rather than individual dishes

Chef retains control of food and likely to outlay on ingredients and labor.

When you're paying $295 per head at Thomas Keller's Per Se, you're putting aside that sum for a culinary experience.

Whereas when you're paying $28 for a single plate of hearts of palm in Per Se's a la carte "salon room," you lose the context of that fine dining arc—and potentially start questioning whether that individual dish is worth what you're paying.

PRIX FIXE AND A LA CARTE New York's Gramercy Tavern and Cambridge, Mass.'s Craigie

on Main come to mind; of course, any number of other fine restaurants, like Chicago's Blackbird, offer a fixed-price tasting menu in addition to the a la carte options.

This approach may ease the fears of diners who don't want to shell out for a set-price menu

Some may feel more comfortable with a $15 appetizer, $29 entree, and $11 dessert than a $50 prix fixe menu—an expensive-looking number, even if it's the better deal.

Ensure that you put sufficient thought into each side of the menu; even if you're counting on more people opting for one choice than another, there's no easier way to alienate potential repeat customers than to make them feel as if they made the "wrong" choice.

If there's any sort of tasting menu offered, ensure that you're able to deliver a suitably impressive performance.

PRIX FIXE LUNCHES Ramp up lunch business that may otherwise be hard to

pull customers into the door. Jean Georges, Del Posto and many other highly

esteemed New York restaurants offer lunch menus at less than a third the cost of their dinner service (the former, two courses for $32; the latter, three for $29; both include bread, amuses and after-dessert treats).

Less extravagant end, the fine Greek restaurant Kefi does a $9.95 soup & half-sandwich combo,

An absolute steal for a sit-down restaurant; and Gramercy Tavern does the same deal for $14, an even steeper discount given the caliber of their cooking.

If you're keeping the space open, with all the operating and labor costs that it entails, it's a possible way to make your lunch business stand out.

PRIX FIXE SPECIALS Valentine's Day, New Years' Eve, Thanksgiving—many

restaurants to switch to a fixed-price menu Both so that the kitchen can better manage and plan

for the number of customers Guaranteed to extract a certain amount of revenue

from the tables you're turning (rather than having a spot taken up by a low spender or light eater, when you could make more off that seat).

Special menus often gain a good deal of attention—whether it's an ingredient- or animal-focused special.

Example: "Come get 4 courses of Mangalista pig, Sundays only!", a seasonal tasting ("Our summer vegetable menu will run from July 13-17"), or a thematic offering "In honor of Cinco de Mayo, we're running a 3-course Mexican-themed menu all week".

RESTAURANT WEEKS Cities and towns all have started periodic "restaurant

weeks" & restaurants offer special prix fixe menus. For the diner, it's a way to experience restaurants that

might otherwise seem out of their price range. For restaurants, it's a way to gain exposure and

encourage advance reservations. It may seem tempting to coast during these

promotions, serving simpler, lower-cost plates to lock in as much of a profit as possible

Not just used to fill seats—it's to show off your restaurant to potential repeat customers.

Cutting corners may get a few more dollars, but the real benefit is finding new patrons who'll come back.

CHANGING MENU PRICES If food prices are rising

rapidly customers may recognize the need of the operation to raise prices.

In periods of stable prices where other factors may dictate increases customers may not be as willing to accept price increases.

Sometimes menu items are removed and then brought back in anew manner with a higher price.

It’s not wise to raise all prices at once.

Market Price. Daily inserts for items that

have costs that fluctuate.