© Copyright 2017 RestaurantOwner.com 1 · Theft Spoilage Cooking ... © Copyright 2017...

3 Essential Food Cost Controls 6/27/2017

© Copyright 2017 RestaurantOwner.com 1

Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant

Welcome!Today’s webinar will be starting shortly.

Best Practices for Controlling Food Cost

3 Essential Food Cost Controls for Independent Restaurants

Jim Laube

Your Hosts

Joe Erickson

ESSENTIAL FOOD COST CONTROLSESSENTIAL FOOD COST CONTROLS


Comments & Questions



IN THE LAST WEEK?IN THE LAST WEEK?

Were you in your kitchen?


In the walk in?


Did you sign for a delivery?




When was the last time you tasted your entire menu?

KEY POINTS!KEY POINTS!

Good results require effective systems &

controls!

There is a LOT going on in your kitchen!

Essential Food Cost Practices



Average Net Profit 5¢ – 7¢

Food & Beverage Labor Operating Occupancy& Other

NET PROFIT

30¢ 35¢ 16¢ 13¢

“WHY”?“WHY”?

It’s VERY easy to lose money working with food!

Sales Expenses Net Profit- =

Food Cost

Theft Spoilage

Cooking Mistakes

Over ‐Portioning

Short Weights

Wrong Orders

Estimated that 10‐15% of restaurant food ends up

in the trash!



WHY IMPROVE YOUR FOODPRACTICES?WHY IMPROVE YOUR FOODPRACTICES?

1. Control costs

2. Improve profitability

Sales Expenses Net Profit- =

Guest Experience Food

1. Control costs

2. Improve profitability

3. Higher quality

4. Greater consistency

5. Food safety

The Guest Experience!

WHY IMPROVE YOUR FOODPRACTICES?WHY IMPROVE YOUR FOODPRACTICES?



6. Point of Difference!

Great execution is the ultimate differentiator!

“I already knew that.”

Does your staff know it?

Are you DOING it?

If so, do your people know WHY?

GETTING THE MOST OUT OF THIS WORKSHOP



WHAT DETERMINES FOOD COST %?WHAT DETERMINES FOOD COST %?

1. Menu prices

2. Recipes

3. Sales mix

4. Product costs

5. Product utilization



IMPROVING PRODUCT UTILIZATIONIMPROVING PRODUCT UTILIZATION

Less waste

Less spoilage

Less theft

Accurate portioning

Results in lower cost, higher quality & greater consistency

HOW SALES MIX AFFECTS FOOD COSTHOW SALES MIX AFFECTS FOOD COST

Menu Ingredient Price Cost

1. Cheeseburger $6.50 $1.56

2. Steak Sandwich $9.95 $3.98

Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost

Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985

Totals 20,463 6,105

Sales $ 20,463 100%

Ideal Food Cost 6,105 29%Gross Profit 14,358

CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES





Totals 20,463 6,105

Sales $ 20,463 100%





Totals 20,463 6,105

Sales $ 20,463 100%





Totals 20,463 6,105

Sales $ 20,463 100%







Totals 20,463 6,105

Sales $ 20,463 100%



Menu Menu Food Food Sales Total TTL Ideal

Item Price Cost Cost % Mix Sales Cost

Burger $6.50 $1.56 24% 750 $ 4,875 $ 1,170 Steak Sand. 9.95 3.98 40% 2,000 19,900 7,960

Totals 24,775 9,130

Sales $ 24,775 100%


CASE #2 – HIGH STEAK SANDWICH SALESCASE #2 – HIGH STEAK SANDWICH SALES

Menu Menu Food Food Sales Total TTL Ideal

Item Price Cost Cost % Mix Sales Cost

Burger $6.50 $1.56 24% 750 $ 4,875 $ 1,170

Steak Sand. 9.95 3.98 40% 2,000 19,900 7,960

Totals 24,775 9,130

Sales $ 24,775 100%


CASE #2 – HIGH STEAK SANDWICH SALESCASE #2 – HIGH STEAK SANDWICH SALES



Sales $ 20,463 100% Sales $ 24,775 100%

Food Cost 6,105 29% Food Cost 9,130 36%

Gross Profit 14,358 Gross Profit 15,645

High Burger Sales High Steak Sand. Sales

WHICH WOULD YOU CHOOSE?WHICH WOULD YOU CHOOSE?

?

NEVER FORGET . . . NEVER FORGET . . .

. . . You take DOLLARS to the

bank, not

PERCENTAGES!

Sales $ 20,463 100% Sales $ 24,775 100%

Food Cost 6,105 29% Food Cost 9,130 36%

Gross Profit 14,358 Gross Profit 15,645

High Burger Sales High Steak Sand. Sales

DON’T JUMP TO CONCLUSIONS!DON’T JUMP TO CONCLUSIONS!



FOOD COST % ALONE DOESN’T TELLTHE WHOLE STORYFOOD COST % ALONE DOESN’T TELLTHE WHOLE STORY

KEY POINT:

Before ASSUMING you have a food cost problem, always check your

GROSS PROFIT DOLLARS!

(and your Sales Mix)

HOW TO CALCULATE FOOD COSTHOW TO CALCULATE FOOD COST

+ Food PurchasesBeginning inventory

- Ending inventory

= Food Cost

(what was bought)(what you started with)

(what was left)

(what was USED)

HOW TO CALCULATE FOOD COSTHOW TO CALCULATE FOOD COST

FOOD COST CALCULATIONFood Purchases $ 10,000Add - Beginning inventoryDeduct - Ending inventoryFood Cost 10,000

PROFIT & LOSS STATEMENTFood Sales 40,000 100%Food Cost 10,000 25%Gross Profit 30,000 75%



FOOD PURCHASES VS FOOD COSTFOOD PURCHASES VS FOOD COST

FOOD COST CALCULATIONFood Purchases $ 10,000Add - Beginning inventoryDeduct - Ending inventoryFood Cost 10,000

PROFIT & LOSS STATEMENTFood Sales 40,000 100%Food Cost 10,000 25%Gross Profit 30,000 75%

$ 10,0006,000

(3,000)13,000

40,000 100%13,000 33%27,000 67%

REDUCE INVENTORY TIMEREDUCE INVENTORY TIME

Products on inventory count sheets in shelf order.

Count Sheet

REDUCE INVENTORY TIMEREDUCE INVENTORY TIME

Have a separate count sheet for each storage location.

Count Sheet

Walk In

Count Sheet

Freezer

Count Sheet

Dry Storage



UNDENIABLE TRUTH OF BUSINESSUNDENIABLE TRUTH OF BUSINESS

What get’s measured, get’s managed.

What get’s managed, improves.

KEY FOOD COST CONTROLKEY FOOD COST CONTROL

1. Calculate Food Cost Weekly

BENEFITS OF WEEKLY FOOD COSTBENEFITS OF WEEKLY FOOD COST

More attention & awareness

Greater accountability

Faster recognition & response to problems

Food cost will GO DOWN!!

2% – 5% of SALES!



DAILY INVOICE LOG ‐ FOOD & BEVERAGE PURCHASESWeek Starting/Ending Dates 1-Jan 7-Jan

Food Liquor Beer Wine OtherBay Seafood 1/2 91265 851.65 851.65

Northwest Distribution 1/2 331-324 875.20 275.80 599.40

Specs Liquor 1/3 90057412 1,052.58 1,052.58

Jakes Supply 1/3 52588 239.80 239.80

Sundown Bread 1/3 P-225841 321.65 321.65

Adams Meats 1/4 1785642 875.47 875.47

Bay Seafood 1/4 45556 627.35 627.35

Jakes Supply 1/5 514421 429.50 429.50

Sundown Bread 1/5 88885112 202.83 202.83

Adams Meats 1/6 5656547 524.68 524.68

Bay Seafood 1/6 5444010 621.40 621.40

Spec Liquor 1/6 90057500 (125.40) (125.40)

TOTALS 6,496.71 4,694.33 927.18 275.80 599.40 0.00

Supplier

PURCHASESInvoice

(CREDIT)

Amount

Invoice

Date

Invoice

Number

COST OF SALES WORKSHEETWeek Starting/Ending Dates 1‐Jan 7‐Jan

Tue Wed Thu Fri Sat Sun $ %

SALES:

Food 1,106 1,298 1,547 1,758 1,956 2,357 1,647 11,669 73.5%

Liquor 151 205 196 223 350 421 338 1,884 11.9%

Beer 75 101 120 138 140 166 158 898 5.7%

Wine 95 109 185 224 205 350 255 1,423 9.0%

Total Sales 1,427 1,713 2,048 2,343 2,651 3,294 2,398 15,874 100.0%

COST OF SALES: Purchases

Food 4,694 2,359 (2,885) 4,168 35.7%

Liquor 927 1,958 (2,554) 331 17.6%

Beer 276 572 (595) 253 28.2%

Wine 599 1,021 (1,146) 474 33.3%

Total Cost of Sales 5,227 32.9%

Gross Margin 10,647 67.1%

Add

Beginning

Inventory

Less

Ending

Inventory

Mon

IN THE RESOURCE LIBRARYIN THE RESOURCE LIBRARY

Cost of Sales Worksheet at ‐

RestaurantOwner.com/foodcost

Also consider the Weekly Prime Cost Worksheets ‐

RestaurantOwner.com/primecost PRIME COST WORKSHEETWeek Starting/Ending Dates 6‐Apr 12‐Apr Taxes & Benefits 22.0%

MON TUE WED THU FRI SAT SUN

6‐Apr 7‐Apr 8‐Apr 9‐Apr 10‐Apr 11‐Apr 12‐Apr BEG END

SALES:

Food 1,406 1,598 1,847 2,058 2,456 2,857 1,983 14,205 84.7%

Liquor 51 105 96 123 150 221 148 894 5.3%

Beer 50 101 106 88 105 136 105 691 4.1%

Wine 55 65 137 151 175 250 142 975 5.8%

Total Sales 1,562 1,869 2,186 2,420 2,886 3,464 2,378 16,765 100.0%

COST OF SALES:Purchases

Food 4,417 3,231 (2,885) 4,763 33.5%

Beverage ‐

Liquor 811 1,958 2,554 215 24.1%

Beer 148 572 595 125 18.1%

Wine 348 1,021 1,146 223 22.9%

Total Beverage 1,307 3,551 4,295 563 22.0%

TOTAL COST OF SALES 5,327 31.8%

LABOR:

Management 1,200 7.2%

Hourly Personnel 433 475 495 469 445 504 392 3,214 19.2%

Payroll Taxes & Benefits 971 5.8%

TOTAL LABOR 5,385 32.1%

PRIME COST 10,712 63.9%

6,053 36.1%

Customer Count 85 95 125 149 145 174 122 895

Check Average 18.38 19.67 17.49 16.24 19.90 19.91 19.49 18.73

PCT

GROSS MARGIN

Blue Fish Grill

INVENTORY

TOTAL




2. Control Inventory Levels

CARRYING TOO MUCH INVENTORYCARRYING TOO MUCH INVENTORY

Ties up valuable CASH

Leads to OVER‐PORTIONING



KEY POINTKEY POINT

“If you buy salad dressing in 5 gallon containers instead of 1 gallon containers, employees don’t measure as strictly.”

-- John ZehnderZehnder’s Restaurant

CARRYING TOO MUCH INVENTORYCARRYING TOO MUCH INVENTORY

Creates more WASTE & spoilage

Encourages THEFT

TRACK YOUR INVENTORY LEVELSTRACK YOUR INVENTORY LEVELS

The ratio tells you how much inventory you have on hand based on how much food you’re using per day

# Days Sales In Inventory



# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY

Ending InventoryLemons UsedPeriod

Assumptions:

7570

7 days

Lemons Used 70

# of Days in Period 7 days= 10

Calculate Average Daily Lemons Used

STEP 1


Lemon Inventory 75

Ave. Used Per Day 10= 7.5 days

Calculate # Days In Inventory

STEP 2

# DAYS IN INVENTORY RATIO# DAYS IN INVENTORY RATIO



Ending InventoryFood CostPeriod

Assumptions:

$10,00030,00030 days


Food Cost (P&L) $30,000

# of Days in Period 30 days= $1,000

Calculate Average Daily Food Cost

STEP 1


Food Inventory $10,000

Ave. Daily Food Cost $1,000= 10 days

Calculate # Days In Inventory

STEP 2




Meat 6.1Seafood 4.5Poultry 3.2Dairy 2.5Produce 1.1Bread 2.2Grocery 8.4

Days Per Category


Full Menu 6 to 7 days

Quick Serve 3 to 5 days

RULE of THUMB

# DAYS IN INVENTORY RATIO# DAYS IN INVENTORY RATIO

WHEN YOU REDUCE EXCESS INVENTORYWHEN YOU REDUCE EXCESS INVENTORY

More CASH

Higher QUALITY products

HIGHER product utilization

Lower FOOD COST

More PROFIT



Week 1 Week 2 Week 3

Weekly Sales

Beg. InventoryPurchasesGoods AvailableLess End. Inv.

Food Cost

$ 25,000

15,00010,00025,000(15,000)

$ 10,000

Food Cost %

Days Sales in Inv.

40%

11

$ 25,000

15,0008,500

23,500(14,000)

$ 9,500

38%

10

$ 25,000

14,0007,500

21,500(12,300)

$ 9,200

37%

9

HOW INVENTORY LEVELS IMPACT FOOD COSTHOW INVENTORY LEVELS IMPACT FOOD COST

Why?

# OF DAYS SALES IN INVENTORY# OF DAYS SALES IN INVENTORY

Ending

Inventory

Cost of

Sales

Number

of Days in

Week

Average

Cost Per

Day

Number of

Days On

Hand

Inventory

Turns

Inventory On Hand:

Food 2,885 4,168 7 595 4.8 1.4

Liquor 2,554 331 7 47 54.0 .1

Beer 595 253 7 36 16.5 .4

Wine 1,146 474 7 68 16.9 .4

Total Inventory 7,180 5,227 747 9.6 .7

Category

Inventory Stats


3. Running Inventory on Key Products




10 – 15 products drives food cost

Can make up 60‐70%+ of total food cost

Running Inventory onKey Products

RUNNING INVENTORY EXAMPLE:BEEF PATTIESRUNNING INVENTORY EXAMPLE:BEEF PATTIES

Opening Inventory 20Purchases 100Total Available 120Less Sales (40)Ending Inventory - IDEAL 80

Ending Inventory - ACTUAL 78

Difference (2)

INVENTORY IS . . . INVENTORY IS . . .



Michael PassalacquaAngelo’s RestaurantWashington, PA

Key Item Running Inventory Worksheet

Week Beginning > WeekDay of the Week > MON TUE WED THU FRI SAT SUN Over(Short)

Beef Patties / EABeginning Inventory 20 135 98 53 0 0 0

Received 144 0 0

Sold 26 35 45

Adjustments + (-) (2)

Ending Inventory - IDEAL 136 100 53 53 0 0 0

Ending Inventory - ACTUAL 135 98 53

Difference - over (short) (1) (2) 0 (53) 0 0 0 (56)

Chicken Breasts / EABeginning Inventory 25 159 102 35 0 0 0

Received 180 0 0

Sold 45 55 68

Adjustments + (-) (1)



Difference - over (short) 0 (2) 1 (35) 0 0 0 (36)

Beef Brisket / LBBeginning Inventory 50 148 95 29 0 0 0

Received 150 0 0

Sold 49 52 63

Adjustments + (-)



Difference - over (short) (4) (1) (3) (29) 0 0 0 (37)

6/14

Restaurant Name

In the Resource Library

1. Weekly Food Cost

2. Reduce Excess Inventory

3. Running Inventory on Key Products


Is there “one” thing that you will do differently?




Your Comments & Questions

Reduce the Hassle and Discover the Benefits of a Better Weekly Inventory Control System

Coming August 9th!!

LIVE WEBINAR: Kitchen Management 101

Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant

Thanks for attending!!

Best Practices for Controlling Food Cost

3 Essential Food Cost Controls for Independent Restaurants

© Copyright 2017 RestaurantOwner.com 1 · Theft Spoilage Cooking ... © Copyright 2017...

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