Almost everyone in hospitality has seen some type of food and beverage cost run in the wrong direction at some point. I’ve worn many hats in the food and beverage world, from management to being a cook, host, busser, bartender, and waiter, and can say from many years of experience that all positions play a role in keeping food costs low. There’s never an easy answer for high food cost and, in most cases, it’s a mix of issues, errors, and poor communication that may lead to its rise.
You must strive to solve the puzzle of high food costs from the ground up—not by simple quick fixes, such as raising menu pricing or lowering the portions and quantity of dishes, as we know that no food and beverage establishment will grow in this manner. Your goal of a good food cost will greatly depend on your type of restaurant. It’s not about one cost fits all. A steakhouse versus a QSR will have greatly different food costs, as well as direct costs. Set a percentage that you, your accounting team, and your chef feel will make a profit and quality that sets your restaurant apart from the rest.
Here are some great cost controlling tips to start regaining control of your food costs.
1. Clean up your inventory list.
Remove unnecessary items and fix errors in item pricing with up-to-date vendor pricing. Many inventory errors are due to filling in the wrong unused item with a higher price versus the correct one.
2. Calculate your inventory.
Many resources for calculating your inventory such as online programs, Excel sheets, and calculators are available. Make sure the inventory and invoicing is being consistently done on a weekly or monthly basis. Some people do inventory every week ending on a Monday, which for many is a good time due to the lower level of inventory because of depleting stock over the weekend.
The Formula for Inventory Food Cost:
Food Cost Percentage = (Beginning Inventory + Purchases – Ending Inventory) / Food Sales
- Your data: $10,000 beginning inventory, $2,000 in purchases, $10,500 ending inventory, $5,000 in sales.
- Your formula: FC% = (BI + P - EI) / S
- (10,000 + 2,000 = 12,000) - 10,500 = 1,500
- 1,500/5,000 = .30 or 30% food cost
3. Review invoices.
Compare pricing from a time that food costs were in the right position. Take a look at more than the price, but review the measurement and pack size, as well. Many vendors are playing with pack measurements due to increasing costs on production. Talk to any retired bar manager and they will tell you that they remember the time when a bag-in-box cola was under $25.
4. Start monitoring waste from kitchen prep to avoid errors and spoilage.
Adjust prep to lower waste or overproduction. Many times the waste can be used in stocks. Talk to your vendor about better cuts with less waste. Place a list near the main cooler and have all staff place the spoilage items on it. This will give you better knowledge about ordering, as well for the following week.
5. Learn yields.
Many lower-priced items might be costing you more than you think if you are not aware of the true yield. A shot rib cut at $6 per pound might have a higher yield than a top roast cut at $4 per pound in some cases. Knowing and testing out yields is many times eye-opening for chefs and owners.
6. Review your POS system.
This is important to monitor for items with incorrect pricing. Go over your menu versus pricing, as well as add-ons. Many restaurants fail to look at pricing for adding on proteins, extra cheese, and many substitutes.
7. Find out your true food cost per menu item with current vendor pricing.
Go over what is going in your plate recipes with true measurements and current vendor pricing. And remember this formula:
Food Cost Percentage Per Menu Item = Total Cost of Ingredients / Sale Price
The steps above are a great start towards your path of profit and growth. If you find yourself on a speed bump, just contact an expert that you feel will get you over those bumps smoothly.