If you have been reading the past few posts about food cost,
you probably have deduced that I do not like to be surprised. I especially do not like to be surprised by a
bad bottom line result.
I entered my career in restaurants in the days of paper and
pencils, and calculators.
I spent lot of time studying food cost and how to manage it
successfully.
No surprises meant that I had to have a very good handle on
the factors that contributed to managing my food cost: pricing menu items, watching
waste, managing yields, tracking inventory and monitoring team activities.
And I got very good with a calculator and pencil.
If you are using the tools that we discussed in the earlier
posts, inventory and plate costs, you will have the tools for analysis of your
food cost.
I always had my inventories set up so that I could compare
each food cost category group to both projections and previous results. For instance, I broke out meat as a category
and a subtotal so that the “meat cost of sales” could be tracked as a component
of the total food cost.
If my food cost ran higher than projection, I could go back
over each category subtotal and review what the problem might be. This allowed me to hard target the problem,
rather than “swagging” (Scientific Wild A** Guess) to my team.
For “Plate Cost” I knew the cost of each menu item, what it
costs to produce the item and what margin I needed for each item. I also know the menu mix for each
Item, so I can assess the impact for both my food cost and
my bottom line.
Using that information, I could react very quickly if the
cost of the ingredients changed, if my yields changed or if the pricing of the
menu item changed.
For example, in one job that I worked, my General Manager
approached me about “my high food cost” on my shifts. His advice to me was “to
get my portions and waste under control or he would fire me” and hire someone
who would not blow up his food cost. I
didn’t know whether to laugh or swear at his ignorance, but I certainly wasn’t
going to take his challenge lightly. Using
my knowledge of inventory and plate cost, I prepared a report for him that
clearly demonstrated that I WAS NOT the problem, that his discounting and
coupons were the cause of the food cost problem. Quite simply, he was not charging enough for
his food!
Even more interesting, the Area Manager got wind of my
little project and asked me to expand my report for the entire last accounting
period. He wanted to share the
discounting and coupon revelation with his boss and his entire team. While I reflected in amazement that the
entire organization seemed clueless about the impact of the mandated discounts
and coupons, I welcomed the opportunity to bring some common sense to the
process.
I prepared the requested report, for an entire accounting
period that clearly demonstrated that our unit had excellent portion control,
minimum waste and effective yield management.
The food cost problem was the menu discounting and coupons, something
that was corporate mandated.
While a good case can be made for the coupons driving top
line sales, the discounts was used, targeting low margin entrees, hurting the
food cost because they did not take into account the high redemption rate by
our guests that used the discounts and the price of the food that was used to
create the menu items.
My report certainly did stir things up, from the unit level
right up to the regional level. I
gathered several new “friends” in the company, and got labeled the “smart guy”,
because I understood Food Cost and could figure it out.
Of course, being labeled the “smart guy” was also a pretty
good career move for me, earning me several promotions, from unit to area to
regional within that company, and then beyond.
They definitely got smarter when they changed the coupons to
drive top line sales by “packaging” multiple entrees and appetizers into a
special deal, and keeping a very profitable margin while focusing our guests on
higher perceived value.
Still, my goal has always been focus to be very smart about my
food cost.
Food cost is a variable cost, but remember it always tracks
with your revenue. It should remain the
same percentage of revenue, no matter what direction your revenue heads, either
up or down. As with labor cost, it is
much easier to manage as your revenue goes up, because you have more offsets
for errors.
But you still must have very tight control over the costs
for food and the revenue it generates, so it doesn’t impact your bottom
line.
Cheers! Here’s to building profits!
