Wednesday, December 05, 2007

Basic Recipe Costing

The majority of operations I start work with do not have an operations manual. These same operators have no formal training for new hires. If you start as a line cook, you take verbal orders for most activities. The restaurant will not provide you with standard recipes. There are no photos of the production action and no information regarding weights and sizes.

When we try to develop recipe standards, I ask the manager to treat me as a newly hired line cook. I want these clients to explain in straight language exactly what they expect me to do when I cook. Do I measure? Are all the necessary sauces and prepped items available on the line? Which ladle do I use for each sauce? Most of my questions involve measurement and prepped items.



Over time, I have learned how to take almost any menu and determine what needs to be prepped ahead of time. Feed me some POS product mix data and I can start to prioritize my work. If you take the time to go through your own menu and ask simple questions, you'll come up with a comprehensive list of batch recipes which need to be created first. This task takes some time to get comfortable with but it is critical to success.

A bad place to start is often the most commonly selected menu item for recipe costing - soup of the day. Soups are often on top of most menus. This soup du jour recipe could easily take days of work to complete. There are many choices and it's unlikely the POS system archives the specific soup du jour details. It is literally many soups with complex recipes involving stocks, mise en place, etc. Then you need to weight each recipe by sales data to properly estimate the recipe cost.

Start with your entrees. Be very specific about how the center of the plate choices go from cases of raw ingredients onto the plate going out to your dining room. Do you portion by cooked weight, pre-cooked weight, portion control item, ladle or piece (rack, steak, thigh, breast, etc.)? Is there a portion control system in place to ensure consistency for both the guest and the accounting staff? You can't spend enough time in this area. This is where the major decisions are made in any recipe costing exercise.

Be prepared for the entrees to run a cost of goods sold higher than your actual food cost %. If you have a 35% food cost percentage, you may see the entrees coming in at 40%. The reason the entrees run higher than the food cost percentage is the beverages typically have portion costs far below the overall percentage. Sales of beverages are made in higher volumes than the sale of entrees. These profitable items will help to lower the overall percentage.

Chefs will get involved once they see you are factoring sides, bread and butter, garnishes, etc. into the total cost of these entrees. They have been correctly trained to price entrees to cover all these costs. In addition, they may correctly point out entrees with a high food cost percentage can produce superior gross margins (in terms of dollars). As you gain the support of the kitchen staff in your exercise, please have them proceed to cost any side, starch, bread, roll, garnish and condiment needed to serve each entree. This is the second area of focus.

Maintain a tight focus on the production and service of center of the plate items. You will find a high percentage of purchase volume is devoted to the raw ingredients needed to produce these entree items.




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14 comments:

Joe Dunbar said...

Hi Joe-

My name is Trace, and I'm a chef at a small restaurant in Seattle. I've
been reading your stuff for a while on restaurantnewsresource.com, and I
had a question about one of your comments. You say, "If you have a 35%
food cost percentage, you may see the entrees coming in at 40%. The reason
the entrees run higher than the food cost percentage is the beverages
typically have portion costs far below the overall percentage."

I don't get this. To me, it seems like apples and oranges. I know that
my FOH manager runs about a 25-ish percent pour cost from the bar while I
run a 30-ish percent food cost in the kitchen (my operation is an Irish
pub/restaurant). But how does one affect the other? I'm trying to draw
the connections between your statements, but I'm just not getting it. Can
you point me in the right direction.

Thanks, man! I love your stuff!

Cheers,
Trace

Joe Dunbar said...

Trace,
Thanks for your excellent point! I should have been more specific. My focus was on non-alcoholic beverages like soda, coffee, tea and water. A fountain soda on ice often costs less than 10%. You should price these drinks to yield a cost of sales way better than an entree.

Desserts and apps should be lower than your overall percentage as well. Not a huge amount but lower.

Joe

leosatter said...

Maybe you can help me out with something…? I want to order all of my food online from now on because of various reasons, but I don’t know where to go for quality food. I have tried 2 companies so far, Fresh Dining, and and Celebrity Foods, but I wanna get others I can try out. Do you know of any? The main thing I’ve ordered so far is steak. I guess you can say, I’m a steak junkie. LOL!!! From what I have found out (from what I have ordered so far) I think I am able to regulate the quality of beef I buy. I hate going to a store and getting that crappy slab of beef that I have to cut down until there is like nothing left. Hahaha!!!! (its so true though) Anyhow, sorry that I made this comment so long. If you can help me out or point me in a direction where I might find more quality foods online, I would greatly appreciate it. Have a good day or night! (depending on when you read this) LOL!!!!

Anonymous said...

The fourth restaurant I worked at had a recipe book bible that not only detailed each recipe to the ounce and to the tablespoon, which ladle to use, photos of each plating and how to plate it... and made it available at all times to any staff that wanted to see it. THEY were doing it right. Any other place that doesn't have something similar has lazy managers and chefs and when they start losing money should only have themselves to blame (but won't).

Joe Dunbar said...

The vast majority of restaurants communicate in a very informal manner. Due to lack of communication and poor documentation, consistency suffers. Many of the same operators blame new hires for not following the policy.

Anonymous said...

Is it a standard practice to include non-alcoholic beverages into food cost? Is that something I should ask my GM to have included in my food cost to help lower the percentage?

I am working in an American Grill/Irish Pub. I am currently running around a 30% food cost and am under pressure to have my food cost dropped down to 25%. Does this seem reasonable in our current economic condition? We are producing a rather large menu for a small kitchen with a walk-in that is shared with the bar and lots of kegs. We do have higher end entrees such as duck and a flat iron entree on the menu.

Anonymous said...

You say that number one cost of food cost being high is over ordering. How do you remedy a private club In in a situation where we are running 54 percent and in the busy months we go arounf 44 to 40. I tried to tell the owner it's because we a vast menu without the volume we do as best 40 covers all day lunch and dinner it's a small club but yet we have a cheesecake factory type menu. What's steps can I take to improve on that. Do make a more simplier menu?

Joe Dunbar said...

The higher volume in the busy months covers your fixed costs and your waste is lower. This creates the swing in fc%. I'm all for a streamlined menu. Putting a huge menu out for 40 guests is a gamble.

Mark said...

Hi Joe,

I am a business guy with only some familiarity with the restaurant business but a lot of background in process and quality contol and costs. Currently in the process of buying a small restaurant that had great food but wasn't successful. Food costing wasn't done just the love of serving great food was applied. Your blog is very good, especially for a guy like me.

Joe Dunbar said...

Thanks for your input Mark!

I sincerely believe it is impossible to succeed in this business without a passion for serving great food in a spotless and inviting restaurant.

My goal is to help these passionate people make a decent living from their hard work.

Please feel free to participate through additional comments.

Anonymous said...

Joe i'm looking into buying a menu costing program/software are there any you recomend?

Joe Dunbar said...

I can recommend 2 or 3 solutions. It depends on your long term objectives. Please email me at joe@joedunbar.com so we can pick your ideal solution.

Joe

Erik said...

From what i have come across, Excel should be the go-to costing program and you should use your own data.

Joe Dunbar said...

Good point Erik!

I can't think of food cost control without Excel in the picture. The only issue I have is the term "Excel user" has a tremendous variation.

There are people who could model the Big Bang using Excel and other people who haven't discovered the SUM formula (use + sign).

Importing history into Excel is a pain if the files change (for example, a new menu item) for anyone who hasn't mastered Excel's terrific data functions.

Once the power users get everything done conceptually, many migrate the model over to Access so database updates go smoother.

Somewhere along this curve, the benefit of purchasing a software tool specifically designed to handle recipe costing, menu analysis and cost control turns positive.

Many of my clients had terrific Excel based recipe costing models which helped us in building a solution. They often find additional savings of 10% (i.e. if their current Excel control food cost was 30% they would find the new food cost would drop to 27%).

Overall, I believe Excel is the logical starting point for anyone who is serious about getting on top of their food cost. My advanced menu analysis tool - The Menu Map - is 100% Excel based. Since the model focuses on only 3 data points (selling price, food cost and number sold) at the core, Excel is ideal.

Once you want to filter purchase data, Excel loses the power a serious food cost controller needs for investigating problems.

For example, FoodTrak lets you filter invoices by date range, vendor, report group, invoice number, and specific items. Their are exception reports to bring many issues to your attention and the terrific data entry alerts show major price variations in real time.

Resorts may need transfer cost reports. This report is a major pain in Excel. Cost updates from purchase data provide freshly costed transfer reports by profit center. Of course, many operations do not have this need. The answer to Mark's question really depends on the operation.

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