Q Factor

Chefs love to see a recipe model come together in the final stages. Sole proprietor owners love this stage even more if possible. What's the lure? They see how much it costs to produce the actual menu items with all the trimmings.

The most frequently asked question at this stage goes something like "How do we tell the system our cover costs? Is there a way to enter a Q factor?"

I let them know they should enter all applicable costs to properly cost the menu. The follow up question is actually a lengthy discussion of complimentary items, starch choices depending on the entree choice, most popular options, etc.

I like to create a setup recipe which may be used over and over in every entree selection. My Q factor includes all complimentary items (rolls, butter, ketchup, mustard, soy sauce, salt & pepper, Tabasco sauce, etc.), salad portion, most popular dressing choice, most popular starch choice and the most popular side choice.

The POS system will keep track of the guest selections. If the most popular salad dressing is Blue Cheese and the POS modifier is Ranch, I like to make the recipe for the Ranch modifier equal to 1 portion of Ranch minus 1 portion of Blue Cheese. Since the Q factor already accounted for the Blue Cheese, the reduction of 1 Blue Cheese portion brings the count in line.

What's a typical Q factor in a high end dining room offering rolls, butter, salad, baked potato, more butter, and sour cream? About $3 if you use fresh baked rolls.

Basic Food Cost Analysis

An investment of time and money in any recipe costing model has a payoff in food cost analysis. Most operators lack sufficient information to conduct a meaningful food cost analysis. Many operators receive a simple percentage which they are told is either too high or too low(occasionally, just right).

If the company's accounts payable system charges all cost of goods sold to the same account, there is no additional information available. So what do these companies focus on when trying to explain their food cost results? Their food cost analysis typically consists of a review of the ending inventory.

This food cost analysis works like this in most cases: 1. Scan the Excel file looking for large inventory totals. 2. Check these high impact numbers for unit cost information. 3. Once a major item is found with some price volatility, the entire analysis ends and management works on "solving the problem". Occasionally, this team may get around to using a top 10 analysis. This is a small step in the right direction.

Often, the food cost analysis completely ignores the true issue. Many food cost "problems" stem from an incorrect inventory value the previous period. No one remembers the over valuation from the previous period. The simple reason this is ignored is the euphoria caused by a great food cost percentage eliminated the need for any proper food cost analysis. This incorrect valuation went completely unnoticed until now.

When I'm called in to help with inconsistent food cost percentages, I find the top 10 items in terms of purchase volume. My work includes tests of everything involving these items. A thorough analysis of the top 10 items is the best place to start any meaningful food cost analysis. Eventually, you will want to increase the list to the Top 25.

Advanced recipe models automatically focus on 10 to 25 items (depending on the menu scope). Knowing the eventual solution will be found in these high impact items can be useful to the operator with limited information.

Treat each item like a stock in a portfolio. Each food cost component has an impact relative to the unit volume, price volatility and risk of spoilage. Focus on perishable, high volume items with volatile market prices. You'll find many solutions in this key item food cost analysis.

Basic Recipe Costing - Part 3

I started my consulting company in 1990 to help food service operators with financial troubles. Finding it difficult to get paid, I started looking for work with companies in better shape. I ran into a local consultant, Bob Kaiser, who said I should work with computers since I had a background in accounting and technology.

My first assignment was with one of Bob's clients. This company had two catering facilities and used Eatec software. The chef had zero success building recipes despite purchasing the The Professional Chef and the Food for Fifty (12th Edition) modules.



These add on modules were a huge time killer. I found myself gutting sophisticated recipes for chicken, beef and vegetable stocks and replacing the classic recipes with a package of soup base and a gallon of water. After hours of wasted time, I completely destroyed the chef's preliminary efforts and built the recipes from scratch.

I used the Professional Chef book's approach and started with Mise en Place and Stocks. Then I progressed to Soups and Sauces before starting work on entrees. After a week, I had all the major protein work done. The vegetables, starches, breakfast items, baked goods and desserts went much quicker.

During the project, my wife and I began to refer to this gig as "The $4,000 Mistake" since it consumed over 200 hours and 3 round trips (300 miles each trip) to finish.

The Food For Fifty book has a fantastic first chapter which is a must read for anyone trying this exercise for the first time. They focus on quantity food service and use the perspective of a caterer or institutional food service operator. Recipes all yield 50 portions. I took many of the chef's clippings from Bon Appetit and Gourmet and converted them to the 50 portion yield.

Before you start a project on a recipe costing program, you need to be very well organized. Create an outline. Take the most complex recipe and imagine you are building the database. You will find you need to stop work and create other sub-recipes first since you can't purchase many of the stocks, sauces, mixes and blends called for in the recipe. Each of these components requires a recipe.

These individual components called for by the complex recipes are the building blocks of a successful recipe model.

Accounting Gets Closer To The Kitchen

This month, I noticed an urgency in 3 restaurant chains which would be out of the question in the past. Top level financial officers have made the dive into inventory control including batch recipe models for work in progress inventory. Calling late at night, I found the CFO of a 35 unit chain in the office working feverishly to get the new database deployed. She was working on recipe costing and linking her recipes to the POS system.

Years ago, restaurant companies needed to be shoved into software systems to get better a handle on their cost of sales. Now, these solutions are ubiquitous. POS vendors throw them in for free to sweeten an offer. Solutions exist in every price range.

I spoke with the Executive Chef of a 6 unit group here in the DC Metro area. He was working on a solution with his brother who works in the accounting department. Each of their concepts has a unique menu and they have finished the first test. Results have exceeded their expectations. The actual food cost has now come down to less than 1% above ideal.

Recessions often force corporate staff to wear different hats.

As these financial people work closely with the chefs, purchasing agents and other key operations people, the reports have to improve. Communications are more focused and everyone has a feel for their counterpart's unique issues.

New York Times Features Butchers

This week, the New York Times featured butchers in an article Young Idols With Cleavers Rule The Stage just when everyone thought butchering was a dying art. They interview young butchers from around the country working primarily in boutique butcher shops.

Basic Recipe Costing - Part 2

After you have your item list broken down into purchase units (e.g. case) and inventory units (e.g. #10 can), you can begin to visualize the production process. For each ingredient, make a list of units commonly called in recipes. This will vary depending on how many different recipes use each item.

Three common portion methods for recipe ingredients are weight, volume and count. Meat items are often portioned by weight and count. When portioning by the piece, you may have more than one portion size. A strip steak could be sold in two or three portion sizes. For each portion size, imagine the entire strip will be used. You need to answer a simple question. How many steaks would you expect if you only cut the one size from the strip? Repeat the exercise for each portion size.

Use the average weight for popular random weight items. Generally, each case will always have the same number of large cuts (ribs, strips, loins, etc.). The total case weight will vary. Huge weight variances from the average will impact the number of portions per piece. It helps to keep accurate records of the butchering and fabrication process.

Yields may change from week to week. If you expected a 80% yield for a particular cut and you actually hit a 70% figure, your costs would run higher by over 11%. The variance is due to the poor yield alone. Add a price variance and some spoilage and the gross margin will begin to disappear. Portion control steaks provide operators with a consistent yield - one portion. When deciding to purchase portion control meat, you need to consider the hidden costs. Look at the whole picture including labor, equipment, risk of injury, and poor yield in your comparison.

Items portioned by volume or weight are straight forward. It is helpful to know the common conversion units for each method. Volume is expressed in gallons, quarts, pints, cups, liters, fluid ounces, milliliters, shots, tablespoons, teaspoons and fractions of each. Weight may be expressed in pounds, ounces, kilograms, grams, etc. A #10 can has about 6 pints (96 fluid ounces) and often about 6 pounds. Check all weight to volume relationships.

When developing standards, you may find your specifications are different than some of the excellent books. If you trim your produce quickly, the yield will probably be lower than the expectation. One way to reduce the variance is to portion produce items by the piece. A 24 head case of iceberg lettuce will yield 144 wedges if sliced in six pieces per head. Cutting the heads into larger wedges of four per head would yield only 96 portions.

Think of this step as the recipe model equivalent of the prep process. Having accurate recipe costs depends on accurate unit and yield data. The recipe costing programs will re-cost your recipes over and over as prices change. Spend the time initially to get this critical information correct for your operation. Don't worry about benchmarks for portion size. Use your unique portion sizes in determining the conversions between inventory count units and the units called for in recipes.

Recipe Costing Technique - Plate Cost

Hi Joe.
I hope im posting this in the correct blog.
In order to cover our waste, free bread, staff food, and complimentary items we are planning to add a plate cost to our new recipes to cover these costs. We understand that this will push our selling prices up. My question is as follows:
Do we add the plate cost to the recipe or do we simply raise the selling price by the respective plate cost?
Ray

From a strategic viewpoint, there are many options for menu price revisions. The correct overall solution would need to take other factors into consideration.

I prefer to add the plate cost as a fixed number(vs. a percentage)for each entree. This is a preference not an absolute. Some operations will be better off taking a different approach.

The fixed dollar method will also cover your costs regardless of the entree selling price. You'll receive the same cost coverage whether the selling price is $9.99 or $29.99. This is especially attractive now as consumers are choosing lower priced menu items.

Generally, any amount you add to a selling price as a fixed dollar amount is 100% variable from a cost accounting perspective. As you sell units (in our case entrees), the revenue (and variable cost coverage ) are in sync making your break even point more predictable.

Many companies provide complimentary items and do not provide for these costs in their selling prices. With consumers looking for value, you need to consider competitive threats when you evaluate any price increase decision.

Basic Recipe Costing - Part1

You may have lots of cookbooks, proprietary recipes, books with food yield statistics, market data, shopping lists, inventory count sheets, supplier quotes, product mix reports, quarterly tracking reports and other documents. A professional recipe model should be designed to integrate all of this useful information. The person working on this project needs to wear many hats: purchasing agent, steward, prep cook, line cook, and chef.

Rather than using a cookbook approach, start with your shopping lists. Use your shopping lists to create a spreadsheet with all your ingredients. Make columns for the name, category, primary supplier, purchase unit, storage area and storage unit.



Since the unit you purchase is used on orders, this is our starting point. It's helpful to know your alternate sources for each ingredient. You may want to categorize each item by the storage method. For example, frozen, refrigerated, dry bulk, canned goods, frozen goods, baked goods, etc. Feel free to add these columns. Its impossible to get too much information for your ingredient list.

[We'll eventually need to know the usage units for each ingredient and portion information. This will be discussed in Part2 (later this month).]

Once the list begins to come together, envision the flow for each item from loading dock to the table. Most items are purchased by the case and are stored as purchased. Some items are immediately transformed into other items through fabrication. Visualize the process of moving from the purchased unit of measure to the storage unit of measure first.

You may simply remove six #10 cans from a case and place the cans in a rack. The purchase unit is case and the storage unit is a #10 can. Focus on the storage unit and the divisor (6 in our example). Breaking down every item you purchase into logical storage units is one of the most important steps in creating a professional recipe costing model.

Each #10 can is valued at 1/6 of the case cost. Don't worry about the actual cost of each can. Focus on the number of storage units in each purchase unit.

Our work will eventually involve many calculations using units of measure, various blends, yield formulas, conversions, reciprocals and standard portion data. The simple exercise of developing a purchase unit to storage unit model is the ideal starting point. Once you complete this exercise, future conversion work will be more intuitive.