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Monday, September 28, 2009

HFTP Question - Final Counts and Safety Factors

In my recent session at the HFTP Annual Convention, I gave my opinion on the use of safety factors in food service operations. Generally, purchasing managers and chefs tend to order a little extra to prevent running out of stock. While a small amount of over stock is optimal, the typical operator has too much stock of many perishable items.

A symptom of over stocked protein is a rising dollar value in freezer inventory.

During the Q&A session, I was asked about optimistic banquet event order final counts. If your sales manager tends to over estimate the final count for banquet events, the probability of spoilage and waste increases. In addition to the freezer, you may find the food in the employee cafe is better than usual. Crab cakes and Chateaubriand should not be on the employee lunch menu.

An optimistic final count number negatively impacts purchasing and production activities since the kitchen will over produce these menu items. Service staffing is also too high.

When you combine the impact of high final counts with a tendency to over order for a safety factor, it is easy to see how costs will run high in this operation. Each department uses their own safety factor to cover the risk of running out. If each department uses a 10% adjustment, you could find the sales team adds 10% to the count, the chef adds 10% to the production forecast and the purchasing manager adds 10% to the chef's order. These adjustments have the biggest impact on high cost per pound, perishable protein items. Look for the impact in freezers, garbage cans, employee meals, soups, stock pots and employee trunks.

Saturday, September 26, 2009

Suggestion from HFTP Annual Convention

My recent presentation at the HFTP Annual Convention in Las Vegas included 3 Q&A spots. In the first Q&A break, there was a suggestion by an audience member regarding purchases and sales.

This food cost professional suggested dividing each day's food purchases by the food sales. I'm a big fan of using sales as a compass for food purchases. At the end of each month, one of the most highly scrutinized statistics is the food cost percentage. This daily check will help to prevent surprises.

Since many operators have between 10 to 14 days of cost of sales in their inventory, I also recommend tracking the most recent 14 days of purchases and sales. You may stock up on a few shelf stable items if market prices warrant. Using a 14 day ratio of purchases to sales will help prevent surprises while allowing for an occasional long term buy.

Simply create a 7 column spreadsheet with DATE, PURCHASES, SALES, % DAY, PURCH 14, SALES 14, % 14DAY. You enter the date, purchases and sales each day. Calculate the 14 day sums once you have enough data. Then you can calculate the daily ratio and the 14 day ratio each day. These ratios will provide you with a compass for controlling food cost.

Thursday, September 03, 2009

Food Service Technology

Dear Joe Dunbar,
Thank you very much, for updating the latest tech & happenings in Hospitality world.


You are welcome Abraham. I am currently taking a look at a very improved product in the $1,000 range. Stay tuned for my review.

Food Cost Formula Question

Hello. I just read an article you wrote concerning food cost. I follow the same formula except for one change, I account for discounts. Should I not do this? Could it sway my food or beverage cost to a less accurate percentage? I would really appreciate your insight to this matter. Thank you


Thanks for the question Lori. I prefer to run two calculations - with and without discounts - each period. Consistency is key.

If you run the numbers with and without discounts, you'll achieve several objectives: 1. You can gauge the impact of discounts on results. 2. I'm not sure the sales figure would have been possible if a discount wasn't offered but the fantasy number for sales (i.e. discounts included in sales and treated as a marketing expense) is always popular with the people trying to achieve a food cost close to ideal. 3. A sense of reality is available for folks trying to pay the bills. Netting discounts from your sales shows the true food cost.

If you would not have made the sales target without the discount, I would definitely focus on net sales. Use the second statistic for the production people. They have no control over sales discounts and follow standard portion sizes. They should know how close they came to the standard and they should also be made aware of the impact of discounts.

Restaurant Data Pros

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