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Thursday, September 03, 2009

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.

1 comment:

Unknown said...

hello, i am in the a/c dept of a hotel & have to figure the food cost of the hotel where we have to take into account complementary food items pl show me a light on this issue.


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