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Sunday, June 06, 2010

Historic Costs vs. Future Costs

The role of a food cost controller is much different from the menu analyst. Cost control relies entirely on historic data to prepare reports which quantify results and alert management to possible problems or opportunities. On the other hand, the menu analyst needs to look to the future.

When a menu price revision takes place, the prices need to cover the future costs and provide a reasonable profit. Knowledge of commodity trends, economic forecasts, unique events in the coming year and other future oriented information is helpful. The costs used to arrive at theoretical menu item costs should use these expected prices.

The food cost controller studies purchase data to understand the previous period. Use of theoretical food cost data may help the controller discover a usage problem. Usage problems involve units rather than dollars. There is concern regarding missing steaks or shrimp or perhaps an entire case is gone. Purchase costs are important only when there is a big swing in price on one or more high volume items.

Using the same price data for both menu planning and food cost control is a mistake. The portion sizes for all key items should be 100% exact. It is the prices which need to vary. Many operators simply take an educated guess on overall inflation and raise menu prices across the board with the same % increase.

Ideally, the menu analyst benefits from the ongoing work of the food cost controller. Portion control tests, relative price volatility and other information the controller has at their fingertips is valuable to their counterpart. They should work together to discover how the current menu has performed.

In a highly collaborative organization, the cost control team could utilize information from the menu analysis team (e.g. future menu price revision strategy) to create better budgets.

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