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Wednesday, April 27, 2011

Reader Question on Food Cost in Health Related Lodging

Dear Joe,

I have a question regarding Food cost in the Hotel, specializing on the Medical treatments (more like a Sanatorium).
They have a 3 times a day big buffet style meals - all inclusive.
All guests (patients) are assigned to different diets and picking up food according to their diet class.
I am Financial Controller of this hotel and when I see Food cost equal to 46% every month – I feel that it is very high for the buffet food.
Please advice if there are any benchmarks for this kind of Hotels – sanatoriums (All inclusive).

Thank you in advance,

Your 46% food cost may still deliver a profit, Maria.  If you have a very reliable (close to 100% accurate) revenue forecast due to the nature of your business, a higher cost of goods sold may be the industry norm.  Generally, everyone dines in the hotel and the buffet is a fixed price.  This creates the environment for the highly reliable forecast.

The buffet style of service keeps dining room staff size low.

We would have to know the cost dynamics in the front desk, marketing, rooms and housekeeping operations.  Is the 46% based on food sales?  Or based on total sales?

If the 46% food cost percentage equals food cost of sales divided by food sales, you will still be profitable.  This is not a benchmark issue.  Most hotels depend on last minute reservations, walk in guests and local dining guests to hit their sales targets.  They use the room count to forecast revenue but the forecast variance in sales is higher than an operation in your niche.

I use a 10% factor for food cost improvement.  In your case, we would use a 4.6% drop as our goal.  This is simply 46% times 10%.  To achieve a 4.6% improvement in a buffet style operation requires effective production controls.  If you offer a selection of protein choices, this is the best place to start.

Closely monitor the production of all buffet pans with protein.  Observe how the expected guest count and preference factors are used to forecast consumption of each menu selection.  Monitor the actual portions produced, served, left over, and/or discarded.  Over time, the numbers will help your culinary team reduce waste due to over production.

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