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Wednesday, July 27, 2011

Food Cost Control Framework Part 1

The essential table required to begin a professional food cost control system is the item list.  This table needs to have the same information you see on the order guides from any national distributor, storage information and vendor information.  In addition, I add several columns to help classify the manner items are purchased including frequency, bid (buy from lowest bidder) and impact.  Impact data can be simplified into the classic A B C model.

The A items are high volume and high cost per pound or volume, the B items are either high volume or cost but not both, and the C items are low volume and cost.  You will see a higher return on your invested time spent controlling A items.

A typical food item would have the fields below for each record:


Category:  MEAT
Purchase Unit: CASE
Pack/Size:  12/5#UP
Catch Weight: YES
Weight/Case (AVG): 72.0
Cost/Pound: $8.00
Storage Method: REFRIGERATED
Inventory Location:  WALKIN COOLER 1
Frequency: 7
Primary Supplier:  Premium Meat Company
Bid: NO
Alternate Suppliers:
Impact:  A

This records tells us we have a high impact meat item which is ordered by the case and invoiced based on catch weight.  We use a single supplier and we order weekly.  Based on our contract, we now pay $8 per pound.  The tenderloin is stored in the main walkin cooler.

These essential fields help us with the food cost control in several ways.  Beef tenderloin is a high volume item for this restaurant and the $8/pound is a relatively high cost.

This data is sufficient for general information.  We would want to add fields to help out the staff working on ordering the meat.  Demand forecast data is preferable to a par stock level for your A items.  If you expected to serve 2,000 covers and on average 25% of patrons choose beef tenderloin, you need 500 portions of filet mignon for the week ahead.  Depending on the size of the steaks, this case will yield either 72 steaks or 60 steaks.  Our data shows 60% of patrons will choose the smaller steak (72/case) and 40% will choose the larger steak (60/case).  We'll need 3 1/3 cases for the larger steaks and 4 1/6 cases for the smaller steaks.  Since we can't order fractions of a case without a split penalty, we would order 8 cases.

Seasonal operators should not rely on par stock averages to purchase any A items or high volume B items in their inventory.  Accurate forecasts are essential.  Fortunately, the counts in your busy season will be higher and more reliable.

We will develop a data table to recap the information required to analyze A items in the next article - Food Cost Control Framework - Part 2.

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