Food Cost Control Framework Part 2

The table below recaps the information required for all items with an Impact rating of A (A, B, C scale).  At the bare minimum, you will want to know the correct specifications.  The table can also include multiple purchasing specifications if you use more than one supplier.  Some suppliers sell meat by the box with the weights written on the side.  Other suppliers sell by the piece with the weights on the packages.  It is very important to understand your options and then make an effort to restrict your purchases on these key items.

You won't want the specifications to be loose since these items (by their nature) have a very big impact on your food cost results.

The consistency issue is number one with regard to your key items.  Your customers make the trip to your restaurant specifically to order these popular items.  They expect a consistent portion size and quality level.  You can't expect a highly consistent end product if you buy different quality or specification each time you order.

The portion size information will help you forecast the number of cases or boxes to purchases.  I have seen certain pieces of meat used to cut steaks with a high yield variance.  In one example, the yield was 62% for the high and 54% for the low.  The average yield was 60%.  If you receive an entire box of meat with a low yield, you could require an extra piece of meat.  This is rare but possible.  Definitely mention the poor yield results to your supplier.  You may be entitled to a credit.

We will be exploring the purchasing model in the Part 3 section.

Theoretical Food Cost In Dispute

Joe,

I own a QSR pizza franchise in Ontario, Canada.  According to the franchisor, my standard food costs should be 39 - 40%.  My food costs based on the franchisors standard recipe is 1 - 3% below this standard consistently.  What is an acceptable margin for error in arriving at this calculation?  As you know, there are many variables which affect the food cost.  One of which is we have a medium one topping pizza which sells for $4.99 which has a food cost of 55%.  This is obviously a good seller and raises the standard.  How can I interpret these results?  On average, we process over 1200 orders per week with a time guarantee or its free. Every pizza is made by hand, no pre-measurements of any toppings with the exception of cheese cups and in my opinion not very accurate when you are in a hurry.  Personally, I feel I am over using and that their standard is far too high.  I feel their calculation is designed to increase their own profitability because all of our inventory is purchased from them.  The profit margin has disappeared.  How can I tackle this issue? I look forward to your response and I thank you in advance.

Mirella

Thanks for your question Mirella!

Let's take a look at the issues:

Franchisors View:
1.  Consistent portion size across the entire company.
2.  Profit motive has a link to franchisee purchasing behavior in your organization.

Franchisees View:
1.  Profit motive is highly correlated with a consistently low food cost.
2.  Portion control is a critical factor in achieving a consistently low food cost.

Taking the franchisor's side briefly, I would be unhappy if my franchisees had agreed to buy dough balls, pizza sauce and cheese from my commissary and they decided to purchase these items from alternative sources.  There would be consistency issues on each of these critical components.  They need to monitor ratios to prevent this activity.

It is evident from your letter you are watching your costs very carefully.  The franchisor's ratios may have built in inefficiency numbers.  If you run your operation more efficiently than the norm, you would beat their ratios.

I favor pre-portioning for cheese and dough balls.  In addition, all pizza bakers should use standard ladles for the pizza sauce.  The reason I favor pre-portioning is due to the peak period factor.  A tremendous percentage of sales volume is achieved during peak periods.  Sloppy portion control during these high volume periods can be very costly.

You have a second motive in pre-portioning the cheese.  The accurate portion control records may be used to support your case against the franchisors actions.

The portion work should be done during down time.