Phone: (413) 727-8897 email:

Wednesday, February 29, 2012

Impact of Discounts on Food Cost %

I am curious if you can shed some light on how to calculate how much food cost variance is attributed to Discounts.
Example below:
I know my discounts should be at 5% of Net sales but they are at 10% of Net Sales. My food cost should be running 30% but is running 33% instead.
Discount Variance 5%
Food Cost Variance 3%
Any numbers can be made up for the scenario to better explain how to calculate the effect. My first assumption was that all the 3% is attributed to the 5% increase in Discounts. But how do I know how much is associated with the discounts?

Thanks for the question Jon.

If we had a food cost of $30,000 and sales of $100,000, our food cost percentage of 30% would be on target for your budget.  You have a consistency issue in your question.

In this example, my $100,000 initial net sales figure would include the first 5% discount.  This reflects the expected 5% discount.  Our 30% is the expected % if the discounts were only 5% (as expected).  Let's call this level the "budgeted food cost %" for your operation.

A food cost of $31,350 would produce a 33% food cost percentage using a $95,000 net sales.  Our gross profit would be $63,650.  You need to look for other explanations of the $1,350 rise from $30,000 of food cost to $31,350.  This amount can not be attributed to the increase in discounts.

You are consuming 4.5% more food for the same gross sales. [$1,350 divided by $30,000]

Thursday, February 16, 2012

Zero Revenue Food Cost Control

Dear Joe,

How are you doing? Hope your are doing fine there. What a great articles you have. It's quite late for me to know but I read it and it helps me a lot at work. I almost read all your articles but still I need your guidance.

I am working onboard a cruise ship (more in casino ship) and I need to make F&B budget. (The ship is not opened yet, still preparing for opening).
I have learned from your articles how to make food cost etc. But there is one thing that makes me confused, do you have any idea how to make F&B Budget or deal with this matter:
1. If the buffet (Breakfast, Lunch, Dinner and Supper) in the Restaurant are free?
2. How to make Food Cost against revenue if its all free?
3. How to make food cost percentage from this buffet cost?
As far as i know when i was in the hotel, when the buffet breakfast is free, we get revenue from the room charge. for ex. USD 5/ room for breakfast.
Our restaurant is open 24 hours (Ala Carte menu available 24 hours). We have only one Main Kitchen to serve 3 outlets so to count food cost for 3 outlets, the main kitchen will make one food requisition then it will transfer to different chillers for different outlets so i can account for each outlet's food cost. According to your articles, if it is central kitchen so the central kitchen will make one food requisition and tranfer to other kitchen outlets. (That's what I understand from one of your articles) so I use different chillers to count the food cost in each outlet. Or do I need to make different food requisition for each outlet? If I'm wrong, please guide me.

Thank you very much for your kind assistance. Stay healthy and Have a nice day.

Kind regards,


Thanks for the question Yulisar.  I believe there are many readers who have the same issue.

How do we account for food cost when there is no revenue figure to divide?  In your operation, there will be a final, confirmed passenger count.  This count will provide a divisor.  As we discussed last month, the food cost calculation will be the same:  FC = BI + P - EI.  You will divide this result by your passenger count.

Since all passengers and crew can eat 24 hours a day, our main concern is over production by day part or for a specific recipe.  Tracking food movement by outlet is interesting after a main shift.  Look for too much or not enough food in stock for each outlet.  If the outlet is a buffet, track pans (by %) leftover.  You will begin to get a handle for the popularity of both the outlets and the specific menu items.  This data can be used in menu planning and production.

Spoilage can be quantified and tracked by passenger-days.  

Focus your initial efforts on the main buffets due to the large volume of consumption.  I like to analyze buffet layouts.  If you cost buffet components (by pan), you can begin to see how layout changes can impact overall food cost.  Ingredient costs change by season and a dynamic recipe model will pay for itself as your prices fluctuate.

There is a tendency in cost analysis to focus on grill items since they are easy to track.  In large volume buffet operations, I prefer to analyze the overall layout (by station) with cost and consumption data for each component (including condiment usage).

Restaurant Data Pros

web counter