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Sunday, March 17, 2013

Managing Restaurant Food Cost

I started this blog in late 2005 to help food cost wizards improve their craft.  Blog visitors include cost accountants, chefs, cooks, food service directors, professors, students, stewards and other food service workers and executives.

In May 2006, a series of articles were posted to rip apart the conventional food cost model.  The series explored each factor of the food cost calculation.  Since blog posts follow a chronological order with the most recent posts at the top, it can be difficult for new visitors to follow a thread.

If you are new to the blog, I suggest I quick tour of the May 2006 posts beginning with Food Cost Percentage-Decomposed which shifts the focus from the inventory valuation to purchasing control.  There are many other posts which delve into storage of food.  Generally, your food cost is your cost of food consumed divided by the revenue received from food menu items.

Inventory does play a major role in the food cost formula.  Accurate cut-offs are required to track consumption.  You will find a new approach to inventory control in the second post in the series, Inventory Control-Decomposed.  The perishable nature of our product requires extra attention to items stored in refrigerators and walk-in coolers.  Frozen items have a major impact on food cost.  Yet you will find the greatest accuracy in many inventory valuations on the dry spice page.

Since the dry storage areas are warm and open, count teams often spend too much time on relatively low impact food items.  They may rush the freezer counts due to the cold environment.  When was the last time you weighed every item in your freezer at month end?  Do you open the boxes of meat and seafood to make sure they are full? 

The final article in the series, Food Purchasing-Decomposed, examines a ranking method for food items using an ABC approach common in manufacturing operations.  This article is aimed at shifting energy to the high impact items which have the greatest weight in your food cost results.

In summary, your guests come to your restaurant to order your most popular menu items.  These items use food ingredients which we call key items.  You spend a large percentage of your total purchasing dollar on these key items.  If you buy too much food, there is a high risk of loss through spoilage, theft and over production.  Over production creates higher food costs and higher labor costs.

Thousands of readers have sent emails with questions about the food cost formula.  Many of the questions involve issues which are central to effective control in a particular segment.

Recently, I received a phone call from a chef who needed help with a course he was taking to improve his menu pricing skills.  He actually had the correct answer but he was not able to find any source other than the blog and he just wanted to be sure he got an A in the test.  It is better for all the readers if the questions could come as blog comments since everyone can join the discussion.

All comments on a industry specific topic are given a thoughtful answer and all readers are welcome to include a hyperlink to your email or website.

Restaurant Data Pros

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