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Tuesday, November 25, 2014

Reader's Industry Information Request

Good afternoon Joe,

Thank you for such fantastic content in your emails and blogs, I have always found them very useful.
I have been in food services for almost 20 years with the exception of the last few, I have started working at hotels.

I am looking for hotel researchers or consultants like yourself whom I could follow or read their blogs and or hospitality case studies.

Would you know anyone that you could suggest and provide an direction?

Thank you once again for your time and patience and hope you are doing well and are in the best of spirits.


Thanks for your interest, Zafar!

My favorite industry sites are listed below:

Hotel Food & Beverage Observor

Hospitality Trends

Profitable Hospitality

The Center for Hospitality Research

Penn State Index of U.S. Hotel Values

UNLV Gaming Research & Review Journal

National Restaurant Association News & Research

Monday, November 24, 2014

Menu Price Question

Dear Mr. Joe,

Since New Year’s Eve is around the corner, we are planning this year end in our restaurant chain to use set menus.  I have saved all my free offers from suppliers as well as my credit notes year to date.  We are going to get all our beverage items (mainly wine) free of charge from our suppliers.

So how do I calculate my beverage cost using such free goods without any charges?

For the food items, I have no problem because I have to buy menu items ingredients and post the menu item name on my POS.  I just have an issue for the beverage.

I am counting on your advice.  Thanking you in anticipation.


I would ignore the free items when setting menu prices.  These items are actually discounts earned throughout the year on the items purchased from the same vendors.  There are several issues supporting my recommendation.  The top issue involves the cost to replace these items.  You will not be replacing the free wine with more free wine.  Use the replacement cost in your calculations.

A second option you may want to consider is using an average cost when determining the true cost per bottle.  You would use the free wine along with all the wine purchased to calculate the true cost per bottle.  Use the total purchase cost and divide by the complete bottle total (including free wine).  Adjust this per bottle cost for inflation to determine the menu price. You will be close to the replacement cost.

Optional Food Cost Formula

Hi Joe,
I am trying to help a colleague at another hotel in our chain.  He is F&B Controller at a new property.  They do not have a food store.  All purchased items are entered as direct purchases. 
At our property we calculate a weekly Flash (food & beverage cost check) and at the month end the food & beverage cost.

The weekly formula is:
Direct Purchase to Kitchen + Store Issues – (Complimentary Items + Employee Meals)= (Cost of Food/Total Sales)% = Food Cost %

The month end calculation is:
Opening Balance + Purchases – Closing Balance = Gross Consumption – (Complimentary Items + Employee Meals) = (Net Consumption/Total Sales)% = Food Cost %

In the case of my colleague's operation what should be his formula? Since he has no store all his purchases are direct to the kitchen.  So, unused items (that should be stored)  are included in the food cost calculation.  This resultant cost percentage does not represent actual consumption and a bloated food cost percentage is the result, I imagine. Am I correct?  I thought about it and it should be the same formula as a fast food operation that does not have a store.  I surfed the Net and could not find any such animal.  

I'd appreciate your feedback.

Thanks for the question, Brian!

Actually, the food cost formula is straight forward:

Food Cost = Purchases - Inventory Change

I prefer to include the cost of complimentary items and employee meals in the calculation.

Your weekly report utilizes a perpetual inventory model with tight control over issues of stock.  Your friend would need to count inventory weekly.  His formula would be very similar to your month end calculation.

If he wants to allow credits for complimentary items and employee meals, these items would be deducted from the actual food cost.  The key issue is consistency.

Weekly inventories provide excellent feedback to management.  Operations benefit from this added control with lower cost of goods sold.  Problems are spotted quickly.


Restaurant Data Pros

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