Basic Recipe Costing - Part1

You may have lots of cookbooks, proprietary recipes, books with food yield statistics, market data, shopping lists, inventory count sheets, supplier quotes, product mix reports, quarterly tracking reports and other documents. A professional recipe model should be designed to integrate all of this useful information. The person working on this project needs to wear many hats: purchasing agent, steward, prep cook, line cook, and chef.

Rather than using a cookbook approach, start with your shopping lists. Use your shopping lists to create a spreadsheet with all your ingredients. Make columns for the name, category, primary supplier, purchase unit, storage area and storage unit.



Since the unit you purchase is used on orders, this is our starting point. It's helpful to know your alternate sources for each ingredient. You may want to categorize each item by the storage method. For example, frozen, refrigerated, dry bulk, canned goods, frozen goods, baked goods, etc. Feel free to add these columns. Its impossible to get too much information for your ingredient list.

[We'll eventually need to know the usage units for each ingredient and portion information. This will be discussed in Part2 (later this month).]

Once the list begins to come together, envision the flow for each item from loading dock to the table. Most items are purchased by the case and are stored as purchased. Some items are immediately transformed into other items through fabrication. Visualize the process of moving from the purchased unit of measure to the storage unit of measure first.

You may simply remove six #10 cans from a case and place the cans in a rack. The purchase unit is case and the storage unit is a #10 can. Focus on the storage unit and the divisor (6 in our example). Breaking down every item you purchase into logical storage units is one of the most important steps in creating a professional recipe costing model.

Each #10 can is valued at 1/6 of the case cost. Don't worry about the actual cost of each can. Focus on the number of storage units in each purchase unit.

Our work will eventually involve many calculations using units of measure, various blends, yield formulas, conversions, reciprocals and standard portion data. The simple exercise of developing a purchase unit to storage unit model is the ideal starting point. Once you complete this exercise, future conversion work will be more intuitive.

Alternate Uses of Over Supply

Many restaurants use their specials board to move over stocked protein items. The protein could be raw or previously cooked. Generally, a menu item is developed to utilize the over stock. For example, leftover roast may be diced and added to chili or soup. Fresh fish may be offered as the "Catch of the Day" and featured at an attractive price.

Many urban areas have charity organizations with the goal of reducing hunger among the homeless. They usually have trucks and will send a driver to pick up any donations. Some restaurants donate over stocked protein items which tend to lose flavor when frozen.

Certainly, many over stocked fresh items find their way to the freezers. Both raw and cooked items are frequently frozen. Some food loses flavor and texture when frozen and thawed. You may consider purchasing items in a frozen state. Commercial flash freezing retains more of the qualities.

My favorite uses of over supply is the stock pot in cold months and salads in warm months. We are now in summer. One of my clients serves a wonderful salad Nicoise using cold seared tuna. In addition to stocks and salads, you may be able to marinate some meats. Kabobs and BBQ often require several days in a marinade.

Photo from Simply Recipes.

Once your over supply of food spoils, the obvious destination is the nearest garbage bin. If the wasted food is disposed of in a heavy plastic garbage bag, it may eventually produce methane which is harmful to the environment. Compost piles may be an option if you are in the country. Some urban garden groups may be interested in your waste. Some fats and oils can be converted into a fuel which can be used in diesel engines.

Accurate forecasts help reduce the management energy spent trying to make the most of over stocked items. In a perfect world, there would be very little left over each night. Improved forecasts will reduce waste.

Why Did This Week Suck?

In the movie "A Few Good Men", Tom Cruise's character Danny shouts out "I want the truth!" and Jack Nicholson's character Colonel Jessup shouts back "You can't handle the truth!" just before the Colonel offers the entire truth. While sitting in on management meetings at some of my client's offices, I'm tempted to mimic Danny and ask for the truth.

The truth gets swept into the closet at too many of these meetings.

With regard to food cost results, I have seen some major screw ups over the years. Here's the top 2:

1. Manager ordered his staff to cook 200 whole rotisserie chickens (typical demand is 40 per night) since he felt they might spoil. He offered the birds at a $1 discount.

Instead of freezing the raw birds, the staff followed orders and prepped 5 times the usual marinade, prepped the chickens and slow cooked them all day long on the rotisserie. They sold an extra 10 chickens. The additional unit sales weren't enough to offset the discount of $50. What did they do with the other 150 birds?

They never did sell well the next day when they were offered cold for $2 off. More ingredients were wasted when the staff whipped up a mess of chicken salad. Try to imagine the additional labor, the marinade ingredients, the gas used to cook the chickens, the mayo and veggies used in the salad.

Instead of stopping the insanity early and eating the $250 on day one, the mistake was allowed to dominate the week. The manager never survived this debacle.

2. A fast moving multi-tasker put 10 cases of baby back ribs over medium heat and went outside to check on a delivery. Since the restaurant was not open for breakfast, no one was in the kitchen for the next hour. The delivery didn't go as planned and several phone calls were required to communicate with the vendor's main office.

By the time the employee made it back to the kitchen, he realized his mistake. The ribs were all ruined (burned on the one side). The owner came in 2 hours later and asked why the kitchen smelled like something was on fire. He was told how the 300 pounds of ribs were burned and discarded.

This was an honest mistake. The ribs were immediately discarded and the employee never wasted another rib again.

These huge errors were well documented due to the shear size of the hit. It would have been impossible to change a couple of Excel entries to heal these wounds. As crazy as it seems, I found the 2 meetings following these events to be fantastic.

Everyone discussed real issues and developed safeguards to prevent a replay.

Food Cost Techniques - Counts

Most food service people are out in their storage areas each and every day. If they stopped to keep a record of their observations, they would have an incredible tool for solving the usage riddles each week. The normal tendency is to check the stock level of the highest volume items frequently. These same items make up a major portion of the cost of goods sold.

Production teams communicate with clipboard lists. The current shift needs to leave a sufficient stock of batch recipe items for the next shift. These clipboard sheets document the movement of major production items. Don't let the data go to waste.

So how do you make the data come alive? Match it with sales activity. Test your forecasts against the actual demand. Did you over produce? under produce? or were you in the zone? Keeping records will help you get in the zone and stay in the zone.

The keys to turning your walk around spot counts into an effective tool are record keeping, feedback and adjustments.

Food Cost Techniques - Receiving

The second biggest opportunity for saving money in a restaurant is available at the loading dock. Receiving controls can save you a bundle. The amount of savings is directly proportional with the number of miles from the supplier. If you are the last stop on the delivery route, the morning's rejects may find their way onto your doorstep.

We once followed a rejected case of salmon all over New York when I was working with a local chain. The driver tried to unload the case at each and every location. Good noses and lots of phone calls kept the spoiled fish from our walkin coolers. Do you let the delivery man load the goods on your shelves? I recommend you end this practice. Especially in operations with limited deliveries and long lead times, drivers often bring the stock up to the order quantity using items already on the shelf.

Imagine you order 20 cases at the order point which is 5 cases. By the time the driver makes the delivery, you have 3 cases left. You let him put the cases in your storage. He delivers 17 cases and calls you in to check off the delivery and sign the invoice. You count 20 cases and sign. You just paid for 3 cases you never received. This is just slightly better than a phantom delivery.

One site I was sent to audit for an out of control food cost had several assistant managers. I was in charge of the inventory and I assigned everyone a location. Keeping the refrigerators for myself, I began looking for a truckload of eggs. Looking everywhere, I could not locate the eggs. The managers started complaining about not finishing in time. I persisted and increased the heat.

Eventually we located the truckload of eggs at our competitor's project five miles away. The invoice had been rubber stamped with one of the manager's signature. We threw out all the rubber stamps and got a credit for the eggs. The driver and our purchasing manager were in collusion.

In general, try to treat your inventory delivery with the same seriousness shown to the armored delivery of cash. You probably lose more cash in food not received than the miscounted cash delivered.