Determine Accurate Recipe Costs For Your Food & Beverage Operations

Determine Accurate R i C t F Y Recipes Costs For Your Food & Beverage Food & Beverage Operations

SlideShare PresentationWesterville, OH May 8, 2013

© 2013 Return On Ingredients LLC P.O. Box 2387 Westerville, Ohio 43086-2387 614.423.4410 Fax 614.340.7946

Request to have this presentation conducted live for your association, group or event at [email protected]

Mark Kelnhofer

• BA in Accounting and Business Administration in 1993

• Masters in Business Administration (MBA) in 2005Masters in Business Administration (MBA) in 2005

• Ohio Dominican University, Columbus, Ohio

• Manufacturing Cost (1993 – 2013)

• Plastics, Lighting, Tire Repair Kits, Buses, RestaurantsPlastics, Lighting, Tire Repair Kits, Buses, Restaurants

• Bravo/Brio Restaurant Group (2002 – 2010)

• Return On Ingredients (2009 – Present)

• Bravo/Brio Restaurant Group Eddie V’s Pistacia Vera Bob Evans Bravo/Brio Restaurant Group, Eddie V s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co., Hospitality USA

• Ohio Dominican University (2007 – Present)

• Adjunct Faculty, Financial & Managerial Accounting

• Midwest Culinary Institute (2011 – Present)

• Adjunct Faculty, Food, Beverage & Labor Cost Controls

Bravo/Brio Restaurant Group

4.2% = $ millions in savings

Return On Ingredients LLC P.O. Box 2387 Westerville, Ohio 43086‐2387 614.423.4410 Fax 614.340.7946Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC

Brio Tuscan Grille – Easton Town CenterColumbus, Ohio

Bravo! Cucina ItalianaBravo! Cucina ItalianaVirginia Beach, VA

Bon Vie – Easton Town CenterC l b OhiColumbus, Ohio

Mark Kelnhofer

• BA in Accounting and Business Administration in 1993

Ad ( A) 200• Masters in Business Administration (MBA) in 2005

• Ohio Dominican University, Columbus, Ohio

• Manufacturing Cost (1993 – 2013)

l h• Plastics, Lighting, Tire Repair Kits, Buses, Restaurants

• Bravo/Brio Restaurant Group (2002 – 2010)

• Return On Ingredients (2009 – Present)

• Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co., Hospitality USAHospitality USA

• Ohio Dominican University (2007 – Present)

• Adjunct Faculty Financial & Managerial AccountingAdjunct Faculty, Financial & Managerial Accounting

• Midwest Culinary Institute (2011 – Present)

• Adjunct Faculty, Food, Beverage & Labor Cost Controls

Other Food Manufactures…

• Restaurants

• Casinos

• Hotel & Lodging

• Sports Arenas

• Hospitals

Colleges and Universities• Colleges and Universities

• Catering and Banquet Centers

• Theme ParksTheme Parks

• Horse Race Tracks

• ….and others!

Amtrak

Fox Business News08/02/2012

Restaurants vs. Manufacturing

RESTAURANTS MANUFACTURING

Ingredients Raw MaterialsIngredients Raw Materials



Prep Production Work In ProcessPrep Production Work In Process



Menu Item Finished GoodsMenu Item Finished Goods



BOH ( h f) / Di t L bBOH (chef) / FOH (bartender)

Direct Labor



FOH (Waiter/Waitress) Indirect LaborFOH (Waiter/Waitress) Indirect Labor



Recipe Bill of MaterialRecipe Bill of Material


Other manufacturing aspects as wellOther manufacturing aspects as well• Prep Time = Labor Routing• Customer Order = Manufacturing Order

O h d (V i bl d Fi d)• Overhead (Variable and Fixed)• Recipe = Bill of Material (BOM)

Top Reasons Top Reasons To Know To Know

Y C t !Your Costs!

The The Restaurant Restaurant

I d tIndustry

The Restaurant IndustryUnited States Highly CompetitiveUnited States – Highly Competitive

Source: NRA 2013 Industry Forecast

The General The General Economic Economic C ditiConditions

The Economy

• Less Discretionary Income• Eating Out Decisions Change• Lower Sales Volumes

“Pi hi P i ” R i• “Pinching Pennies” Reaction

Shouldn’t we be pinching pennies Shouldn t we be pinching pennies in all economic conditions?

Commodit Commodity Costs

Commodities In The News

FSR Magazine, 03/2013

“P i P i “Protein Prices Rise, Restaurants Cope”

Commodities In The News

QSR Magazine, 03/20/2013, “Commodities in Crisis”

Fuel Update

Business First, 12/03/2012/ /

Cost Management

NRA Daily, “Restaurant Operators Report Higher Food Costs”, 12/28/2012g , / /

Source: NRA Daily, 12/28/2012

Cost Management

NRA 2013 Industry Forecast, “Food Costs Continue To Chop Into The Bottom Line”p


Cost Management

NRA 2013 Industry Forecast, “Controlling Costs Is No Picnic”


Cost Management

NRA 2013 Chefs Survey, “Balancing Rising Food Costs”

How do you respond to respond to higher food costs?costs?

Commodity Research

Source: American Restaurant Association www.americanrestaurantassociation.com1-888-423-4411 Fax 941-953-4034Forecasting and Managing Food and Energy Commodities

Commodity Researchck

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Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com

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Ind str Industry Failure Rate

Restaurant Failure Rate

The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry




Controls“A d h N l R A (2009)“According to the National Restaurant Association (2009), a typical restaurant in America earns a net profit under 10%. That means 90% of revenues are used to defer the cost of doing f f f gbusiness. Thus, managers that do not understand the importance of cost controls are bound to fail in the restaurant business. Two

j t i th t t i d t f d t d l bmajor costs in the restaurant industry are food cost and labor cost. These two costs together are referred to as prime costs. For a restaurant to succeed, the prime costs are expected to be less p pthan 60% of revenues. It is a ‘rule of thumb’ and a good rule to follow. Most restaurants that have failed often were found to have prime costs exceeding 60% indicating greater potential to


prime costs exceeding 60% indicating greater potential to failure.”

The Missing Link

+

Culinary Arts The Numbers

ROI Methodology

Recipe costing is the base for manyRecipe costing is the base for manyother aspects of the operations.

The Reality Is…

• Some restaurant operators do not phave any written or documented recipes.

• Some have recipes that are written are only for execution, not costing.

• The few that have costing in many cases do not take a manufacturing approachapproach.

• Menu pricing in some cases is not based on proper analysis and databased on proper analysis and data.

What is in your control?

Knowing your costs Knowing your costs

What is in your control?

Knowing your costs Knowing your costs

Establishing your selling price

Types of Recipes

• Batch or Prep RecipesBatch or Prep Recipes• Larger quantities

• Become their own unique Become their own unique inventory item when produced

• Can be used in other recipes

• Serving or Menu Item Recipes• Ultimately is what is sold to the

guest or customer

Recipe Writing

Analyze and question the recipe to account Analyze and question the recipe to account for accuracy and the process. Ask questions!

Recipe Writing

Blended Oil, EVOO, Soy

Recipe Writing

S i h G tSpanish, Green, etc.Diced? Minced? In house?

Recipe Writing

P k d?Precooked?

Recipe Writing

Mi d l ?Minced or cloves?

Recipe Writing

I di d K h ?Iodized or Kosher?

Recipe Writing

5 6 6 6 G H i l Ch R ?5x6, 6x6, Green, Heirloom, Cherry Roma?

Recipe Writing

Th i ld d lt i i d f ti !The yield or end result is required for costing!

Recipe Writing

Weights & Measures

Portion control thro gh the se of • Portion control through the use of utensils (Tbsp, tsp, dishers, spoodles etc )spoodles, etc.)

• Accuracy of weights and measures is paramount.is paramount.

1 cup, Basil Leaves 1 cup, Granulated Sugar

0.2 ounce 6.8 ounces

Density: 2.5% Density: 85.0%

Batch Recipes & Yields

• Batch recipes should account for the • Batch recipes should account for the proper yield (what the result is) including known waste and the gprocess (labor)

• When the purchased product has p pchanged form in any way, a batch recipe should be created to account f h for the cost.

• If you don’t account for the process d i ld l l t i and yields, your menu level costs in

most cases is understated!

Batch Recipe Example #1

• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz

Ingredients Quantity UOM Cost Extended

Basil, Fresh 16.0 oz $0.531 $8.500

BASIL PICKED

• The new item ‘Basil Picked’ now

Basil, Fresh 16.0 oz $0.531 $8.500

Yield 11.0 oz

The new item Basil Picked now has a correctly stated value of $0.773/oz or $12.36/#


• We purchase ‘P&D 31/40 Shrimp’ p / pat $5.50/# or $0.344/oz

/Ingredients Quantity UOM Cost Extended

P&D 31/40 16.0 Oz $0.344 $5.500

P&D 31/40 SHRIMP THAWED

Th it ‘P&D 31/40 Th d’

P&D 31/40 Shrimp, frozen

16.0 Oz $0.344 $5.500

Yield 14.2 oz

• The new item ‘P&D 31/40 Thawed’ now has a correctly stated value of $0 387/oz or $6 19/#$0.387/oz or $6.19/#


• We purchase ‘Lobster Bisque Soup’ p q pby the bag/8# for $16.95 bag.


Lobster Bisque 1.0 Bag $16.950 $16.950

LOBSTER BISQUE SOUP YIELDED

Th it ‘L b t Bi S

Lobster Bisque Soup

1.0 Bag $16.950 $16.950

Yield 0.98 gal

• The new item ‘Lobster Bisque Soup Yielded’ now has a correctly stated value of $17 30/gallon or $0 136/ozvalue of $17.30/gallon or $0.136/oz


• We purchase ‘Bananas’ for p$0.513/#.


Bananas 16.0 Oz $0.032 $0.513

BANANAS PEELED

Th it ‘B P l d’

Bananas 16.0 Oz $0.032 $0.513

Yield 10.5 oz

• The new item ‘Bananas Peeled’ now has a correctly stated value of $0 049/oz or $0 782/#$0.049/oz or $0.782/#

Packaging

• Packaging is part of the raw g g pmaterial cost, similar to the ingredients

• Packaging includes:

• Bottles, lids

• Boxes

• Labels

• Wraps

The Costing Problem

Ingredients

Prime Cost

Ingredients Labor

Total Cost

Ingredients Labor

Overhead

Total Cost Breakdown

Labor & Overhead Costs

• Your labor and overhead can be accounted for in the recipe

• Prep Time, Labor Routing• Time/motion studies (stopwatch)

• Time (hours) is loaded on every recipe

• Standard Labor (BOH) Rates• By store

• Includes wages and fringes

Time Motion Studies

• Stopwatch time motion studyp y

• Must be in a live environment

• Must be a controlled testMust be a controlled test

• Must be the personnel that will actually execute the recipesy p

Batch Recipe ExamplePrime CostPrime Cost



Basil, Fresh 16.0 oz $0.531 $8.500

BASIL PICKED

Basil, Fresh 16.0 oz $0.531 $8.500

Labor 0.167 hr 15.66 $2.616

Total $11.116

Yi ld 11 0

• The new item ‘Basil Picked’ now has a correctly stated value of

Yield 11.0 oz

has a correctly stated value of $1.011/oz or $16.18/#

Direct (BOH) Labor Rate

• The direct (BOH) labor rate should ( )include the base rate plus any other additional fringes associated

h h lwith those personnel• Unemployment Insurance

Workers’ Compensation• Workers Compensation

• Social Security & Medical

• Health, dental and vision insurance plans

• 401(k) or other retirement plans

• Vacation & Sick Pay

Child• Childcare

Overhead Rates

• Based on budgeted expenses and

Predetermined Overhead Rate

g pdirect labor hours (BOH) by location.

Total Budgeted OverheadTotal Budgeted Overhead

Direct Labor BOH Hours = $0.000/hr.

OverheadRate

Overhead Rates

• FOH Labor & Fringes

Predetermined Overhead Rate

• FOH Labor & Fringes• Advertising & Marketing• Repair & Maintenance• Supplies• Training• Utilities Utilities • Communications• Landscaping• Research & Development• Research & Development• Occupancy• Taxes

BudgetedDirect Labor

HoursHours

Batch Recipe ExampleTotal CostTotal Cost


BASIL PICKEDIngredients Quantity UOM Cost Extended

Basil, Fresh 16.0 oz $0.531 $8.500

Labor 0.167 hr $15.66 $2.616

Overhead 0.167 hr $34.97 $5.840

Total $16.956

Yield 11 0 oz

• The new item ‘Basil Picked’ now has a correctly stated value of

Yield 11.0 oz

has a correctly stated value of $1.542/oz or $24.67/#

Wine Bottle Conversions

Source: chathamhillwinery/blogspot.com

Wine Glass Pour Costs

750ml bottle750ml bottle

Bottle cost $8.99fl. oz. 25.3613fl. oz. cost $0.354Pour cost $2.127Pour cost $2.127

Standard recipe pour = 6.0 fl. oz.

Item Description Qty UOM Unit Cost Extended

Estancia Pinot Noir 6.00 fl. oz. $0.354 $2.127

Direct Labor 0.025 hr. 12.00 0.300

Overhead 0 025 hr 34 97 0 874

Source: chathamhillwinery/blogspot.com

Overhead 0.025 hr. 34.97 0.874

Total Cost $3.301

Beer Keg Conversions

Draft Beer Pour Cost

½ BBL½ BBL

Keg cost $89.00fl. oz. 1,984fl. oz. cost $0.0449Pour cost $0.718Pour cost $0.718Standard recipe pour = 16.0 fl. oz.


Sam Adams Lager 6.00 fl. oz. $0.718 $0.718

Direct Labor 0.017 hr. 12.00 0.204

O h d 0 017 h 34 97 0 595Overhead 0.017 hr. 34.97 0.595

Total Cost $1.517

Liquor Recipe Cost

FOUR HORSEMEN


Johnnie Walker Red 0.25 fl. oz. $0.907 $0.227

Jose Cuervo Gold 0.25 fl. oz. 0.778 0.197

Jim Beam 0.25 fl. oz. 0.562 0.140

Jack Daniels 0.25 fl. oz. 0.739 0.185

Direct Labor 0.034 hr. 12.00 0.408

O h d 0 034 h 34 9 1 189Overhead 0.034 hr. 34.97 1.189

Total Cost $2.346

Liquor Recipe Cost

BLACK RUSSIAN


Choice of Vodka 1.50 fl. oz. $0.000 $0.000

Kahlua Coffee Liqueur 0.75 fl. oz. 0.778 0.197

Direct Labor 0.025 hr. 12.00 0.300

Overhead 0.025 hr. 34.97 0.874

Base Recipe Cost $1.371

Well PremiumCall Super Premium

1-1/2 fl fl. oz.

Low Average High

Make Buy Decisionsy

• In order to make valid comparisons, all p ,costs must be considered

dIngredients

$0.80Made In House

$0.80/#

Outsourced

$3.25/#

Make Buy Decisionsy

• In order to make valid comparisons, all p ,costs must be considered

dIngredients Labor

$0.80 $1.00 Made In House

$5.13/#

Outsourced

$3.25/#

$3.33Overhead

Efficient Batch Designsg

• Are the batch or prep recipes p p pdesigned for efficiency?

Batch #1Yields: 28 oz

Batch #2Uses

24 oz of Batch #1

Efficient Batch Designsg

• Are the batch or prep recipes p p pdesigned for efficiency?

Automatically incurs 4 oz of waste each time

Batch #1Yields: 28 oz

Batch #2Uses

24 oz of Batch #1

Sales Mix & Execution

Review of the sales mix with assigned grecipes for each station

Station #1 Station #2 Station #3 Station #4 Station #5

Where is the distribution of the sales mix?Where is the distribution of the sales mix?

Execution vs. Costing

• Recipes are written differently for p yexecution than they are for costing.• Execution usually states what utensils

to utilize

Costing involves weights and • Costing involves weights and measures

Execution vs. Costing

Execution Costing

BALSAMIC MARINADEIngredients Qty UOM Qty UOM

Olive Oil Blended 90/10 3.0 cups 24.0 oz

Balsamic Vinegar 1.0 cup 8.0 ozg p

Salt and Pepper Mix 0.25 cup 2.025 oz

Chopped Shallots 0.25 cup 1.20 oz

Chopped Parsley 0 25 cup 0 45 ozChopped Parsley 0.25 cup 0.45 oz

Yield 38.0 oz

Menu Level Costing

Menu Level Costing

Prime Cost

Menu Level Costing

Total Cost

Where do I start?

Step 1: Purchased Items Step 1: Purchased Items

Step 2: Batch Recipes Ingredient level only

Step 3: Serving Recipes

Step 4: Time Standards

Step 5: Labor and Overhead Rates Step 5: Labor and Overhead Rates

Step 6: Performance Benchmarking

Systems

• MBE (Manage By Excel)( g y )

• Systems & Software (do your Systems & Software (do your research!)• Features (i.e. recipes, production,

ordering,

• invoicing, menu engineering, etc.)

• Service

• Cost

• Your overall plan (short and long term)

Our Systems

hThe

Top 10 Top 10

kTakeaways

The Top 10 Takeaways

Takeaway #1Takeaway #1

Get the competitive edge!p g

The restaurant industry is hi hl titi d th highly competitive and the current economic factors f

compound that.



The business failure rate has fhistorically been very large. Use both your culinary skills Use both your culinary skills

and data to keep from becoming a statistic.



Recipe costing is vitally p g yimportant to the success of

the operations Recipe the operations. Recipe costing can be a science.

Everything can be

accounted for accounted for.



Recipes should be written with pmore accuracy and details. In order to cost recipes the In order to cost recipes, the

details are required!



When using portion control g ptools, capture the density.

Proper weights and measures Proper weights and measures is critical to the accuracy of

the recipe and the cost.



When writing a batch prep g p precipes, the yield or the end

result is required to result is required to determine the cost as it

moves through the process.



Writing a recipe for execution g p fis very different than for

costing Execution is for the costing. Execution is for the line personnel. Costing is

for the management.

You need bothYou need both.



Beer, wine and liquor recipes , q pshould be accounted for.

Liquor recipes need to match Liquor recipes need to match the POS system for costing

and depletion.



This is your call to action!y

Start the process. If you do t h d t ti not have adequate time or

skills, get some professional , g p fassistance!



To ensure success –

The bottom line is

know your costs!

Plan for success!Plan for success!

Be proactive, not reactive!p ,

Reference Books

The Book of Yields: Accuracy in Food Costing & Purchasing

Francis T. Lynch

John Wiley & Sons

ISBN 13: 978-0-471-74590-7ISBN 13: 978 0 471 74590 7

ISBN 10: 0-471-745909-1

Ch f’ B k f F l Yi ld & SiChef’s Book of Formulas, Yields & Sizes

Arno Schmidt

John Wiley & Sons

ISBN 10: 0-471-22716-1

Note: Neither references is truly comprehensive. You need to practice the f y p pcosting methods discussed in this presentation.

Cost Control

ACCURATE RECIPE

Audit to Improve ffi i iRECIPE

COSTINGEfficiencies

MENU ENGINEERING

Benchmarking (Actual v.

Theoretical)

JIT Production &

Ordering(Dynamic

P )Pars)

Results

• Quality• Consistency• Efficiency Improvements• DisciplineDiscipline• Cash• Profits

• Waste• Waste• Inventory Levels• Costs

Articles Booklet

• “Obtaining Accurate Recipe Costs”Obtaining Accurate Recipe Costs

• “Improve Your Menu Engineering”

• “The Case For Theoretical Food Costs”• The Case For Theoretical Food Costs

• “The Advantages of Just-In-Time”

• “Robust Supply Chain Management”• Robust Supply Chain Management

• “Line Checks That Create Efficiency”

“Traits of Effective Cost Management”• Traits of Effective Cost Management

http://www.ReturnOnIngredients.com

Other Speaking Events

Current 2013 ScheduleOh 2/ C l b O• Ohio Dominican University – 2/7 in Columbus, OH

• Columbus Culinary Institute – 2/12 in Columbus, OH

• North American Pizza & Ice Cream Show – 2/17 in Columbus, OH

• Canadian Restaurant & Foodservice Association – 3/3 in Toronto Ontario• Canadian Restaurant & Foodservice Association 3/3 in Toronto, Ontario

• International Restaurant & Foodservice Show 3/4-3/5 in New York, NY

• Western Illinois University – 3/7 in Macomb, IL

• International Boston Seafood Show 03/10 in Boston, MA

• Nightclub & Bar Expo – 3/19-3/21 in Las Vegas, NV

• Owens Community College – 4/4 in Toledo, OH

• ODU Dominican Scholars Dinner – 4/15 in Columbus, OH

ACF M Ch f A i i 5/6 i Fi dl OH• ACF Maumee Chefs Association – 5/6 in Findlay, OH

• Western Foodservice Expo – 8/18 – 8/20 in Los Angeles, CA

• Florida Restaurant & Lodging Show – 09/22 – 09/24 in Orlando, FL

• World Congress of Nutrition & Health Conference – 10/12-10/14 in Dalian World Congress of Nutrition & Health Conference 10/12 10/14 in Dalian, China

• Americas Food & Beverage Conference – 10/28 in Miami Beach, FL

Culinary Schools

This program is offered at no cost to culinary and hospitality schools programs based on availability and budgetschools programs based on availability and budget.

• Lexington College (Chicago, IL)

• Roosevelt University (Chicago, IL)

• Western Illinois University (Macomb, IL)

• Lake Michigan College (Benton Harbor, MI)

• Central Michigan University (Mt. Pleasant, MI)

• Guilford Technical Community College (Jamestown, NC)

• University of Nevada Las Vegas (Las Vegas NV) • University of Nevada Las Vegas (Las Vegas, NV)

• Midwest Culinary Institute (Cincinnati, OH)

• Columbus Culinary Institute (Columbus, OH)

• Hocking College (Nelsonville, OH)

• Owens Community College (Toledo, OH)

Please email me at [email protected]

O ll di tl t C ll 614 558 2239Or call me directly at Cell 614.558.2239

Questions & Answers

Mark Kelnhofer, President & CEO

Return On Ingredients

P.O. Box 2387

Westerville, Ohio 43086-2387

614.423.4410

Fax 614.340.7946

Cell 614.558.2239

[email protected]

http://www.ReturnOnIngredients.comp // g

http://www.LinkedIn.com/kelnhofer

Questions & Answers

If you have a questions later, contact me!

k@ t i di [email protected]

614 558 2239614.558.2239