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3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 1
Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant
Welcome!Today’s webinar will be starting shortly.
Best Practices for Controlling Food Cost
3 Essential Food Cost Controls for Independent Restaurants
Jim Laube
Your Hosts
Joe Erickson
ESSENTIAL FOOD COST CONTROLSESSENTIAL FOOD COST CONTROLS
ESSENTIAL FOOD COST CONTROLSESSENTIAL FOOD COST CONTROLS
Comments & Questions
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 2
IN THE LAST WEEK?IN THE LAST WEEK?
Were you in your kitchen?
IN THE LAST WEEK?IN THE LAST WEEK?
In the walk in?
IN THE LAST WEEK?IN THE LAST WEEK?
Did you sign for a delivery?
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 3
IN THE LAST WEEK?IN THE LAST WEEK?
When was the last time you tasted your entire menu?
KEY POINTS!KEY POINTS!
Good results require effective systems &
controls!
There is a LOT going on in your kitchen!
Essential Food Cost Practices
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 4
Average Net Profit 5¢ – 7¢
Food & Beverage Labor Operating Occupancy& Other
NET PROFIT
30¢ 35¢ 16¢ 13¢
“WHY”?“WHY”?
It’s VERY easy to lose money working with food!
Sales Expenses Net Profit- =
Food Cost
Theft Spoilage
Cooking Mistakes
Over ‐Portioning
Short Weights
Wrong Orders
Estimated that 10‐15% of restaurant food ends up
in the trash!
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 5
WHY IMPROVE YOUR FOODPRACTICES?WHY IMPROVE YOUR FOODPRACTICES?
1. Control costs
2. Improve profitability
Sales Expenses Net Profit- =
Guest Experience Food
1. Control costs
2. Improve profitability
3. Higher quality
4. Greater consistency
5. Food safety
The Guest Experience!
WHY IMPROVE YOUR FOODPRACTICES?WHY IMPROVE YOUR FOODPRACTICES?
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 6
6. Point of Difference!
Great execution is the ultimate differentiator!
“I already knew that.”
Does your staff know it?
Are you DOING it?
If so, do your people know WHY?
GETTING THE MOST OUT OF THIS WORKSHOP
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 7
WHAT DETERMINES FOOD COST %?WHAT DETERMINES FOOD COST %?
1. Menu prices
2. Recipes
3. Sales mix
4. Product costs
5. Product utilization
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 8
IMPROVING PRODUCT UTILIZATIONIMPROVING PRODUCT UTILIZATION
Less waste
Less spoilage
Less theft
Accurate portioning
Results in lower cost, higher quality & greater consistency
HOW SALES MIX AFFECTS FOOD COSTHOW SALES MIX AFFECTS FOOD COST
Menu Ingredient Price Cost
1. Cheeseburger $6.50 $1.56
2. Steak Sandwich $9.95 $3.98
Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985
Totals 20,463 6,105
Sales $ 20,463 100%
Ideal Food Cost 6,105 29%Gross Profit 14,358
CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 9
Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985
Totals 20,463 6,105
Sales $ 20,463 100%
Ideal Food Cost 6,105 29%Gross Profit 14,358
CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES
Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985
Totals 20,463 6,105
Sales $ 20,463 100%
Ideal Food Cost 6,105 29%Gross Profit 14,358
CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES
Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985
Totals 20,463 6,105
Sales $ 20,463 100%
Ideal Food Cost 6,105 29%Gross Profit 14,358
CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 10
Menu Menu Food Food Sales Total TTL IdealItem Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 2,000 $ 13,000 $ 3,120 Steak Sand. 9.95 3.98 40% 750 7,463 2,985
Totals 20,463 6,105
Sales $ 20,463 100%
Ideal Food Cost 6,105 29%Gross Profit 14,358
CASE #1 – HIGH BURGER SALESCASE #1 – HIGH BURGER SALES
Menu Menu Food Food Sales Total TTL Ideal
Item Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 750 $ 4,875 $ 1,170 Steak Sand. 9.95 3.98 40% 2,000 19,900 7,960
Totals 24,775 9,130
Sales $ 24,775 100%
Ideal Food Cost 9,130 36%Gross Profit 15,645
CASE #2 – HIGH STEAK SANDWICH SALESCASE #2 – HIGH STEAK SANDWICH SALES
Menu Menu Food Food Sales Total TTL Ideal
Item Price Cost Cost % Mix Sales Cost
Burger $6.50 $1.56 24% 750 $ 4,875 $ 1,170
Steak Sand. 9.95 3.98 40% 2,000 19,900 7,960
Totals 24,775 9,130
Sales $ 24,775 100%
Ideal Food Cost 9,130 36%Gross Profit 15,645
CASE #2 – HIGH STEAK SANDWICH SALESCASE #2 – HIGH STEAK SANDWICH SALES
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 11
Sales $ 20,463 100% Sales $ 24,775 100%
Food Cost 6,105 29% Food Cost 9,130 36%
Gross Profit 14,358 Gross Profit 15,645
High Burger Sales High Steak Sand. Sales
WHICH WOULD YOU CHOOSE?WHICH WOULD YOU CHOOSE?
?
NEVER FORGET . . . NEVER FORGET . . .
. . . You take DOLLARS to the
bank, not
PERCENTAGES!
Sales $ 20,463 100% Sales $ 24,775 100%
Food Cost 6,105 29% Food Cost 9,130 36%
Gross Profit 14,358 Gross Profit 15,645
High Burger Sales High Steak Sand. Sales
DON’T JUMP TO CONCLUSIONS!DON’T JUMP TO CONCLUSIONS!
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 12
FOOD COST % ALONE DOESN’T TELLTHE WHOLE STORYFOOD COST % ALONE DOESN’T TELLTHE WHOLE STORY
KEY POINT:
Before ASSUMING you have a food cost problem, always check your
GROSS PROFIT DOLLARS!
(and your Sales Mix)
HOW TO CALCULATE FOOD COSTHOW TO CALCULATE FOOD COST
+ Food PurchasesBeginning inventory
- Ending inventory
= Food Cost
(what was bought)(what you started with)
(what was left)
(what was USED)
HOW TO CALCULATE FOOD COSTHOW TO CALCULATE FOOD COST
FOOD COST CALCULATIONFood Purchases $ 10,000Add - Beginning inventoryDeduct - Ending inventoryFood Cost 10,000
PROFIT & LOSS STATEMENTFood Sales 40,000 100%Food Cost 10,000 25%Gross Profit 30,000 75%
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 13
FOOD PURCHASES VS FOOD COSTFOOD PURCHASES VS FOOD COST
FOOD COST CALCULATIONFood Purchases $ 10,000Add - Beginning inventoryDeduct - Ending inventoryFood Cost 10,000
PROFIT & LOSS STATEMENTFood Sales 40,000 100%Food Cost 10,000 25%Gross Profit 30,000 75%
$ 10,0006,000
(3,000)13,000
40,000 100%13,000 33%27,000 67%
REDUCE INVENTORY TIMEREDUCE INVENTORY TIME
Products on inventory count sheets in shelf order.
Count Sheet
REDUCE INVENTORY TIMEREDUCE INVENTORY TIME
Have a separate count sheet for each storage location.
Count Sheet
Walk In
Count Sheet
Freezer
Count Sheet
Dry Storage
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 14
UNDENIABLE TRUTH OF BUSINESSUNDENIABLE TRUTH OF BUSINESS
What get’s measured, get’s managed.
What get’s managed, improves.
KEY FOOD COST CONTROLKEY FOOD COST CONTROL
1. Calculate Food Cost Weekly
BENEFITS OF WEEKLY FOOD COSTBENEFITS OF WEEKLY FOOD COST
More attention & awareness
Greater accountability
Faster recognition & response to problems
Food cost will GO DOWN!!
2% – 5% of SALES!
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 15
DAILY INVOICE LOG ‐ FOOD & BEVERAGE PURCHASESWeek Starting/Ending Dates 1-Jan 7-Jan
Food Liquor Beer Wine OtherBay Seafood 1/2 91265 851.65 851.65
Northwest Distribution 1/2 331-324 875.20 275.80 599.40
Specs Liquor 1/3 90057412 1,052.58 1,052.58
Jakes Supply 1/3 52588 239.80 239.80
Sundown Bread 1/3 P-225841 321.65 321.65
Adams Meats 1/4 1785642 875.47 875.47
Bay Seafood 1/4 45556 627.35 627.35
Jakes Supply 1/5 514421 429.50 429.50
Sundown Bread 1/5 88885112 202.83 202.83
Adams Meats 1/6 5656547 524.68 524.68
Bay Seafood 1/6 5444010 621.40 621.40
Spec Liquor 1/6 90057500 (125.40) (125.40)
TOTALS 6,496.71 4,694.33 927.18 275.80 599.40 0.00
Supplier
PURCHASESInvoice
(CREDIT)
Amount
Invoice
Date
Invoice
Number
COST OF SALES WORKSHEETWeek Starting/Ending Dates 1‐Jan 7‐Jan
Tue Wed Thu Fri Sat Sun $ %
SALES:
Food 1,106 1,298 1,547 1,758 1,956 2,357 1,647 11,669 73.5%
Liquor 151 205 196 223 350 421 338 1,884 11.9%
Beer 75 101 120 138 140 166 158 898 5.7%
Wine 95 109 185 224 205 350 255 1,423 9.0%
Total Sales 1,427 1,713 2,048 2,343 2,651 3,294 2,398 15,874 100.0%
COST OF SALES: Purchases
Food 4,694 2,359 (2,885) 4,168 35.7%
Liquor 927 1,958 (2,554) 331 17.6%
Beer 276 572 (595) 253 28.2%
Wine 599 1,021 (1,146) 474 33.3%
Total Cost of Sales 5,227 32.9%
Gross Margin 10,647 67.1%
Add
Beginning
Inventory
Less
Ending
Inventory
Mon
IN THE RESOURCE LIBRARYIN THE RESOURCE LIBRARY
Cost of Sales Worksheet at ‐
RestaurantOwner.com/foodcost
Also consider the Weekly Prime Cost Worksheets ‐
RestaurantOwner.com/primecost PRIME COST WORKSHEETWeek Starting/Ending Dates 6‐Apr 12‐Apr Taxes & Benefits 22.0%
MON TUE WED THU FRI SAT SUN
6‐Apr 7‐Apr 8‐Apr 9‐Apr 10‐Apr 11‐Apr 12‐Apr BEG END
SALES:
Food 1,406 1,598 1,847 2,058 2,456 2,857 1,983 14,205 84.7%
Liquor 51 105 96 123 150 221 148 894 5.3%
Beer 50 101 106 88 105 136 105 691 4.1%
Wine 55 65 137 151 175 250 142 975 5.8%
Total Sales 1,562 1,869 2,186 2,420 2,886 3,464 2,378 16,765 100.0%
COST OF SALES:Purchases
Food 4,417 3,231 (2,885) 4,763 33.5%
Beverage ‐
Liquor 811 1,958 2,554 215 24.1%
Beer 148 572 595 125 18.1%
Wine 348 1,021 1,146 223 22.9%
Total Beverage 1,307 3,551 4,295 563 22.0%
TOTAL COST OF SALES 5,327 31.8%
LABOR:
Management 1,200 7.2%
Hourly Personnel 433 475 495 469 445 504 392 3,214 19.2%
Payroll Taxes & Benefits 971 5.8%
TOTAL LABOR 5,385 32.1%
PRIME COST 10,712 63.9%
6,053 36.1%
Customer Count 85 95 125 149 145 174 122 895
Check Average 18.38 19.67 17.49 16.24 19.90 19.91 19.49 18.73
PCT
GROSS MARGIN
Blue Fish Grill
INVENTORY
TOTAL
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 16
KEY FOOD COST CONTROLKEY FOOD COST CONTROL
2. Control Inventory Levels
CARRYING TOO MUCH INVENTORYCARRYING TOO MUCH INVENTORY
Ties up valuable CASH
Leads to OVER‐PORTIONING
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 17
KEY POINTKEY POINT
“If you buy salad dressing in 5 gallon containers instead of 1 gallon containers, employees don’t measure as strictly.”
-- John ZehnderZehnder’s Restaurant
CARRYING TOO MUCH INVENTORYCARRYING TOO MUCH INVENTORY
Creates more WASTE & spoilage
Encourages THEFT
TRACK YOUR INVENTORY LEVELSTRACK YOUR INVENTORY LEVELS
The ratio tells you how much inventory you have on hand based on how much food you’re using per day
# Days Sales In Inventory
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 18
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
Ending InventoryLemons UsedPeriod
Assumptions:
7570
7 days
Lemons Used 70
# of Days in Period 7 days= 10
Calculate Average Daily Lemons Used
STEP 1
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
Lemon Inventory 75
Ave. Used Per Day 10= 7.5 days
Calculate # Days In Inventory
STEP 2
# DAYS IN INVENTORY RATIO# DAYS IN INVENTORY RATIO
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 19
Ending InventoryFood CostPeriod
Assumptions:
$10,00030,00030 days
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
Food Cost (P&L) $30,000
# of Days in Period 30 days= $1,000
Calculate Average Daily Food Cost
STEP 1
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
Food Inventory $10,000
Ave. Daily Food Cost $1,000= 10 days
Calculate # Days In Inventory
STEP 2
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 20
Meat 6.1Seafood 4.5Poultry 3.2Dairy 2.5Produce 1.1Bread 2.2Grocery 8.4
Days Per Category
# DAYS SALES IN INVENTORY# DAYS SALES IN INVENTORY
Full Menu 6 to 7 days
Quick Serve 3 to 5 days
RULE of THUMB
# DAYS IN INVENTORY RATIO# DAYS IN INVENTORY RATIO
WHEN YOU REDUCE EXCESS INVENTORYWHEN YOU REDUCE EXCESS INVENTORY
More CASH
Higher QUALITY products
HIGHER product utilization
Lower FOOD COST
More PROFIT
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 21
Week 1 Week 2 Week 3
Weekly Sales
Beg. InventoryPurchasesGoods AvailableLess End. Inv.
Food Cost
$ 25,000
15,00010,00025,000(15,000)
$ 10,000
Food Cost %
Days Sales in Inv.
40%
11
$ 25,000
15,0008,500
23,500(14,000)
$ 9,500
38%
10
$ 25,000
14,0007,500
21,500(12,300)
$ 9,200
37%
9
HOW INVENTORY LEVELS IMPACT FOOD COSTHOW INVENTORY LEVELS IMPACT FOOD COST
Why?
# OF DAYS SALES IN INVENTORY# OF DAYS SALES IN INVENTORY
Ending
Inventory
Cost of
Sales
Number
of Days in
Week
Average
Cost Per
Day
Number of
Days On
Hand
Inventory
Turns
Inventory On Hand:
Food 2,885 4,168 7 595 4.8 1.4
Liquor 2,554 331 7 47 54.0 .1
Beer 595 253 7 36 16.5 .4
Wine 1,146 474 7 68 16.9 .4
Total Inventory 7,180 5,227 747 9.6 .7
Category
Inventory Stats
KEY FOOD COST CONTROLKEY FOOD COST CONTROL
3. Running Inventory on Key Products
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 22
KEY FOOD COST CONTROLKEY FOOD COST CONTROL
10 – 15 products drives food cost
Can make up 60‐70%+ of total food cost
Running Inventory onKey Products
RUNNING INVENTORY EXAMPLE:BEEF PATTIESRUNNING INVENTORY EXAMPLE:BEEF PATTIES
Opening Inventory 20Purchases 100Total Available 120Less Sales (40)Ending Inventory - IDEAL 80
Ending Inventory - ACTUAL 78
Difference (2)
INVENTORY IS . . . INVENTORY IS . . .
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 23
Michael PassalacquaAngelo’s RestaurantWashington, PA
Key Item Running Inventory Worksheet
Week Beginning > WeekDay of the Week > MON TUE WED THU FRI SAT SUN Over(Short)
Beef Patties / EABeginning Inventory 20 135 98 53 0 0 0
Received 144 0 0
Sold 26 35 45
Adjustments + (-) (2)
Ending Inventory - IDEAL 136 100 53 53 0 0 0
Ending Inventory - ACTUAL 135 98 53
Difference - over (short) (1) (2) 0 (53) 0 0 0 (56)
Chicken Breasts / EABeginning Inventory 25 159 102 35 0 0 0
Received 180 0 0
Sold 45 55 68
Adjustments + (-) (1)
Ending Inventory - IDEAL 159 104 34 35 0 0 0
Ending Inventory - ACTUAL 159 102 35
Difference - over (short) 0 (2) 1 (35) 0 0 0 (36)
Beef Brisket / LBBeginning Inventory 50 148 95 29 0 0 0
Received 150 0 0
Sold 49 52 63
Adjustments + (-)
Ending Inventory - IDEAL 152 96 32 29 0 0 0
Ending Inventory - ACTUAL 148 95 29
Difference - over (short) (4) (1) (3) (29) 0 0 0 (37)
6/14
Restaurant Name
In the Resource Library
1. Weekly Food Cost
2. Reduce Excess Inventory
3. Running Inventory on Key Products
ESSENTIAL FOOD COST CONTROLSESSENTIAL FOOD COST CONTROLS
Is there “one” thing that you will do differently?
3 Essential Food Cost Controls 6/27/2017
© Copyright 2017 RestaurantOwner.com 24
ESSENTIAL FOOD COST CONTROLSESSENTIAL FOOD COST CONTROLS
Your Comments & Questions
Reduce the Hassle and Discover the Benefits of a Better Weekly Inventory Control System
Coming August 9th!!
LIVE WEBINAR: Kitchen Management 101
Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant
Thanks for attending!!
Best Practices for Controlling Food Cost
3 Essential Food Cost Controls for Independent Restaurants