Taking the "Gut Feel" Out of the Food Cost Equation

by Chuck Gohn

Food cost. The sound of those words is enough to send a chill up the spines of the most intrepid chefs. Blood pressures are raised by it. Bonuses are forfeited because of it. Careers hinge on it. It is undoubtedly one of the most sensitive topics in the industry.

I propose that more often than not, the source of the stress isn't the food costs themselves, but the never-ending disparity between managers and chefs regarding what the magical "ideal" or "theoretical" food cost should be. Depending on which side of the serving line they are on, each member of the management team uses their own "gut feel" to attack or defend the monthly food cost number, a feeling that is influenced by industry averages, experience or bonus desperation.

But feelings can get in the way of facts. By monitoring food costs based upon some arbitrary number instead of investing the time to calculate the true ideal food cost, management can be guilty of criticizing a kitchen staff's performance when the costs are in line or, worse, be lulled into food cost complacency when the costs are running two to three percentage points off the mark. The best gauge of a restaurant's food cost is an internally developed standard based upon an analysis of inventory, recipes, sales mix and price structure.

Simply put, an ideal food cost is the number that will end up in the monthly food cost bucket if everything goes as planned. It is the aggregate cost of all ingredients that should have been used, based upon your recipe costs and sales mix. There is nothing arbitrary about it.

"The trick is identifying all of the menu items and condiments that go out to your customers, nailing down each item's recipe ingredients, calculating the cost of preparing each recipe based on current inventory prices and ensuring that you have a system in place for tracking the menu sales mix. Depending on the size and complexity of your menu, that can be about as much fun as a visit from the health inspector."

Fortunately, your back office computer can take the bulk of the pencil pushing out of costing your menu. There are currently numerous software programs on the market that have streamlined the arduous task of menu costing, replacing the tedious manual recipe cost sheets with "electronic" cost sheets that can update your recipes "on the fly" for changes in ingredients, portion sizes, inventory costs, or menu prices. And best of all, the programs are designed to be "manager friendly", so you don't have to be an engineer to operate one.

Yes, you still have to dig through the invoice pile to find the current cost of pineapple tidbits and get your chef to commit to the number of parsley springs on the blue plate special, but the beauty of these programs is that once the inventory and recipes have been entered, you have a database that is packed full of valuable information on inventory usage, purchase trends and menu item profitability that would take many labor hours to accumulate manually.

So stop making excuses. If you want to replace the monthly food cost rationalization game with food cost accountability, then get serious about getting a handle on your food costs. The bonus you save may be your own.

CLICK HERE TO VIEW THE RESTAURANT RESOURCE GROUP'S RECIPE, INVENTORY & MENU PROFITABILITY WORKBOOK. This Excel Workbook is designed to easily cost each menu item in your restaurant, maintain dynamic links to each ingredient used, and accept inputs from your POS system with the number of each menu item sold. Not only can your restaurant's overall Ideal Food Cost be automatically derived from this workbook, but so can the Ideal Food Cost of each Menu Category (e.g. Appetizers, Entrees, Desserts).

 

Chuck Gohn is President of Restaurant Associates NW (www.ranw.com). Chuck specializes in restaurant accounting systems and cost controls. He can be reached via email at chuck@ranw.com.

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