Top 10 Food Costing Tips
Getting your prices right is the most important aspect of catering, especially at this time of year! Follow our top 10 tips below to save your business money and add healthy profits to the bottom line.
1. STANDARDISE AND COST YOUR RECIPES
Every recipe for every menu item, both à la carte and catered, must be standardised and costed correctly. This basic discipline ensures consistency of product and ongoing profitability. While the initial set up requires some effort on the part of the chef or management team, it allows each item to be priced based upon its raw ingredient cost. Some ingredients will change price quickly, so its important to revisit recipe costing on a regular basis. Set up each recipe on a separate worksheet in Microsoft Excel. This way you can amend the ingredient prices and re-cost dishes quickly. Train someone else in your team to re-cost also, this will lighten the burden for you.
2. PRICING BASED ON KNOWN COST STRUCTURE
The standard method of pricing is to take the cost of each menu item and multiply it by an appropriate multiplier to cover the cost of labour, fixed and variable costs. For instance if you multiply the cost of the ingredients by 2.5, you will yield a 40% food cost, with a 60% profit; 3 times, will yield a 33% food cost and 66% profit. This simple formula is all well and good, but if your revenues are below projections and/or your payroll cost or overhead are higher than expected, you may still lose money. Given the interplay of revenues, pricing, volume of business, and cost structure, these numbers must be tracked closely and reviewed frequently.
3. PORTION CONTROL IS ESSENTIAL
Standardised recipes are costed based upon specific portion sizes. If untrained or poorly supervised employees routinely serve larger than costed portions, you can kiss your profitability goodbye. Costly meat and fish products should be weighed to ensure correct portion size. Ladles of specific sizes should be used to plate menu items. Pies, cakes, and other baked desserts should be cut and served using templates to ensure the correct number of portions are realised from a multi-portion. All kitchen staff must be trained to serve the portion size that has been costed.
4. LABOUR CONTROL
Labour, both front-of-house and in the kitchen, is the single largest expense in a food service operation; it is also a continuing challenge to control. Electronic timekeeping systems make it easier for supervisors to verify employee hours, but regardless of system used, supervisors must monitor payroll hours daily. In my experience a ceiling of 20% of VAT exclusive income should be adhered to, to ensure profitability if a 66% profit is achieved.
5. BENCHMARKING REVENUES AND EXPENSES
Benchmarking is the act of measuring and analysing operating performance. In a food service operation there are many things to benchmark, such as meals served and average spend per meal period by day of week; payroll hours by position by meal period or day; and beer, wine, liquor sold per meal period and day of week. When tracked over time, these statistics become the baseline to project and monitor future performance. Benchmarks also allow measurement of customer reaction to foodservice initiatives such as new menus or pricing. Most importantly, benchmarking makes supervisors more knowledgeable about their operations. Such knowledge translates to improved operations and bottom lines.
6. ROUTINE AND CONSISTENT INVENTORIES
Inventories are critical to monitor stock levels, avoid shortages, control pilferage, and determine cost of goods sold. Inventories can also be time consuming and inconvenient for hard working chefs. Inventories sometimes get delegated to poorly trained subordinates who miss or miscount key items. Sloppy inventories contribute to erratic cost of goods sold. Poorly organised storerooms contribute to sloppy inventories. Keys to accurate inventories include well-organized storage areas, knowledgeable individuals conducting inventories, routine and timely inventories, and organised receiving documents, invoices, and credits slips. Delegating counts is acceptable if employees are trained. However, having the same employee conduct all inventories without spot-checking and oversight will invite problems.
7. SUGGESTIVE SELLING TRAINING FOR EMPLOYEES
Service employees who are trained in the techniques of suggestive selling can improve your average sale value and bottom line. Whenever a new menu is put in place, all servers should be provided a “selling sheet” that gives key information about each entree. Such information should include cooking method, ingredients, time of preparation, and enticing descriptors to help sell each item. Just as standardised recipes are important in the kitchen for consistency of product, selling sheets provide the service staff with the knowledge and information they need to sell the product. In addition to entrees, special training should be given for the suggestive selling of appetisers, desserts, wines, and speciality alcoholic beverages. The time spent providing servers with the information and confidence to sell your food and beverages will yield consistently higher average sales values.
8. CONTINUAL FEEDBACK TO EMPLOYEES
Every month’s budgeted food sales is made up of how many meals are sold and how much each guest spends on average for a meal. By breaking your projections down into meals and average spend per head and posting your daily targets prominently in the kitchen, you provide your servers with goals that connect their daily efforts to your profitability. By comparing month-to-date actual meal counts and average spend per head to projected, you give your employees a day by day record of their progress. Most people are competitive by nature and this simple technique will become a powerful incentive to servers. The same technique can be applied to appetisers, desserts, and bottles of wine sold.
9. FORECASTING AND SCHEDULING
By tracking key benchmark statistics and keeping a daily log of business levels and staffing, foodservice supervisors can develop a routine system of forecasting business levels. While some level of volatility can always be expected in guest patronage, the act of forecasting, when formally done and evaluated after the fact, will assist in maintaining service levels while controlling labour cost.
10. GUEST FEEDBACK
While some guests are vocal with their opinions, many are not. Food service supervisors should make it easy for guests to provide feedback. Comment cards must be readily available, periodic surveys should be conducted, revenue benchmarks should be analysed to measure guest responses to offerings and initiatives, and employees should be trained to routinely report comments made or overheard to supervisors.
Every professional food and beverage manager is aware of these necessary elements to success. Unfortunately, in the ongoing rush of business they are often overlooked. At its root the problem is one of organisation. By taking the time to establish systems to address each guideline, by training and delegating tasks, by making each guideline part of the daily routine, each of these steps can be easily integrated into your operation. While the initial exertion may be great, so also is the ongoing payback.
Useful formula – To determine profit percentage = Gross Profit cash multiply by 100, and then divide by VAT exclusive sales price.To achieve a particular profit percentage = Take your desired % figure from 100. Then take the cost price of your portion/product and divide it by the number you have left. Then multiply that by 100.