How much is that hoagie in the window

Student Objectives: • Define the term food cost  • Perform simple percentage food cost calculations  • Define the term formula pricing  • Describe the term product specification and

How much is that hoagie in the

window?

Student Objectives:

 • Define the term food cost

 • Perform simple percentage food cost calculations

 • Define the term formula pricing

 • Describe the term product specification and relate its

role in maintaining food cost

 • Define the term minimum standard

 • Define the term par stock and describe how it is

related to food cost

 • Define the term portion control and discuss how to

implement effective portion control

 • Define physical inventory and describe its importance

in controlling and defining food cost

 • Demonstrate the ability to calculate food cost and

percentage food cost

 I What is food cost? Food cost is the cost

of food prepared for and consumed by the customer In a broader sense, it is part of

The Cost of Sales which refers to the cost of all products, both food and beverage,

consumed by the guest

 A Food costs are traditionally expressed in both dollar amounts and as a percentage of sales For example, if your operation’s

monthly sales were $75,000 and your food costs were $25,000, what would your

percent food cost be for that month? (33.3).

 B. Actual food cost dollars are essential to keep track of, but food cost is a variable expense that rises and falls with the volume of sales

 (i.e., its size is relative to the volume of sales) A percentage food cost can be a reliable indicator of performance and should remain consistent

regardless of sales volume

 C. There is no “magic number” when it comes to food cost percentage

 Percentage food costs are what your operation decides for them to be

 Your operation’s targeted food cost will vary

depending on the market segment you serve,

your volume of business, fixed expenses and

overhead, other variable costs, desired profit and your sales and pricing strategies

 D. Percentage food costs are valuable to the

foodservice manager because

periods, budgets and industry averages for operations that fall into similar categories (i.e quick-serve Mexican restaurants in central Texas with an annual sales

volume of $750,000 to $1,000,000) In this way the

manager can gather quick feedback for comparison and can judge optimal performance.

II Controlling food cost

individual item is not “formula priced” according to the targeted food cost If this was the case, given a 30%

targeted food cost, a glass of iced tea that costs your

cents

a shrimp cocktail that costs $5 to produce, your selling price would be $20 (not a likely price point)

food cost from all items on the menu and the frequency

of sales for each item in the menu’s product mix.

II Controlling food cost

 B Purchasing

– 1. Specifications (specs): All of the food,

beverages and supplies that your operation has selected to meet certain minimum specifications

to ensure the quality and consistency your

customers have come to expect when they visit your facility

B Purchasing

 3 Most operations put their product “specs” out to bid or enter into a buying agreement with a trusted, reputable vendor.

B Purchasing

 4. Prices may fluctuate with the seasonality of items and other supply and demand situations

 Try to determine pending price fluctuations in

advance through discussions with your vendors and apprise management of any pending price changes

B Purchasing

 5 Vendors adherence to minimum

specifications must be monitored with each delivery.

B Purchasing

 6 Price is not always the determining factor Service, flexibility, consistency and trustworthiness of the vendor must be taken into consideration

B Purchasing

 7 Sometimes food cost can actually be too low Remember that specifications are

carefully outlined in order to achieve

customer satisfaction and expectations If the purchasing agent compromises quality for price, food cost may drop but so will your customer base.

C Receiving and storage

 1. Delivery times should be scheduled to meet

the needs of the operation Trained personnel

must be present to check in, weigh, count and

examine each delivery at the time of delivery

 2. Discrepancies and/or rejected products must

be noted at the time of delivery

 3. Invoice prices must match those quoted on the order form Adjustments or credit memos should

be issued immediately

 4. Management should be notified about any

discrepancies, back-orders, out-of-stocks or

rejected product



 5. All perishable inventory should be rotated into

stock immediately upon

 delivery.

 6. All inventory should be dated upon receipt.

 7. All storage facilities should be monitored regularly

for temperature and sound storage practices to

maintain maximum product quality, shelf life and

safety.

 8. All products should be inventoried and accounted

for on a regular basis.

 9. Minimum par levels should be established and

maintained to avoid over-and under ordering.

 10. FIFO (first in, first out) stock rotation should be

practiced and monitored

D Preparation

 1. Food preparation staff should be issued only the supplies needed for that day’s/shift work

needs

 Requisitions should be maintained for all goods

taken from storage for production, and these

requisitions should be logged

 2. Perpetual inventories should be taken on high cost items (steaks, lobster tails, etc.) and matched against sales and waste sheets

 3. A.P to E.P yield tests should be done

frequently

 4. Portion control procedures should be set in

place and carefully monitored

 8. Production charts and carry-over foods need to

be logged and identified for immediate use

 9. Make sure scales are in place and portion

control is being followed

 10. Food preparation staff needs to be well trained.

 statement (a.k.a financial statement); other

inventories are for proactive

 control by management

E Controlling inventory

 4. All food items are entered into a record and that record is extended to reflect the as-

purchased value of all food items (A similar

inventory is taken for all products related to

alcoholic beverage service.)

E Controlling inventory

 5 Physical inventory sheets should be

designed to be taken shelf-to-sheet

 6 This value of the closing inventory is then used with the food revenues for

 the same time period to determine the

cost of goods sold (C.O.G.S., or

 food cost).

E Controlling inventory

 7. The dollar value of closing inventory of any

given accounting period is

 also the value of the opening inventory for the next accounting period

 8. The formula for determining food or beverage cost is expressed as follows:

 Opening Inventory + Purchases = Total Available - Ending Inventory =

 Cost of Food

10 Determining prime cost

profitability by determining contribution to overhead

11 Customer ordering

 a Ensure effective communications

procedures are in place between the line cooks and the service personnel.

 b Remove any barriers (physical or

otherwise) to efficient service and produced customer orders.

correctly-11 Customer ordering

 c Monitor line or service personnel who are frequently involved in menu items being

misfired, improperly prepared, improperly

served or sent back by the customer.

11 Customer ordering

 d Line and service staff need to be a trained team focused on customer

well-satisfaction.

III Six tips for controlling food

cost

 A Frequent line checks: conduct a line

check prior to each meal period or day

segment Some things to look for

A line check, Some things to look for:

 1. Taste the food

 6. Check line pars against forecast

 7. Inspect in-line storage and

refrigeration for organization

 8. Check back door security

III B Employee training

 1. Observe employees at work

 2. Note where minimum standards are not being met

 3. Schedule retraining

on those standards

 C. Schedule regular meetings—Have frequent

kitchen meetings Daily, post shift meetings are

good forums for

 1. Discussing all the shift events and offering

D Menu analysis

 1. Review your product

sales mix daily

 2. Track your best and

worst selling items

 3. Investigate the worst

selling items

D Menu analysis

procedures are being followed, determine if item(s) should be replaced on the menu by successful specials

infrequently-used items and recipe ingredients and try to find a way to remove them Simplify your inventory!

price changes; it may impact your menu, recipes and

menu pricing

E Establish security systems

 1 Meat and alcoholic beverage storage is locked

 2 Perpetual inventories are reconciled

 3 Back door remains locked

E Establish security systems

 4 Managers are highly visible

 5 Employees are accounted for

 6 Trash runs are periodically and randomly accompanied by a manager

F Monitor systems

 1 Management follow-through

– Check inventories

– Due line checks

– Follow up on all employee and maintence

issues

F Monitor systems

 2 Managing by example

– Be highly visible

Be consistent in how you deal with customers and employees, “ Are you thinking what is best for the business when making decisions.

F Monitor systems

 3 Maintain ticket and transaction control, audit frequently:

 Check for:

– A beverage for every guest

– An entrée for everybody

– Randomly compare table contents to what is on

check/ make note of variances and settle all

disputes at checkout

F Monitor systems

 4 Investigate all till variances at all POS systems and reconcile

– Why is there a variance

– Who is responsible for the error

– Was food being prepared without a ticket

– Is there a possibility of wrong doing or just an

honest mistake