Simple Food Costing Tool is like a heart monitor for your business. Sometimes you’re not aware of issues until it’s too late. By monitoring your costs, which is basically when you got high blood pressure, you need a heart monitor to monitor.
There are many benefits to food costing including:
- Creates an awareness that food costs will be analyzed closely and a culture amongst the staff that cost controls are important
- The people are paying that which you pay attention to gets attention.
- It puts the restaurateur in control.
- It duplicates what the chains know and do.
There are three important aspects to food costing:
1. Price
2. Recipe mix
3. Tracking
The menu item pricing of course is the owner’s responsibility to go out in the marketplace, and determine the competitor’s pricing, what the market can bear and to adjust those prices accordingly to remain competitive.
The recipe mix involves the ingredient costs – what the food company charges you. So depending on the ingredient costs and the portion you use, that drives the cost of the recipe mix for menu item.
Ongoing tracking provides a daily pulse of the business based on date range who will give you the food costing based on actual sales.
To get their food cost percentage, most owners I know just look at their QuickBooks to their profit and loss, and take what they bought in a month, and they divide that by total sales, which may or may not include sales tax. One major item of note: I want to teach an operator that food cost does not equal total food purchases divided by total unit sales.
What we want is true food cost. A simple food cost formula is made up of two percentages:
The first percentage is the actual food cost percentage. That is calculated by taking your beginning inventory on a given date range, plus the purchases of items that you used (food and paper), less the ending inventory on that date range you’re selecting. That will equal your food cost in dollars.
You take that number, and divide it by net sales. We call that “x tax,” which means it’s net sales exclusive of sales tax.
So you take the food cost in dollars, divide it by the net sales, and that will give you your actual food cost percentage. Then you subtract out the expected food cost percentage, and you’re expected food cost percentage is calculated by your simple food cost divided by net sales.
Your simple food cost is made up of your actual sales mix, meaning, what you sold of each menu item at a given day, times your theoretical menu item cost that we performed in the simple food cost program.
So it’s your actual sales mix from your point of sales system times the food cost, ingredient cost, and portions that your Performance Food Services rep helps the owner come up with. You take that number, which is in your simple food cost, divide that by net sales, and then you come up with your expected food cost percentage.
So you have your actual food cost percentage less your expected food cost percentage. In other words, exactly if you portioned it out perfectly every time like McDonald’s does, the difference of those two percentages is your waste. Waste is a number that you want to control, and the only way to control it is to actually put a program in place to do simple food costing.
So again, the benefit of understanding and implementing food costing is that it creates an awareness of exactly where the price, the recipe mix, and what the results are generating from every action that you put into the menu.
It puts the owner and the Performance Food Services food supplier in control of the food costs. Bottom line is you’re duplicating what the chains know and practice at minimal cost; and if it is successful for the chains, it’s successful for the independents.
