# Cut food costs, not quality

#### According to the National Restaurant Association’s 2015 Industry Report, wholesale food prices have jumped more than 25% in the past 5 years, and more than 5% in 2014.

More than ever, the restaurant business is notorious for its slim margins. The cost of food is one of the largest operation expenses. Since you can’t control the markets, figuring how to control food cost can boil down to a do or die scenario.

In fact, food cost plays a significant role in any restaurant’s success or failure. You might serve great food or provide splendid customer service, but if it kills your profit, your business won’t last very long.

First, let’s define what we mean by ‘food cost’. It’s the percentage of total restaurant sales spent on food product. The formula for calculating food cost is simple: net food purchases divided by net food sales. A good rule of thumb within the fine dining industry is to maintain a 30% food cost, or less.

There are two important points that restauranteurs sometimes miss.

First, the definition of cost control in general is the elimination of any expenses that won’t diminish quality of goods or services as perceived by the customer. If you sacrifice your service and lose customers in an effort to reduce your food cost to a predetermined point, you fail.

Second, while food cost percentages are significant, don’t forget to always see at the bigger picture. Though higher cost items will frequently have a lower markup than lower cost times, they might be more profitable. Take a closer look at this example:

Let’s say your menu has two main dishes: pasta and steak. Your pasta costs you \$4.00 and you sell it for \$16.00. This means its food cost is 25% (4 / 16 = 0.25). Your steak costs you \$12.00 and you sell it for \$32.00. The food cost for the steak is 37.5% (12 / 32 = 0.375).

Now if you only look at the food cost percentage, since 37.5% is higher than \$25%, you’d think you would be better off selling the pasta. But consider how much money you make with each dish. You’re taking in \$12 (16–4 = 12) with the pasta, while with the steak, your profit is \$20 (32–12 = 20). So if you look at the dollars, steak is the winning item here.

When writing your menu, it’s important to create a menu that offers a sufficient variety of choices at the right price and style for your restaurant. The menu items should highlight the strengths of your kitchen staff and minimize their weaknesses. At the same time, they should be practical in terms of equipment and space.

Make your menu work for you. Weigh the menu with both low and high cost times and adjust it to meet your food cost targets. Some months you will have to sell more item A because it’s a low cost item that your customers really enjoy. If food costs are low, you can serve more expensive item and not charge as much. Running low cost menu items to balance it out so you can charge a higher cost item at a more reasonable price point.

Keep in mind that the ingredients required to make the menu items should work together to optimize usage and eliminate waste. For instance, scraps from onion rings can go into the stock pot. Trimmings from cuts of beef can go into a Bolognese sauce. It might take you a week to accumulate enough scraps to run a special for one day, but don’t give up.

Even if you can’t figure out how to get a by-product from one menu item somewhere else on the menu in another form, serve it for family meal, or save some money and create goodwill that way. In order to ensure all the ingredients are optimized for usage, your kitchen has to be organized. Of course, cooperation and organization, are always good habits to develop and encourage in any kitchen.

### 2. Purchase wisely

Your goal when it comes to purchasing is to get the right amount of everything you need, when you need it, with the correct specifications, at the best price available with an acceptable level of service. All purchases should be menu driven. For items used in large quantity, you can also order in bulk.

The purchasing agent should work closely with the chef and manager to determine what, when and how much of everything to order. Create spreadsheets to keep track of lists of all food items, including pertinent specifications, preferred vendors and price history. The lists will come in handy when you want to figure out food costs for individual dishes.

Remember ordering something you don’t need is as sloppy and expensive as not ordering what you do need. If you own several restaurants, it’s a good idea to have more than one vendor for each type of product. This keeps them interested and competitive and you can avoid working with middle men.

On the other hand, if you run a small restaurant, it might be better to give most of your business to fewer vendors so that you can be a more significant account to them. Of course, this only happens if you have established a good relationship with the vendors. Stay current with any changes in prices, and be aware of how timely deliveries are. Likewise, being organized and always paying your bills on time help you get the best service out of any vendor.

### 3. Make sure you receive what you ordered for the price you were quoted

Have a system in place to ensure that the vendors are delivering what you have ordered. Many vendors can get away with shorting shipments, especially when it comes to products such as meat, seafood, and dry goods. Whoever checks the order should carefully count, inspect the produce, and even smell the products for freshness.

In addition, it’s no good if the vendor delivers 30 pounds of tomatoes and shows you an invoice indicating 30 pounds of tomatoes, but in fact you order 300 pounds of tomatoes.

Try to find vendors who offer easy returns and refunds for unacceptable product and quick delivery of shorted items. Also, keep an eye open for any specials they might be offering.

### 4. Track your inventory regularly

Inventory that goes bad before you even use it is money wasted due to poor planning and lack of attention.

Once inventory arrives at your restaurant, it must be stored so that you experience minimum loss through spoilage and theft. For instance, dry storage areas should be well ventilated and pest-free. Sufficient space and light to make it easy to rotate stock. Refrigerators and freezers should be checked frequently for correct temperatures and cleanliness.

Assign one or more employees to the task of checking and storing orders. With the help of restaurant software, inventory can be conducted very quickly. You can gain significant insight into the daily consumed goods, and identify the need of new purchases in a proper time frame. You can also calculate any loss of inventory due to shrinkage, water weight, improper storage, expiration data and so on.

Tracking inventory on a regular basis will help you avoid the creation of unnecessary goods that often results with food spoilage and big financial losses.

### 5. Control portion size

Portion control is an important factor both in terms of your costs and your customers’ satisfaction.

There are two places where portion control takes place: during prep and at service.

Use a portion scale. Any usable trim should be properly stored to be used in a timely fashion. Your kitchen should have both ounce and pound scales for different jobs. Management should check them periodically for accuracy. Make sure your staff members are properly trained — for example, knowing that each portion of salmon fillet should be four ounces and not any more can make a difference in your food cost target and potentially your business profits.

For sauces and soups, use the appropriate size ladles. Spend time working with your cooks on portioning and presentation can help avoid consistent, repetitive mistakes that cause the increase in food costs.

Your restaurant also can benefit from a well-written recipe with accurate yields. Not only does it enable you to figure out the cost for a particular dish, but it also helps the chef in terms of his ordering and preparation. Update the recipes as needed. Indicate all weights as accurate as possible. Your recipes should reflect what you’re actually producing and what you’re buying from the vendors.

We’ve already mentioned the food on the menu at the beginning of this article. However, this point concerns the price on the menu. In fact, menu pricing is a crucial part in running a successful operation.

To start off, figure out how much you think you can get away with. Try to take everything into consideration, from your location, competition, food quality, concept, to atmosphere, service, restrooms, parking, anything you can think of that matters to your customers. Do you like to be on the higher end and make more from less, or the lower end and make up for it in volume?

Be aware, if your food cost is high and you think you’re not charging enough, that’s how you can get into trouble. If the pricing is too high, try to reconstruct the dish to include less expensive ingredients.

### 7. Educate your staff

Every one of your employees should receive adequate practical training about the rules of movement in the kitchen or bar while preparing meals or drinks. How can they contribute to keeping food costs low if they’re properly trained?

Your cooks need to understand the value of using every piece of a product and to be creative with the scraps. Workers in the bar must learn to move circularly to avoid unnecessary bumping that results in slower service and frequent spilling of drinks. Train managers and bus staff to serve diners to help out during rush hours.

Teach your staff how to sell specials, upsell appetizers, desserts and beverages, remember regular customers and their preferences, and work with your kitchen staff to get orders in and out quickly. This will improve staff quality, productivity and customer service.

It’s one thing to require a process for putting together menu items, ordering and storing inventory, but it’s another to uphold that process. With the help of restaurant software, you can track employee performance. This allows you to see firsthand who’s over-portioning and focus on coaching staff members who need it most. Likewise, you can reward top performers to ensure their continued standards of excellence.