How to Control Your Food Cost and Explode Your Profits

These five simple systems can help you rein in food costs

By David Scott Peters, TheRestaurantExpert.com

Most caterers point to their food distributors and ask me how they can ever make a profit when rising food prices seem so out of control. The truth is food prices are just a small part of your challenges. What you do with your product has a much bigger impact than what you’re paying for product.

Now, don’t get me wrong; I am not saying you’re not supposed to ensure your vendors are treating you fairly. I’m just saying that with the right systems in place, they won’t have that much of an impact.

Before we get into how to control your food cost and make more money, I want to make sure you understand that your food cost is not purchases divided by sales; it’s beginning inventory, plus purchases, minus ending inventory, to give you the dollar value of the product used, thereby giving you your cost-of-goods-sold number. To get the percentage, divide usage by gross sales for that time period.

Now you’re ready to use these five simple systems to cut your food cost:

1. Descending Dollar Report: Gather all your food purchases for the past three to six months from every vendor or store where you get food. Next, put all that data in a single spreadsheet, and sort it according to what you spend the most money on. What you probably don’t know is that the top eight to 10 items you purchase represent 50 percent or more of every food dollar you spend on food. Once you know your top 10 purchases based on dollars spent, talk with your sales people. Ask them if they will give you a better price if you promise to purchase all of one or each of the products from them. If not, do they have a like-quality or better-quality product for a lower price? (Never substitute product of a lesser quality, however!) By going through this exercise, you could potentially reduce your food cost by 1 to 3 percentage points buying the same groceries you do now.

2. Receiving Procedures: Make sure you only let a key employee or manager who has been trained on receiving deliveries check them in. They should check for product pricing, catch weights, temperature, quality and quantities. Whether by accident or on purpose, some vendors end up charging you incorrectly, sending you bad product and much more, all costing you money you didn’t need to spend. By the way, your vendors know who checks and who doesn’t. By implementing this simple check and balance, you could easily save $300 to $500 a week in food purchases.

3. Key Item Report: This is a clipboard system that prevents expensive or key products from being stolen. It’s a simple count sheet for 10 to 15 items you want to keep track of on a daily or shift-by-shift basis. List the product and how many portions are on the line or cooler. Then write in how many were prepped that day or shift, depending on how much control you wish to have. Starting amount plus prepped gives you how many portions you could have sold. Next, go to your point-of-sale system and find out how many of that product you have sold. Subtract that from what you could have sold. This will tell you how many you should still have in stock. Now go visually check the actual count with that number. If you are short product, it better be on the waste sheet. If not, you either have theft or worse: managers not using the systems you put in place to control your food cost. The sole purpose of this system is to keep honest people honest and discourage theft.

4. Waste Sheet: This is a clipboard system in which you mark down every product/item that is wasted, spoiled, dropped, over-cooked, etc., plus who wasted it, the cost of that product and the reason why it was wasted. Most back-of-house team members think this is an “I gotcha!” It really isn’t. It’s a proactive management tool. When you discover there is a problem, you can fix it today rather than 15 days into next period, when your profit-and-loss statement says your food cost is high. By then, it’s too late because you’ve lost that money.

5. Portion Controls: If your ideal food cost is 30 percent, and you over-portion items by just 10 percent, you end up making a 30 percent ideal food cost 33 percent. If your catering business does $1 million in food sales, that’s the equivalent of $30,000 down the drain just from over-portioning. You need to put portion controls everywhere you can in your kitchen; have a manager be responsible for checking a line checklist to ensure portion controls are being used and followed. You will steady your food cost and see increased sales. The more consistent you are, the more likely your sales will go up because of returning customers.

If you are looking at your food cost and wondering why it’s running so high, first make sure you are calculating the numbers correctly. Once you have done that, start implementing these five simple systems to control your food cost, and watch it drop while your bank account grows.

About the Author

David Scott Peters is a restaurant consultant, event speaker and founder of TheRestaurantExpert.com, a company committed to the success of independent restaurants. TheRestaurantExpert.com
offers an exclusive online restaurant management software designed specifically to meet the complete operational needs of independent operators. Combined with one-on-one coaching and group workshops, TheRestaurantExpert.com is assisting independent restaurants find success in the highly competitive restaurant industry. Download a free
report to discover the number-one secret to lowering food and labor costs, and learn more about how Peters can help you at www.TheRestaurantExpert.com.