Ultimately there are only two ways to make a food business more profitable: you can increase sales or reduce cost. In a depressed economic environment increasing sales is challenging. The following tips are proven methods of reducing food cost:
1. Measure It
“You can’t control what you don’t measure”. Regular stock takes provide a basis for the calculation of the “Cost of Goods Sold” (CoGS). CoGS are calculated using the following simple formula.
Opening Value + Purchases – Closing Value = CoGS
The CoGS as a percentage of Sales is a valuable measure for food cost control.
A spreadsheet can be used as a easy and cost effective solution for calculating Opening and Closing stock values and tracking purchases.
2. Shop Around
It is important to build a relationship with your suppliers, howeverit is also healthy to compare prices with competitors to ensure you are getting a good deal. Keeping a finger on the pulse of market prices by regular price comparisons can reduce food cost.
3. In-House Preparation
Preparing food in-house rather than purchasing pre-prepared ingredients can reduce food cost. There are a wide variety of pre-prepared ingredients available, from pre-cut vegetables to pre-made sauces. Typically pre-prepared ingredients are substantially more expensive than their raw ingredients.
There are a number of considerations when comparing pre-prepared with in-house preparation including:
- Labor cost
- Availability of suitably skilled staff
- Quality
4. Monitor Waste
Again: “You can’t control what you don’t measure”. There are a number of ways to monitor waste including:
- Implementing a waste log
- Waste bin audits
- Waste collection and measurement
A balance between reasonable controls and controls that apply excessive overhead is required. It is often useful to implement controls as required (when food costs are out of control) and/or spot checks.
5. Portion Control
Food portions vary for a number of reasons including differences in staff practices and raw ingredient size fluctuations. Portion size variation can be minimized by employing tactics such as documenting standard recipes and measuring out portions prior to service.
6. Stock Rotation
Rotating stock not only improves the quality and consistancy of your end product but also reduces waste, reducing food cost. Labelling food with recieval date takes the guess work out of stock rotation.
7. Go Seasonal
The cost of vegetables varies greatly depending on seasons. Typically when produce is “in-season” there is a greater supply, so that demand is easily met, and the price decreases.
Fresh seasonal produce also lasts longer. The quality of produce that is in-season is usually better as it has not been stored for long periods or travelled great distances.
8. Cost It
Costing recipes/menus provides a baseline by which to compare actual costs. Without a yardstick there is no means to determine if food cost is too high or too low.
Accurately costed recipes also provide valuable information for sales mix analysis and menu engineering.
9. Planning
Effective planning can be used to purchase wisely and reduce waste. Sales estimates based on previous periods, same time last year sales, future bookings and special events can provide a basis to purchase adequate amounts, but not excessive stock.
10. Specials
Offering specials not only adds variety to the menu, but can be used to reduce food cost. By selecting specials with a low food cost, but high perceived value can reduce the overall food cost. Specials can also be used to move slow moving stock and reduce waste.
