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
