Questions & Comments. 3 Essential Food Cost Controls 12/6/2017. Copyright 2017 RestaurantOwner.com 1. Your Hosts

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1 3 Essential Food Cost Controls for Independent Restaurants Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant Best Practices for Controlling Food Cost Welcome! Today s webinar will be starting shortly. Your Hosts Joe Erickson Jim Laube Questions & Comments Copyright 2017 RestaurantOwner.com 1

2 In The Last Week? IN THE LAST WEEK? Were you in your kitchen? In The Last Week? IN THE LAST WEEK? In the walk in? In The Last Week? IN THE LAST WEEK? Did you sign for a delivery? Copyright 2017 RestaurantOwner.com 2

3 In The Last Week? IN THE LAST WEEK? When was the last time you tasted your entire menu? KEY POINTS! Key Point There is a LOT going on in your kitchen! Good results require effective systems & controls! Essential Food Food Cost Cost Practices Practices Copyright 2017 RestaurantOwner.com 3

4 Average Net Profit Food & Beverage Labor Operating Occupancy & Other NET PROFIT Why? It s VERY easy to lose money working with food! Sales - Expenses = Net Profit Cooking Mistakes Theft Short Weights Food Cost Estimated that 10 15% of restaurant food ends up in the trash! Wrong Orders Spoilage Over Portioning Copyright 2017 RestaurantOwner.com 4

5 Why Improve Your Food Practices? 1. Control costs 2. Improve profitability Sales - Expenses = Net Profit Guest Experience Food Why Improve Your Food Practices? 1. Control costs 2. Improve profitability 3. Higher quality 4. Greater consistency 5. Food safety The Guest Experience! Copyright 2017 RestaurantOwner.com 5

6 6. Point of Difference! Getting the Most Out of This Webinar I already knew that. Does your staff know it? Are you DOING it? If so, do your people know WHY? Copyright 2017 RestaurantOwner.com 6

7 What s In Food Cost & What Isn t? What s Food Cost? Food & non alcoholic beverage products only! Soft Beverages Bottled Drinks Syrup CO2 Coffee Tea Copyright 2017 RestaurantOwner.com 7

8 Multiple Food Cost Categories How to Calculate Food Cost How to Calculate Food Cost + Beginning inventory + Food Purchases - Ending inventory Food Cost (what you started with) (what was bought) (what was left) (what was actually USED) Copyright 2017 RestaurantOwner.com 8

9 How to Calculate Food Cost Steps to Speed Up Inventory Counts Reduce Inventory Time Shelves Organized & Labeled Copyright 2017 RestaurantOwner.com 9

10 Reduce Inventory Time Products on count sheet in shelf order Count Sheet Reduce Inventory Time Have a separate count sheet for each storage location Walk In Count Sheet Freezer Count Sheet Dry Storage Count Sheet 5 Key Factors That Affect Your Food Cost % Copyright 2017 RestaurantOwner.com 10

11 Factors That Affect Your Food Cost % 1. Menu prices Factors That Affect Your Food Cost % 1. Menu prices 2. Recipes Factors That Affect Your Food Cost % 1. Menu prices 2. Recipes 3. Sales mix 2, ,205 Copyright 2017 RestaurantOwner.com 11

12 Factors That Affect Your Food Cost % 1. Menu prices 2. Recipes 3. Sales mix 4. Product costs $3.80 $18.50 $9.25 Factors That Affect Your Food Cost % 1. Menu prices 2. Recipes 3. Sales mix 4. Product costs 5. Product utilization When You Improve Product Utilization Less waste Less spoilage Less theft Accurate portioning Results in lower cost, higher quality & greater consistency Copyright 2017 RestaurantOwner.com 12

13 The Impact of Sales Mix On Food Cost Impact of Sales Mix On Food Cost Menu Ingredient Price Cost 1. Cheeseburger $6.50 $ Steak Sandwich $9.95 $3.98 Impact of Sales Mix On Food Cost Menu Menu Food Food Sales Total TTL Ideal Item Price Cost Cost % Mix Sales Cost Burger $6.50 $ % 2,000 $ 13,000 $ 3,120 Steak Sand % 750 7,463 2,985 Totals 20,463 6,105 Sales $ 20, % Ideal Food Cost 6,105 29% Gross Profit 14,358 Copyright 2017 RestaurantOwner.com 13

14 Impact of Sales Mix On Food Cost Menu Menu Food Food Sales Total TTL Ideal Item Price Cost Cost % Mix Sales Cost Burger $6.50 $ % 2,000 $ 13,000 $ 3,120 Steak Sand % 750 7,463 2,985 Totals 20,463 6,105 Sales $ 20, % Ideal Food Cost 6,105 29% Gross Profit 14,358 Impact of Sales Mix On Food Cost Menu Menu Food Food Sales Total TTL Ideal Item Price Cost Cost % Mix Sales Cost Burger $6.50 $ % 750 $ 4,875 $ 1,170 Steak Sand % 2,000 19,900 7,960 Totals 24,775 9,130 Sales $ 24, % Ideal Food Cost 9,130 36% Gross Profit 15,645 Which Would You Choose? High Burger Sales High Steak Sand. Sales Sales $ 20, % Sales $ 24, % Food Cost 6,105 29%? Food Cost 9,130 36% Gross Profit 14,358 Gross Profit 15,645 Copyright 2017 RestaurantOwner.com 14

15 NEVER FORGET!!... You take DOLLARS to the bank, not PERCENTAGES! Food Cost % AND Gross Profit Dollars KEY POINT: Before ASSUMING you have a food cost problem, always check your GROSS PROFIT DOLLARS! Bonus: Prime Vendor Copyright 2017 RestaurantOwner.com 15

16 What do all large chain operators have in common? Prime Vendor Economics Sales Product Costs Gross Margin Distributor A Competitive Bid $ 50,000 40,000 $ 10,000 20% Buying from 3 Broadline Distributors & Some Speciality Suppliers Prime Vendor Economics Sales Product Costs Gross Margin Distributor A Competitive Bid $ 50,000 40,000 $ 10,000 20% Prime Vendor $ 200, ,000 $ 30,000 15% Copyright 2017 RestaurantOwner.com 16

17 Prime Vendor Rationale Be open to ways of lowering THE SUPPLIER S costs and enhancing their potential for profit in return for LOWER PRICES!! Prime Vendor Rationale Be open to ways of lowering THE SUPPLIER S costs and enhancing their potential for profit... Fewer deliveries Night drops Short payment terms Online ordering Utilize stocked products Potential Prime Vendor Benefits Lower overall prices Less bookkeeping Access to more vendor services Copyright 2017 RestaurantOwner.com 17

18 Potential Supplier Services Menu design Menu & recipe development Server training Serve safe training Business practice reviews Recipe costing software Potential Prime Vendor Benefits Lower overall prices Less bookkeeping Access to more vendor services Less time on purchasing activities Opportunity to have a genuine win win relationship Smart suppliers WANT you to succeed! (& show it) In The Resource Library Prime Vendor Bid Templates Audit privileges are part of the agreements! Understand how the distributor defines cost! Copyright 2017 RestaurantOwner.com 18

19 In The Resource Library Prime Vendor Bid Templates In The Resource Library Prime Vendor Bid Templates In The Resource Library Prime Vendor Bid Templates Copyright 2017 RestaurantOwner.com 19

20 Prime Vendor Prime Cost Resources Articles Prime Vendor Prime Cost Resources Templates 2016 State of Your Restaurant Survey QUESTION: What was the best decision, new business practice you implemented in 2016? MEMBER: Prime Vendor Agreement. Consolidating roughly 80% of our purchasing to one Prime Vendor saved roughly 9% COGS as well as administrative time saved by contacting less vendors and processing less checks. Copyright 2017 RestaurantOwner.com 20

21 2017 State of Your Restaurant Survey QUESTION: What was the best decision, new business practice you implemented in 2017? MEMBER: We fired several vendors. We now use a prime vendor. We cleaned up our inventory, reducing the number of items we had to purchase and track. We were able to reduce cogs an average of 5 %. 3 Key Controls to Reduce Your Food Cost NOW! 1. Weekly Food Cost Copyright 2017 RestaurantOwner.com 21

22 What get s measured, get s managed. (what get s managed, improves) Benefits of Weekly Food Costing Greater awareness & accountability Will change your kitchen s culture Faster recognition & response to problems Your food cost will go down! Invoice Log Copyright 2017 RestaurantOwner.com 22

23 Blue Fish Grill PRIME COST WORKSHEET Week Starting/Ending Dates 6 Apr 12 Apr Taxes & Benefits 22.0% MON TUE WED THU FRI SAT SUN INVENTORY 6 Apr 7 Apr 8 Apr 9 Apr 10 Apr 11 Apr 12 Apr BEG END TOTAL PCT SALES: Food 1,406 1,598 1,847 2,058 2,456 2,857 1,983 14, % Liquor % Beer % Wine % Total Sales 1,562 1,869 2,186 2,420 2,886 3,464 2,378 16, % Purchases COST OF SALES: Food 4,417 3,231 (2,885) 4, % Beverage Liquor 811 1,958 2, % Beer % Wine 348 1,021 1, % Total Beverage 1,307 3,551 4, % TOTAL COST OF SALES 5, % LABOR: Management 1, % Hourly Personnel , % Payroll Taxes & Benefits % TOTAL LABOR 5, % PRIME COST 10, % GROSS MARGIN 6, % Customer Count Check Average Essential Food Cost Controls 12/6/2017 Monday to Sunday Reporting Cycle Opening managers often count products on Monday mornings anyway Low inventory levels on Sunday night / Monday morning RO.com Resource Library Cost of Sales Worksheet at RestaurantOwner.com/foodcost Also consider the Weekly Prime Cost Worksheets RestaurantOwner.com/primecost Copyright 2017 RestaurantOwner.com 23

24 2. Control Your Inventory Levels Carrying too much inventory is one of the MOST EXPENSIVE things you can do Problems With Carrying Too Much Food Ties up your valuable cash Leads to over portioning Copyright 2017 RestaurantOwner.com 24

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26 If you buy salad dressing in 5 gallon containers instead of 1 gallon containers, employees don t measure as strictly. -- John Zehnder Zehnder s Restaurant Problems With Carrying Too Much Food Creates more waste & spoilage Encourages theft Copyright 2017 RestaurantOwner.com 26

27 Problems With Carrying Too Much Food Less inventory, less theft! Track & Monitor Your Inventory Levels # Days In Inventory Ratio Tells you how much food you have compared to how much you re using each day # of Days In Inventory Ratio Full Service Restaurant: Ending Inventory Food Cost Period $10,000 30, days Copyright 2017 RestaurantOwner.com 27

28 # of Days In Inventory Ratio STEP 1 Calculate Average Daily Food Cost Food Cost (P&L) $30,000 # of Days in Period 30 days = $1,000 # of Days In Inventory Ratio STEP 2 Calculate # Days In Inventory Food Inventory $10,000 Ave. Daily Food Cost $1,000 = 10 days # of Days In Inventory Ratio RULE of THUMB Full Menu Quick Serve 6 to 7 days 3 to 5 days Copyright 2017 RestaurantOwner.com 28

29 How Inventory Reduction Lowers Food Cost Weekly Sales $ 25,000 Beg. Inventory 15,000 Purchases 10,000 Goods Available 25,000 Less End. Inv. (15,000) Food Cost $ 10,000 Week 1 Week 2 Week 3 $ 25,000 15,000 8,500 23,500 (14,000) $ 9,500 $ 25,000 14,000 7,500 21,500 (12,300) $ 9,200 Food Cost % Days Sales in Inv. 40% 11 38% 10 37% 9 When You Reduce EXCESS Inventory More CASH Higher QUALITY products HIGHER product utilization Lower FOOD COST More PROFIT RO.com Order Guide Template By Product Par Levels Purchases Inventory Quantities Copyright 2017 RestaurantOwner.com 29

30 RO.com Order Guide Template Order Guide Templates Webinars Articles 3. Running Inventory on Key Products Running Inventory on Key Products products drives food cost Can make up 60 70%+ of total food cost Copyright 2017 RestaurantOwner.com 30

31 Example: Beef Patties Opening Inventory 20 Purchases 100 Total Available 120 Less Sales (40) Ending Inventory - IDEAL 80 Ending Inventory - ACTUAL 78 Difference (2) Inventory Is... Essential Food Cost Controls 1. Weekly Food Cost 2. Reduce Excess Inventory 3. Running Inventory on Key Products 4. BONUS: Prime Vendor Would any of these work in your restaurant? Same Practices = Same Results Better Practices = Better Results Copyright 2017 RestaurantOwner.com 31

32 How to Create a Superior Guest Experience & Make 2018 Your Best Year Ever Coming December 13th!! Unintentional Guest Journey Positive Emotion Negative Emotion STAGE >> ARRIVE WALK IN MEAL PAYMENT WALK OUT EMOTIONAL STATE (MOOD) Potholes in Parking Lot No Wait / + Good Booth Mood - Bad Mood No Trash Near Welcome Front Door? Delicious Food Appealing Refreshing Menu Drinks No Towels Lame in Restroom Apology Wait For 2 nd Entrée Server Served Sincere Thank You Quick Processing One Entrée Lost LONG Wait for Check Unintentional Guest Journey Positive Emotion Negative Emotion EMOTION STAGE >> ARRIVE WALK IN MEAL PAYMENT WALK OUT PLEASED EMOTIONAL STATE (MOOD) CURIOUS DISTRACTED Potholes in Parking Lot Trash Near Front Door HOPEFUL No Wait / Booth No Welcome UNSURE Delicious RELIEVED Food Appealing Refreshing Menu Drinks DISAPPOINTED No Towels Lame in Restroom Apology AMBIVALENT Wait For 2 nd Entrée Server IRRITATED Served Sincere Thank You IMPATIENT Quick Processing One Entrée Lost LONG Wait APPEASED for Check ANNOYED ANGER Copyright 2017 RestaurantOwner.com 32

33 How to Create a Superior Guest Experience Events How to Create a Superior Guest Experience & Make 2018 Your Best Year Ever Coming December 13th!! 3 Essential Food Cost Controls for Independent Restaurants Proven Systems & Practices to Create a Better Guest Experience & a More Profitable Restaurant Best Practices for Controlling Food Cost Thanks for attending!! Copyright 2017 RestaurantOwner.com 33