COMBATING THE RISING COST OF FOOD

Transcription

1 COMBATING THE RISING COST OF FOOD

2 TABLE OF CONTENTS Author: Jessica Anguiano Introduction... 3 Chapter 1: Understanding Food Costs... 4 Chapter 2: Factors Causing Rising Food Costs... 4 Chapter 3: Management Essentials... 5 Handling Inventory Calculating Menu Item Costs Reducing Menu Item Costs... 7 Counting Inventory... 7 Chapter 4: In the Kitchen... 8 Keeping Kitchen Costs Low... 8 Reducing Food Waste... 9 Conclusion

3 INTRODUCTION All business owners must be able to accurately record inventory, manage staff, create schedules, and effectively forecast trends. In addition, restaurant managers must also be able to track and manage food costs, which are constantly changing. While it seems rising food costs are unavoidable there are many changes that can be made to be prepared to address rising costs. Today, restaurants have moved towards management software that simplify complex data and better streamline processes, allowing managers to gain better insights regarding their businesses. This ebook will trace current industry trends within the restaurant industry, how they impact profitability and the methods business owners can use to more effectively manage business day-to-day and combat rising food costs. 3

4 UNDERSTANDING FOOD COSTS Food cost is determined as the percentage of the total of your restaurant sales that are spent on menu ingredients. Food cost is an important ratio and key factor to the success of your restaurant as it directly impacts profitability. Typically, a profitable restaurant will generate approximately 28% to 35% food cost. Food costs are being cited as one of the top challenges facing more than one quarter of restaurant operators this year. In fact, 2011 brought on the strongest annual increase (8%) in food prices and an average of 30% over the past six years. The trend of rising food prices puts tremendous pressure on restaurant owners and operators. FACTORS CAUSING RISING FOOD COSTS A number of factors including the economy, inflation, taxes, labor laws and policies affect the restaurant industry. When it comes to food costs factors such as oil and fuel prices have a significant impact as well. Oil is essential in the agricultural processes as it is used in nearly every fertilizer. A Congressional Budget Office report recently reported that the use of ethanol accounts for approximatley15% of the increase in food prices. Oil is not only affecting the planting process, but also has a significant impact on the transportation and packaging of products. The current water supply has also become a major factor in rising food costs. The drought in California has impacted the cost of dairy, feed and beef. The LA Times reported that cattle supply is at its lowest level since 1951 and prices are at record highs. Meanwhile, the drought in Brazil has caused rising prices in sugar, soy products and coffee. Coffee beans are being damaged due to a condition known as Coracao Negro, which makes green beans black and shriveled. It is estimated that it will take Brazil years to recover and grow healthy beans. As worldwide populations continue to flourish, the demand for increased food supply grows. Due to restrictions on certain oil types, pesticides and water usage meeting these increased demands can become troublesome. 4

5 MANAGEMENT ESSENTIALS Managing a restaurant is filled with intricacies. One of the most detailed issues a manager has to deal with is inventory and how it impacts food costs. With all of the current issues causing prices to rise, managers must be prepared to handle these changes and more efficiently run their restaurants. Here are the essentials managers need to know. HANDLING INVENTORY STEP 1: ORDERING Over-purchasing or shorting when ordering can significantly impact food cost and cause major problems in a restaurant. The first place to begin when managing inventory is to have ordering guides set in place. Ensure that inventory guidelines are easy to read and understand. Take into account the time of year and what kind of demand you will have in your restaurant prior to submitting your order. You should plan for any upcoming holidays or events that may impact the operation. STEP 2: DELIVERY To better streamline your inventory process, it is crucial to establish a fixed time for delivery. It is suggested that early mornings between 7a.m and 10a.m, before the kitchen and restaurant are open, is the best time for deliveries. This also leaves ample time to accurately count and store deliveries before customers arrive. Upon delivery, all items should be weighed and tracked to ensure deliveries are accurate and you are not being shorted. This is especially necessary for items such as; meat, poultry, seafood and cheese as the slightest mistake can be costly. STEP 3: STAFF TRAINING Having a well-trained team in place to take care of inventory is key. Staff should have a strong understanding of inventory categories, purchase units, dining room traffic levels, and should be in a set ordering routine. Implementing an inventory system will help to more accurately track inventory while reducing labor costs. 5

6 STEP 4: COUNTING INVENTORY Counting inventory when ordering and receiving items will help to better anticipate demands and more accurately account for shrink or theft. When businesses count their inventory, people notice that someone is paying attention and will be more likely to avoid theft as well as do a better job to control losses. CALCULATING MENU ITEM COSTS Calculating the overall cost of a dish is important because how much you pay for food will determine how much you need to charge for it. The cost to serve a meal in your restaurant includes both overhead costs and the food actually on the plate. Properly calculating menu item costs will prevent major headaches down the road. To begin calculating costs list all of the ingredients that are in the dish. Account for everything including any amounts of condiments such as ketchup, mustard, or mayonnaise. Seasonings and garnishes must also be accounted for. Then, calculate the amount of each individual item used to make the dish and every item included on the plate. For example, if a tomato is $0.25, each one yields eight slices and you use two slices on each plate, the cost would be $0.06. You can then calculate the total cost of the ingredients by adding together the total number of all ingredients used. You should then calculate the overhead costs included in the meal served. This means accounting for nonfood costs such as rent, labor, taxes, and any other additional expenses such as paper goods. Overhead costs should be determined based on daily needs. Establish a target menu price for your items and establish how much you want to profit from each meal. Here you should determine whether or not your menu prices cover your food and overhead costs. 6

7 REDUCING MENU ITEM COSTS SHOP AROUND Establish a relationship with vendors and avoid favoritism of one food vendor over another. It will pay to work closely with several vendors to get the best deal. STAY CURRENT Stay up to date with industry prices by checking competing vendor prices. REVIEW ORDERING HABITS Keep track of how you have been ordering and take note in what you can to do improve your orders. Ask yourself if it is possible to consolidate deliveries, as it will reduce delivery fees. LOCK-IN PRICES One of the best ways to stabilize your menu item costs is to lock in food costs with your vendors. Do this by working out details in advance and sign price contracts. BUY IN SEASON Popular items are much less expensive when they are in season. Try to buy produce and ingredients when they are in season and at the peak of freshness. IMPLEMENT INVENTORY CONTROL SOFT- WARE Automate your inventory management. Inventory control software offers restaurant owners and managers the necessary tools to monitor and analyze inventory. You can quickly determine when losses occur and analyze why. 7

8 IN THE KITCHEN One of the biggest overhead costs on a menu item is exerted by the prep work required to make the item. To reduce costs you should work to find a balance between labor costs and prep that will better produce high profit margins. KEEPING KITCHEN COSTS LOW LOW PREP MENU ITEMS - Incorporating some menu items with less preparation time can be used to save labor without sacrificing the integrity of your menu. Items including salad dressings and marinades can be pre-made and are fairly inexpensive to use as well as store. PRE-PORTIONED ITEMS- Having items presliced and weighed can help to significantly reduce labor costs. Knowing how much of an item you will use for a dish will allow your staff to pre-portion items and will save you money. INVENTORY CONTROL SOFTWARE- Automate your inventory management. Inventory control software offers restaurant owners and managers the necessary tools to monitor and analyze inventory. The ease of learning automated systems will help to significantly reduce the costs of training staff to record inventory. Automated systems also allow you to plan menus, set prices, manage your staff, and control waste, helping you cut both costs and time spent on these tasks. 8

9 REDUCING FOOD WASTE Food waste is one of the major expenses within restaurants. Food waste in the kitchen is not a cost you can justify. Eliminating waste in the kitchen is crucial to increasing the profitability of your menu items. MONITOR AND CONTROL PORTION COSTS Calculate the costs per portion and implement portion control throughout your plates. Portions should be measured and weighed to increase consistency. This is the easiest way to reduce costs due to food waste. MONITOR FRESHNESS Avoid purchasing items that are out of season. Perishable items should be closely monitored and used quickly. KEEP RECORD OF WASTE All kitchen waste should be accounted for and tracked. Use a daily waste chart to track and compare daily habits for decreasing waste. A major cause of food waste is due largely to poor food handling. Ensuring your staff is properly trained in the kitchen can help to reduce food waste immediately. Controlling your food waste revolves around monitoring how your inventory items are being utilized. Automating the inventory process can help to drastically reduce the time and effort required for keeping tabs on waste. Lowering food waste will not only help you save money, but will help the environment in the long run. 9

10 CONCLUSION Rising food costs continues to be a consistent problem within the restaurant industry. Combating it requires managers to play close attention to their inventory, portion sizes and ordering. Follow the tips and strategies in this ebook to best control your food costs and maintain your profit margins. 10