Food Cost Control & Purchasing Management Articles

Restaurant Storage Best Practices & Food Cost Control

Proper product storage procedures are critical in controlling food service costs, as well as managing restaurant product quality and consistency.  While not the most interesting of food cost control topics, any restaurant cost control efforts that fail to include proper storage procedures will fall short of their mark.  To better understand both the importance and details of correct food service storage procedures, it is helpful to first outline their goals.  

Firstly, a fundamental goal of storage procedures should be to ensure that product is safely maintained until it is ready for production.  Fulfilling this responsibility means working with approved suppliers, maintaining proper receiving procedures, ensuring correct cooking and handling behaviors and observing recommended storage practices.  Often times, these storage practices are overlooked by operators as a possible key contributing factor in the spread of food borne illness, and failure to understand the impact that this can have on product safety can lead to significant financial losses for a food service operator, not to mention the ethical issues associated with the negligent spread of food borne illnesses.

Secondly, storage procedures should also be designed in a manner that enables inventory visibility and control, ensuring that on-hand product can be accurately counted and ordered.  Failure to command this inventory visibility can lead to improper orders, resulting in a surplus of inventory that can result in spoilage and employee pilferage.  Improper orders can also lead to insufficient product levels that can cause poor guest service because of out-of-stock product, as well as increased product costs and inconsistency as operators attempt to acquire product, last minute, at grocery stores or neighboring restaurants.  In either case, failure to maintain accurate inventory levels can have significant negative effects on a business, and the first step in avoiding this is to understand what product is on the shelves.  Instituting storage practices can help provide this inventory visibility.

Thirdly, storage procedures should facilitate easy access to products by those responsible for production and service.  By properly organizing storage areas, personnel will be able to more easily locate the correct product needed for shift execution.  Improper organization can mean not only delays for staff seeking product, but often also results in employees removing the wrong product from storage, as they fail to locate either a previously opened container of product or the oldest product container on the shelves that should have been utilized first.  If you want to test the level of organization within your storage areas, we recommend taking a stroll through the walk-in and dry storage to see if there are multiple opened containers of like product.  To be fair, this is not always due to improper organization, but also because of improper staff training.  In fact, it is much more common to find multiple opened containers of product utilized by front of the house staff, such as dressings and bags of grated parmesan, than those products utilized by kitchen employees—not that front of the house staff are less trained, but rather that their focus and training is geared more towards service, whereas kitchen staff are typically better trained on product management.  Getting products organized and grouped together, however, is a first important step in modifying this behavior.

Fourthly, storage practices should seek to secure product to reduce theft and pilferage.  According to the National Restaurant Association, 75% of inventory shortages are attributable to food service employees, which is roughly equivalent to four percent of food service revenue. This means there is over $25 billion in annual food service employee theft.  According to the US Department of Commerce, seventy-five percent of employees steal from their place of business at least once, with half of them stealing repeatedly.  So, even if you have the most trusted and experienced food service team at your operation, statistics indicate that it is important to have systems in place to monitor behaviors and reinforce ethical practices. 

Fifthly, proper storage procedures should help reduce product spoilage, which can result in both increased costs and diminished quality.  The manner in which product is stored has a direct correlation to shelf life and quality.  Most operators are very selective about the quality of products that they purchase to ensure a proper fit with how the product is utilized within the operation, as well as to ensure the best guest experience.  As there is a cost associated with ensuring a specific product quality, it is critical that storage procedures are able to maintain this quality until the product is utilized for production or served to the guest.

Now that we have identified the main goals associated with restaurant product storage, we will attempt to highlight what we believe to be food service industry storage "best practices" for optimizing food cost control.  When identifying each best practice, we will attempt to explain how they can be achieved and how they help reach one or more of the previous outlined goals.

1. Keep storage areas clean
Maintaining clean storage areas is critical in promoting the service of safe food.  Not only does maintaining clean storage areas help fight illness causing bacteria, but it also reinforces the importance of cleanliness and safety as a priority for the business among your staff.  To achieve this goal, it is recommended that operators utilize daily and weekly cleaning schedules for all storage areas.  A few ‘must-haves’ on any cleaning schedule would be the daily mopping of storage area floors, routine cleaning of storage shelving and walls and the changing out of drip pans used to collect any blood/liquid from stored or thawing product.

2. Put products away immediately after receiving them
The first opportunity for product quality loss is directly after receipt of the product.  To help prevent this, it is critical that product is immediately stored in its proper location once it has been received.  Failure to do so can cause those products requiring refrigeration or freezing to be exposed to ambient temperatures that can reduce product quality within a relatively short period of time.  Further, as product thaws, it will more easily contaminate other products surrounding it, creating both safety and quality concerns.  Finally, until product is safely stored in its proper location, there is an increased likelihood of pilferage or utilization of the new product for production needs, rather than staff going into storage to procure the correct product.  The key to executing this best practice is to ensure adequate staffing on delivery days, as well as managing the times of delivery with your suppliers.

3. Follow health/safety guidelines for shelf storage, including keeping items off the floor and following recommended storage room temperatures.
Maintaining proper temperatures and ensuring that products are stored in a manner that prevents cross-contamination is critical in the safe storage or products.  There are a number of resources that outline these procedures, including HACCP materials and the NRA's ServSafe program, as well as our safe food temperature chart which can be downloaded form our website.  Temperature is typically the most influential factor in product quality and spoilage reduction. It is critical that storage units are maintained at optimal temperatures and, for refrigeration and freezer units, their gaskets are in good repair and that doors are not left open.  Next to temperature, the most critical storage safety concern is ensuring that products are zoned in a manner to help prevent the cross contamination of potentially hazardous foods from spilling or dripping.  The materials previously referenced can provide acceptable product zoning procedures to help reduce the effects and possibility of cross contamination, or you can download our refrigeration storage chart from our website.

4. Follow recommended storage “zones” to maintain optimal product quality.
Depending on the storage limitations of a particular business, operators may wish to store products in product-specific coolers, such as separate meat, produce, seafood or dairy coolers.  While this is often not possible because of space and financial limitations, at least segregating these items within a shared cooler can help maintain product quality, as these products have varying optimal temperatures and can suffer from being stored too closely to other products that can influence their flavor—fresh fish stored near butter, for example.   It should be noted that this is a refinement of the previous best practice.  While there are product zones that should be established to ensure safe product and limit cross contamination, there are also products that require separate zones to maintain quality, even if there is not a food safety concern, as in the previous example of the neighboring butter and fish.  Ensuring all product is properly sealed can help prevent this quality issue, as well.

5. Store product in labeled "zones"
It is highly recommended that operators label storage areas and shelving so that personnel know the correct “home” for each product.  The most common brand of storage shelving, Metro, makes a label clip that can be attached to the shelving unit so that a label can be affixed.  Regardless of the method used to label product zones, be sure that labels will adhere to the surface over a long period of time.  Once shelves are labeled, it should be clear to personnel where product should be stored, and much easier to train staff on how to routinely organize storage areas.  Labeling and zoning storage areas will also help ensure that safety and quality objectives are maintained, even by staff members not familiar with the reasoning behind the specific zoning.

6. Do not store products in the shipping box/case, if product is stored in smaller boxes within the shipping case.
Unless product is utilized for production solely by the case in which product was received, product should be stored in the smaller product pack units of each case.  Doing so helps conserve space on shelves, enables personnel to quickly grab a container of product as needed and enables an operator to better see what products are on the shelves at any given time.  For example, #10 cans of product should be stored out of the cardboard container in which they were received.

7. Do not store product in opened containers, cans or boxes.
Once product is opened, it should be removed from its original container and stored in one that can be sealed and labeled--such as a cambro or lexan-style container.  Following this practice will help personnel easily identify open product that should be utilized first, as well as prevent the exposure of product that can lead to quality loss or cross contamination. 

Operators should also consider transferring product to heavy-duty containers for those products received in packaging that is susceptible to damage, such as bulk bags of sugar, flour or rice.  As these bags can become easily punctured or exposed to moisture, using large, plastic sealable storage bins for these, and similar, products is recommended.

8.  Sufficient refrigerated storage to enable proper thawing of frozen product.
Properly thawing product is critical to ensuring that product safety and quality is maintained.  In keeping with this, it is important that operators have sufficient space set aside in walk-in coolers to enable the safe thawing of product—often referred to as “pull thaw”.  Further, it is highly recommended that “pull thaw” pars are set so that personnel know how much given product to pull from the freezer on a given day to ensure sufficient time for product to thaw before being required for production.  It is also important that personnel use drip pans for thawing products so that product does not rest in liquid or blood, nor drip onto products below.  

9.  Properly cooling product before storage.
It is important that prepared, hot product be either brought to a safe temperature prior to storage, or stored in a manner that will enable the safe cooling of the product.  This can be done through ice baths, blast chillers or breaking the hot product down into smaller pieces or batches. Regardless of the method used, it is important that hot, prepared items are cooled down and stored so that they do not remain in the temperature danger zone for more than four hours once placed into storage.   More information and recommendations on this are available through the NRA’s ServSafe program or HACCP, or by downloading our food service safe temperature chart from our website.

10.  Label all opened product with the date the product was opened, as well as the name of the item.
Once a product is opened, it is important that product is labeled with the name of the product and the date the product was opened.  For those operators that want to go a step further, it is not a bad practice to also label the expiration date of the opened product based on established shelf lives.  There are a number of ways to complete this, but one of the easiest is to purchase dissolvable “day dots” that your staff can use to label product, and will then dissolve in the dishwasher when the pan is washed.  Labeling products will enable operators to follow through on established shelf lives.

11.  Establish shelf lives for your products and post these charts for staff to reference.

Products will most likely need to have an unopened shelf life and an opened shelf life.  Establishing product shelf lives is critical in ensuring the safest and highest quality products.  Further, it is essential that these shelf lives are communicated to operational personnel.  A good way to help with this is by creating shelf life charts that can be posted in various operational areas, especially those used for product preparation.  In most cases, products will need to have two shelf lives: one for unopened containers and one for opened product.  Many of these shelf lives can be obtained from your suppliers.  Based on these charts, employees can label product they open with the expiration date to ensure adherence to these dates or, at a minimum, dated product can be compared to posted charts to check shelf life.

12. Date each box placed into storage with the receiving date.
Just as product that is opened should be "dated" to ensure it stays within established shelf lives, unopened containers of products should be labeled with their receiving date to ensure that they not only are used before their shelf life expires, but also to ensure proper product rotation is being observed and that ordering pars make sense based on the usage of particular products.  The easiest way to complete this is by using a “price gun,” similar to those used in stores to affix prices to products.  Making this process as easy as possible will increase the likelihood that staff consistently executes the standard.

13.  Restrict access to storage areas to only those that require it.
Every operator must find the balance between restricting access to product and the need for personnel to quickly access this product during production.  For example, operators may wish to restrict access to liquor storage to management only, but may find this policy difficult to adhere to on busy shifts.  As a general principle, however, operators should try and restrict access to product to only those personnel that require the product.  For costly product, operators may wish to limit access to management only--such as for liquor, steaks and some seafood.  If separate coolers are not possible for high-cost product, we recommend the use of product cages that can be setup within storage areas.  Again, Metro is a common manufacturer of product cages.

14.  Utilize the proper storage equipment and containers.
Setting the right standards with your staff will only be effective if they have the right tools to execute the established standards.  This means that operators should be sure to have sufficient storage containers and lids, thermometers for storage areas, sufficient cleaning suppliers, enough drip containers/pans so that they can be routinely changed out, labels for containers, date "gun" for new product, etc.  Having sufficient supply of these products requires an investment, but will help ensure that your product is being stored in the safest manner possible to protect your product and guests.  Further, there is no better way to reinforce negative behavior in your personnel than setting a standard and then not supplying the necessary tools to achieve the standard--it is almost guaranteed that the standard will never be met.

This may be a good place to note that it is important that the storage equipment designated for particular products needs to work with the storage zone designated for the particular product.  To do this, it is helpful to establish the maximum par of each product, figure out the number of containers needed to store that level of product and to then ensure that the established zone has the necessary room for the containers.

15.  Periodically organize storerooms to return products to the proper zone.
One of the most critical, routine practices in restaurant storage management is having personnel regularly assigned to spending thirty minutes in each storage area organizing the room according to the established product zones and standards, as described in this article.  This practice will prevent storage areas from getting too disorganized over a series of busy shifts, and will again stress the importance to your staff regarding the organization of the storage areas, as well as creating a “sense of ownership.”

16.  Store products in a neat and organized manner, with labels facing up and forward and product stored towards the front of the shelves.
It is important that product, in addition to being stored in zones, is stored in a neat and uniform manner.  This should include labels facing up and forward, as well as product being stored to the front of the shelves, leaving room towards the back for new product that may be received in the future.  Storing product in this manner makes it much easier to view what is on the shelves, as well as execute orders, inventories and receive new deliveries.

17.  Rotate product upon receiving.
Another critical factor in ensuring fresh product is the rotation of product upon delivery.  It is essential that older product be moved towards the front of each product zone, making room in the back for newer product.  This practice will help ensure that older product is utilized first, a practice commonly referred to as FIFO—first in, first out.  FIFO, of course, is also an accounting practice that values inventory using the same philosophy.  Labeling product upon receipt is a good way to validate this practice.  While product rotation is relatively easy for some items, you may find staff avoiding this practice on heavy, bulk freezer items that require the movement of significant product in order to store new product.  It helps to ensure that product pars are properly set so there is only a limited amount of each product on hand, making the rotation process a bit easier.

Hopefully, we have been able to successfully outline storage best practices, as well as the reason for their importance.  We began this article stating that the subject matter is not very interesting.  This is not only true of articles about restaurant storage procedures, but about the practice itself.  Often times, operators overlook the importance of dedicating staff and time to this critical function because there seems to be many more important operational areas to focus on.  That being said, we hope that we have been able to convey why following these best practices is important for food service operations and how executing them is critical in any comprehensive food cost control program.

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Restaurant Inventory & Product Management Spreadsheet

A Note About This Blog:

The following short blog is written to explain the benefits of a new, comprehensive Excel spreadsheet that we just made available for download.  This program uses the collection of key data to automatically generate actual food costs, ideal food costs, recipe card price changes and product order guides.  On Monday, we will be posting a more general blog that once again returns to our food cost control focus. In the meantime, if you are an independent or regional food service operator that is not currently able to execute these critical cost control practices, you may find this free restaurant spreadsheet program and article useful.

 

In the past two months, Food Buyers Network has published whitepapers about various restaurant food cost control topics, such as yield management, recipe costing, menu engineering, product specification development, product usage variances and ideal food costs.  While executing these restaurant cost control practices takes focus and commitment, they also require the processing and management of operational data.

While all of the data required to execute food cost control practices is readily available, many operators often access this data during specific food cost control tasks, rather than systematically processing it in a manner that makes it available for multiple food cost control reports.   One example of this is the often neglected practice of recipe costing through the use of standardized recipe cards that are updated frequently to ensure the most current pricing.  While most operators update their product prices prior to executing a food inventory, as this is a critical best practice to ensure the proper valuation of inventory, they do not manage this process in a manner that enables them to simultaneously update both their inventory product prices and their recipe card prices.  Rather, mangers spend twice the time necessary by updating prices in two separate areas or, more likely, the practice of updating menu item recipe prices gets forgotten.

Quite frankly, getting access to many of the powerful food cost control reports can be achieved relatively easy, if key data is entered in a single location.  To help independent and regional food service operators achieve this, we have developed a free Excel program that you can download from our site.  By creating a series of spreadsheets that collect key operationaldata, such as product prices, menu item recipes, menu item prices, on-hand inventory figures and the menu item sales mix, restaurant managers are then able to easily generate ideal food costs, actual food costs, order guides and recipe cards in a systematic fashion.  Of course, executing this process still requires a time commitment, but by utilizing a single program to process key operational data, it will become much easier and more efficient to generate these reports.

You can download this restaurant spreadsheet on our site.  There are instructions, but this program is still in BETA, so there may be some glitches.  If so, please shoot us an email or give us a call so we can fix them and get out a new version.  As always, we hope you find these tools helpful. 

 

Download Spreadsheet Here

Restaurant and Food Cost Control in Economic Downturns

Open any newspaper and it is quickly apparent that we are being bombarded with signs of an economy in peril. While these predictions have sometimes become self-fulfilling prophecies as publicized economic fears have fueled consumer behavior, there are certainly economic signals that indicate a struggling economy.

Consultants, manufacturers and vendors have provided us a plethora of reasons for the rising costs in our industry. Oil, of course, seems to be driving this sharper increase in the cost of goods. Oil prices have driven shipping costs upwards, caused increased price pressures on the corn market due to ethanol production, reduced the supply of other vegetables as farmers shift production to corn, created a rise in vegetable oils and shortenings, and raised the costs of products that require animals fed from these high-priced grains, such as eggs, poultry, dairy, beef, pork, etc. Operators, however, don’t need to look at economic signals to realize that the cost of operating restaurants has risen more sharply of the past year.

The problem of the current situation is being compounded by the fact that consumers are being more cautious about spending, as they see their disposable income shrinking and confidence in their own jobs dwindling. These are, of course, generalizations. The two-fold nature of the current situation, the rising cost of goods coupled with slowing revenue growth, creates difficulties for restaurants seeking to maintain a consistent bottom line.

Under a scenario where the cost of goods remains the same, but revenue slips, it is easier for operators to offer discounts and promotions to drive revenue. The additional expenses associated with discounts and promotions can be absorbed in the P&L due to the stability of cost of goods and the increased revenue these expenses will generate. Conversely, a scenario of rising cost of goods, but consistent revenue can be off-set, at least in the short term, through strategic price increases. In our current situation of both sharply rising cost of goods and decreasing revenue, however, operators are caught in a catch-22. Raise prices to off-set the rising cost of goods and operators risk driving revenue levels down even further. Lower prices or offer promotions and discounts to try and maintain revenue levels and operators will see profitability diminish as a result of shrinking margins.

As we know, however, maintaining profitability is not impossible during difficult economic periods. In fact, these difficult environments can be used to an organization's benefit. Obviously, we all prefer times of prosperity, as prosperous economies enable operators to utilize improved cash flow to expand operations, invest in growth strategies and benefit from increased profits. During these periods of prosperity, time and capital is spent on increasing market share through the opening of restaurants, improved advertising and marketing, new product launches, store remodels, facility and equipment upgrades, outside training and consulting, etc.

The nature of a free market economy, however, means that we can expect both periods of economic growth, as well as recession. A strong business can not only survive economic downturns, but use these periods to add value to the organization and strengthen its position. While periods of prosperity tend to result in expansion and strategic risks taken to capture market share, they also represent periods when businesses pay less attention to productivity, efficiency and cost control. Therefore, it is imperative that while companies use prosperous times to increase their market share, it is just as critical that operators stay mindful of the fundamentals of restaurant cost control basics. This can be achieved through the creation of "cost control muscle memory." Like a golfer's swing, the muscles of an organization must remember to exercise the basic fundamentals of restaurant cost control in all endeavors and in any economic environment. Of course, successful businesses incorporate cost control procedures into their culture and training programs for the outset. However, cost control systems are not hard-wired into a restaurant along with the electric and plumbing—though this would be great! Rather, cost control systems are an organic process, affected by changes in management and personnel, as well as corporate priorities and initiatives. In short, even the best companies can find themselves losing focus on some of the basic cost control systems as focus is diverted in other areas.

Therefore, operators can use economic downturns as a way to re-focus the corporate body on restaurant cost control fundamentals, such as portion control, receiving standards, product bids, labor pro formas, risk and loss prevention, menu analysis and planning, vendor negotiation, staff productivity metrics, utility conservation, etc. Of course, for this re-focus to be successful, these fundamentals must have already been part of the corporate culture and training. However, using down cycles can be a great time to re-examine corporate effectiveness with respect to executing these basics and fundamentals. Using this time to focus on the basics will create the corporate cost control muscle memory that will last beyond these slumps and into periods of growth.

Nobody likes economic slumps. But economics 101 teaches us that these slumps are a natural correction by the market resulting from bad decisions or actions we have taken in the past, such as charging too much on our credit cards, paying too much for a house, speculating in risky markets and buying gas guzzling SUVs. Therefore, let’s take advantage of the slump and learn its lesson by focusing on restaurant cost control fundamentals so that we can position ourselves to be more prosperous as the economic tides turn.