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
Many firms that make their income through consulting or the sale of
systems to help operators become more profitable through cost control
often find that their business peaks during economic slumps. It seems
that many operators become more concerned about effective cost control
systems when it is critical to the survival of the restaurant, rather
than when these systems could help the business thrive and prosper.
Often, the initial call made by an operator to a cost control
consultant is out of a sense of confusion, concern or desperation.
Often times the owner or operator is feeling the squeeze from a
tightening economy and is wondering why they see their gross margin
slipping period after period as a result of an increasing food cost. Of
course, the answer to this question could potentially be very complex
and detailed. Many times, however, operators fail to rule out the
obvious possibilities first, before enlisting the aid of an expensive
cost control consultant. I guess psychologically this makes sense. The
frustrated operator many times assumes that they were managing food
cost properly before, so any problem in food cost must be complex and
require deep analysis from a specialist. Maybe, maybe not.
During times of prosperity, operators may seem less concerned with
verifying their cost control systems and ensuring that costs are being
accounted for accurately. Rather, operators are content to not question
profitable times and results. Ironically, profitable times do not mean
that restaurants are operating efficiently. In fact, times of increased
revenue may very well provide positive cash flow and overall
profitability, but an analysis of costs may very well indicate that a
significant amount of money is being left on the table each period.
Don't forget the adage "high volume hides a multitude of sins." This
being the case, it is always recommended that operators start at the
beginning when trying to ascertain the reason behind a rising food cost.
The result of this diligence is often the identification of a
fundamental operating flaw: operators either have out-of-date recipe
cards or, believe it or not, no recipe cards at all! Because operators
are, therefore, unable to gauge actual food cost against a theoretical
food cost based upon menu recipe cards, operators often assume the
answer to a rising food cost is theft, improper portion controls or
poor server performance. While this may be true, it might also have
absolutely nothing to do with the situation. Unless recipe cards are
completed for each menu item and kept up to date by adjusting
ingredient prices as they increase by a predetermined threshold, there
is very little way for an operator to know that the rise in food cost
is due to mismanagement, rather than a simple cost of goods increase.
Because operators often fail to have basic cost control systems in
place, such as the use of recipe cards, they often spend countless
hours hunting down fictitious thieves, invest thousands on unnecessary
consultants and lower morale through the constant correction of
employees and managers on not doing a better job on portioning and
waste control. One might think that this logic would be intuitive for
even the moderately successful operator, but often times it is not. Too
often, operators that do not utilize menu cards have an inaccurate view
of the purchasing situation and, consequently, their ideal/theoretical
cost of goods. These operators may believe that purchases have been
managed through the selection and procurement of specific deals that
were thought important, through a minimal bid process that focuses on a
core group of key items or by assuming that the overall cost of the
menu has stayed the same from when it was written! Often times this is
not the case. Vendors and salesmen are often magicians. They are
acutely aware of what an operator's purchases are and they are also
well aware of which of these items are increasing in cost during a
given period. Salesmen are very effective at keeping an operator
focused on one category, while prices skyrocket in another. The only
difference between the salesman and the magician is that it is your
profit that disappears, not the rabbit! Of course, this statement is
not intended to imply that all vendors and salesmen are dishonest, but
rather to communicate that operators must maintain vigilance through
proper fundamental systems.
The result after a year of no recipe cards may be a menu with an ideal
food cost two or three percent higher than when it was written. Of
course, it is worth noting that the converse may also be true. It is
very possible that an operator has too much confidence in their
employees and might assume that the rising food cost is due to price
increases and automatically increases the menu pricing when, in fact,
the cost of goods increase was due to operational inefficiencies, such
as theft and improper portioning. The moral of the story is stay on top
of your food cost by knowing what your ideal cost is through the
creation of recipe cards for each menu item and by keeping them
updated.
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