4 Mistakes Killing Your Food Cost Margins
11 May 2017
Veteran restaurateurs will tell you that making great food isn’t the biggest challenge of running a good restaurant. Making food profitably is the real beast.
Despite ever-rising ingredient costs compressing margins to razor-thinness, operators are reluctant to pass those increases on to price-conscious consumers. That makes monitoring every step of the food production process—from the loading dock to the very plates on which food is served—essential if an operation is going to make money.
It’s always fun to hear customers’ rave reviews about your food, but successful operators listen just as closely when the accountant says food costs are out of line. Let’s examine four key ways not managing food costs can kill your profit margins.
- You don’t take daily inventory.
Restaurant cost consultant, Jim Laube tells seminar attendees to imagine all their edible inventory as stacks of cash—not lettuce, not cheese, pasta or chicken, rather as piles of real dollars you merely traded for those items. In that light, operators learn quickly to watch their inventory like a hawk.
That means doing daily inventory and a random spot check during every shift on the 10 costliest items in your inventory. That way, you know almost immediately whether key items are being over-portioned, overcooked or even stolen. The good news is inventory is easier than ever to do with mobile devices. From a smartphone or tablet, managers can cruise through walk-ins and stock rooms, tallying up inventory and placing their orders wirelessly through apps that connect to back-office systems.
- You purchase the wrong amounts.
Over-ordering is dangerous to food costs in two main ways: the added cash outlay is unnecessary; and the risks of spoilage, waste and over-portioning soars because cooks assume, “We’ve got plenty of that.” Under-ordering is equally lethal when customers leave disappointed because you ran out of their favorite item.
Thankfully, back-office systems provide abundant data to show what items are selling and which aren’t, allowing managers to make their food orders with targeted precision. Such systems also provide invaluable glimpses into short-, long-term and even historic sales trends that detail what customers want, and how much of anything an operator needs on hand. Inventory and purchasing systems also automate ordering based on par levels and vendor lead times, making ordering correctly nearly fool-proof.
- You don’t check deliveries closely.
Even if regular delivery drivers have proven trustworthy, it’s always wise to check each delivery thoroughly. Compare them line by line to everything brought in, ensure brand names match order details, spot weigh random cuts of pricey items like steaks, and use a thermometer to verify highly perishable items like seafood and poultry meet temperature requirements. Modern back-office systemslike SynergySuite function with your smartphone camera to document any concerns, such as damaged goods or brand mismatches, and send those images to the foodservice distributor.
- Your recipes aren’t costed or portioned accurately.
Managing this takes real diligence, but it’s where better profits are realized. The cost of every menu item should be entered into an electronic database that reflects ingredient price fluctuations in real time. A dish that’s a profit maker in the summer can actually cost a restaurant in the winter if its ingredient costs rise. Fortunately, a good cost management systemcan alert your managers when price changes pummel a dish’s profitability. That empowers you to adjust its price or remove it from the menu altogether. And if you’re not already, become a portion-control stickler with cooks. Not only does it keep costs in line, it ensures guests enjoy consistent products.
Though restaurants are accurately described as “people businesses,” running them will always be a numbers game. And without paying strict attention to food costs, even the busiest restaurant risks losing money and going out of business.