Food Cost, how does it save your business?
Food Cost is the scientific method of inventory management and purchase of raw materials useful for the preparation of the dishes that make up the menu offered to the Restaurant Customer.
As with all businesses, a judicious choice of suppliers and prices can significantly change the year-end balance sheet and pave the way for important savings in economic resources that can be used for other areas of the business, or for the growth of the product itself with the choice of higher-value ingredients.
What is Food Cost ?
In a very simple way we can reduce this expression thus :
A fundamental percentage value that establishes the relationship between the cost of raw materials used to produce dishes and the selling price in order to make a profit.
The dl food cost configurations are :
1. The Calculation of Consumption (Passive or Final Food Cost).
2. The Cost per BOM (Active Food Cost or Estimate).
Precise recipes and adherence to grammages is one of the fundamentals of proper kitchen management for the implementation of what one has set out to do, and being able to condense the average food cost in a percentage value is useful and convenient because we can at any time check whether or not we are meeting the parameters we set for ourselves.
To achieve a greater degree of reliability in calculating a selling price, other parameters should also be evaluated: The degree of processing of a dish, i.e., an indicator of the complexity of execution by considering the actual processing time of the dish and applying the cost of labor required to make it, the rejection rates of ingredients, and the weight loss of some foods due to cooking.
Food cost Estimate and Food cost Final
The Sum of costs in preparing a single portion or dish is the estimated food cost needed to determine the cost of a dish before selling it .
On the other hand, when we evaluate the consumption in a given period, say a month, we talk about final food cost, which we can use as an indicator to correct and improve kitchen management using this simple proportion : takings:100=food cost : x , total consumption/covers in the period = average meal cost, average meal revenue:100=average meal cost 😡
Methods for applying prices
In the sales price strategy, it is essential to know the characteristics of our customer, analyze the competition, determine the costs and profits, select method and goals and n. place settings available.
One method frequently applied by restaurateurs (low middle level) is to rely on their own management skills without any calculation of price application , i.e., “by eyeball.”
Practical method, on the other hand, and that based on the profit margin, with information taken from the operating budget , and where it is established that, the same percentage of overhead costs of restaurant management, is applied to each potential customer and with a profit set for the management itself.
Other method is on the calculation of first costs (food cost and labor cost) knowing the food cost of the dish, labor costs, n. expected customers and percentage of first costs in budget.
Still another method is with theapplication of the multiplier that takes into account the cost of the dish and the potential food cost.
With a simple operation we can derive a factor (multiplier) that will be used quickly, to establish the selling price , but being very imprecise serves for a quick first consideration of the price.
Finally the question : how much do I have to sell ( no. covered) to cover the expenses ?
With the data we have from cost accounting (fixed and variable costs, no. of place settings, etc.,) we can know the b.e.p. i.e. the breakeven point of operations and thus determine how much we need to sell to cover the restaurant’s fixed expenses.
Summarizing , for a catering management, here are some tips :
1. calculate the cost of the dish (products making up the dish, gross quantity used, purchase price per unit, cost of ingredients)
2. recipe storage and their costs
3. food cost calculation of the dish in percentage
4. table with calculation in percentages of rejects and net weight
Daily food cost (adjusted with monthly inventory) 5.
6. calculation of the selling price of the dish (application methods that will be applied with the sales experience of our restaurant)
7. revpash or calculation of business volume with reference to service times, opening hours and no. covered.
8. b.e.p. or break-even point
All accounting with its rules and applications is crucial to designing a successful menu, containing costs, identifying the most favorable market, and adjusting supply to achieve increased sales and profit maximization.