Food Cost
One of the most important parameters in running a restaurant is the ability to manage food costs and to carry out quality control over this cost.
In general, raw material costs in food businesses range between 20 and 40 percent of the business's total expenses, depending of course on the business and the menu.
It is important to know: calculating all food and drink purchases divided by total revenue will yield the cost of goods sold (food cost).
The goal in managing food cost properly is to aim for the lowest possible cost for each raw material and product required in the business, separately.
To achieve this goal we need to:
A. Know how to choose the most suitable product -
Choosing the most suitable product does not depend on cost alone but on several parameters.
Take for example a hamburger bun:
The first step, and perhaps the most important, is matching the product (the bun) to the need:
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Do its taste, shape and eating experience suit the chef's requirement?
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Does the bun properly "hold" the liquid released by the hot patty?
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Is the business built for baking on site, or does the bun need to arrive ready made?
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Is there an ability to bake or heat a frozen bun (freezer and oven space, staff skilled in using the oven and so on), or is there a need to receive fresh buns every day?
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Does the price of the bun fit the cost of goods framework (FC) as defined for the whole hamburger dish? (If not, we go back to step 1 to choose another product..)
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Is there also a dish where the bun must be "special" (gluten free, for example), and then questions 1 to 5 must be asked again..
B. Run a market survey
Run a market survey and negotiate with suppliers in order to cut as significant a percentage as possible from the cost of the required product. After we have chosen the product, we need to examine the following parameters:
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Compare prices between different suppliers
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Compare supply convenience and efficiency:
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The supplier's professionalism in uniform production and transport suited to the product
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Frequency of supply
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Minimum cost or quantity per delivery
C. Use the product to the maximum
Inventory must be controlled in an orderly way:
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Make sure regularly that purchases match sales
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It is important to understand the gap between purchases and sales (examples below) and then include it in the product cost:
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If buns are left at the end of the day
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If some of the buns go to staff meals
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If some of the buns are damaged in the production process
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You should use as many parts of the product as possible, for example:
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Yesterday's buns can be sliced and made into bruschetta
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Yesterday's buns can be turned into croutons for a salad
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And many other possible solutions..
D. And of course run a monthly financial control of food cost.
If you own a restaurant, cafe or fast food business, we will be happy to help you manage and calculate food cost.
For restaurant business consulting contact us.
Financial calculator for restaurants
Planning to open a new restaurant? Want to know how much it will cost you to set it up? Want to know how much the restaurant will earn?
You are welcome to try our financial calculator.
All you need to do is click the link and fill in the calculator, and the results will be sent to you immediately by email
