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HOW DO I CALCULATE FOOD WASTE INTO MY FOOD COST?
November 23rd, 2015 by Kenny Arone

I have been hearing this for years.  The inexperienced or new Restaurant Owner or Manager is usually looking for a percentage number that he can take off his food cost %  or a cost to add each Menu Item.

What I tell my customers is that food waste in a management problem.   It must be treated that way.

Before you can discuss “Waste” you must address a few other items first.

For example the first thing you do is to verify the recipes that have meat yields both raw and cooked.  An example of raw would be a Top Sirloin Butt and cooked would be a Prime Rib (Bone in or out, being a Rib Eye Roll)  Other items would be the actual number of Shrimp in a pound, or any other ingredient with a count per pound.

Hopefully you have the ability to get a theoretical food cost (from Menu Costing Software) or a Projected Food Cost from other means.

From this you get a variance.  Let’s say your actual food cost is 34% and your theoretical is 30%. You are looking for 4%.  If you’re Food Sales for one month is $60,000.  You are looking for $2,400.    Actual Food Cost is $20.400. Theoretical Food Cost is $18,000.  Variance is $2,400.

From my experience waste is just a part of this. To answer the question “How do I calculate waste into my Food Cost?  You don’t.   The first thing you do is to take food waste out of the equation.  How do you do that?  Go back and use and verify all of your kitchen production tools:

  • Yield Sheets
  • Production Sheets
  • Order Sheets
  • Verify food specifications on key ingredients
  • Verify yields on recipes
  • Verify portions on Menus Items
  • Ken Arone, Owner of Cost Genie Menu Costing Software.   www.costgenie.com
  • With proper management in the kitchen and our food cost is still high we need to look at other areas and that is another story.
  • Now we come to the infamous “Waste Sheet” a license to steal or hide poor performance. Yes there are items overcooked, wrong orders, over production resulting in throwing food out. Again you have to ask yourself. Why would you want to deduct from your food cost for poor management.
  • Again these are management problem. Why would you want to deduct from your food cost for poor management
Cost Genie Menu Costing Software 15th Anniversary
November 17th, 2015 by Kenny Arone

   R & I Solutions creator of Cost Genie Menu Costing Software is an innovative company, combining over 30 years of food service management expertise, with the latest computer application development techniques to help you accurately cost out your menus and manage your food cost. Unlike most software vendors, we understand restaurant people because we are restaurant people. We are excited to offer user-friendly software packages that will fit your restaurant needs.

Of all the critical business challenges restaurant operators face, determining menu price can be the trickiest. Deciding on when to increase prices and to what extent can be an agonizing task for both the new and experienced restaurateur alike. Price too low and the error is deducted right off your bottom line. Price too high and you may lose the sale completely. Cost Genie provides the tools to help you make these decisions.

Your costs on your food directly affect your bottom line, your profits. If you don’t have a strong handle on your food costs every day you are losing money! This powerful software was developed by people who have been in the restaurant, food and bar industries for over 20 years and know from firsthand experience the hard work and dedication it takes to run a successful restaurant or bar. This food costing software was designed for the restaurant or bar owner or manager. It is simple, fast easy to learn and easy to use.

Cost Genie is a professional software program for Restaurant Inventory Control, Recipe Control, Menu Costing, Menu Engineering, Catering, Purchasing, Ordering Sheets, and Nutritional Analysis. The easy-to-use food cost program contains the same tools, information, and productivity enhancements that larger companies get from their corporate staffs and expensive computer networks

Why Use Food Costing Software?

Do I really need software? Isn’t it pretty easy to figure out? Actually, yes, figuring out your food costs is actually not very difficult. It is an easy formula. But running a restaurant or bar every day, 6 or 7 days a week is another story, this is why we have developed Cost Genie, the leading food costing software solution. Your costs on your food may change every week, sometimes every day, you must gain control over them in order to survive. The restaurant business is tough enough without trying to operate without knowing exactly what your food costs are and how to keep them to a minimum and still keep high quality menu items and recipes. Cost Genie is easy to use, comes with free training, great support and currently has a onetime cost. It is a value that is hard to beat!

Restaurant Food Cost Control: Information & Tips
July 3rd, 2014 by Martin

My name is Kenny Arone. I am a consultant at-large in the hospitality industry and partner in a restaurant management software company.
Over the last fifteen years, I have accumulated a great many questions from consulting customers as well as customers from my menu costing software company.  The questions are always the same, and the first question is usually, “What should my Food Cost be?”
I’m going to share the answers with you, because, consistently, they have not changed that much over the years.
You should know what qualifications I have so that you can feel secure that the information presented in this blog is based on my lifetime of professional experience and knowledge.

I have been in the Food Service Industry for over thirty years. I graduated from Los Angeles Trade Technical College with an AA Degree in Restaurant Management as well as additional courses in Culinary Arts.  My first job out of college was with ARAMARK (formerly ARA Food Service); if you wanted to learn the numbers of our business, this was the place to start.  Taking Inventory every week, and being responsible for a Weekly and Monthly P&L (Profit & Loss) Statement.  Also, if you wanted a get a good restaurant manager’s foundation, you went to work for Howard Johnsons! There, they would start you off as a dishwasher and train you at every position up to Manager.  I was glad I chose ARAMARK along with other core concepts, “Food Cost” was drilled into me.  When you are working on “Cost per Meal”, one penny can make a big difference, especially serving over a thousand meals or more a day.  I then went on to managing restaurants and multiple restaurant units as Director of Operations.

Now, in my consulting  I mainly deal with the independent restaurant operator as they struggle with (usually) their first restaurant.  Problems start to happen after the first few months when they realize that they are putting money in the restaurant each month to keep it open.  That’s when the panic sets in, and it becomes a whole new ballgame.  At this time, their food cost is the least of their problems, however, it is a factor that can add money to the bottom line right away.

 

In this blog, I will answer the questions so that those that may not have expert, or even a “good grasp” of the concepts can easily understand the direction they need to take.
What should my food cost be? Mike Nelson, Cowboy Steak House, Big Bear, CA
I tell him along with other customers that it is based on how they priced out their menu and the product mix they sold. (Restaurant Costing 101). This is the starting point for finding out what their food cost should be. In most cases they are not ready for this answer and rightly so, it is not that clear cut.  There are many factors that affect their food cost and each restaurant has their own and sometimes unique set of problems. However, Menu Costing is the foundation of their Food Cost.

The first thing we have to do is to find out what their actual food cost is. This is not a difficult thing to do.  All they have to do is to add up their food invoices for a month and divide the total by the Net Sales (After Sales Tax is deducted out of the total sales).  It will become more accurate over a three month period.

This is a start and gives them a foundation to work with.
Based on the type of restaurant I will be able to give them a
Benchmark for their food cost I usually start with 28% to 32%

We are now ready to trouble shoot.  If for example they have a Steakhouse and their food cost is over 40% then the first place we look at is Sales.  What procedures are they using.  In most cases they do not have any systems and controls, so we start with basics.
We start with the following items below:

a. Make sure that all refrigeration is locked at night
b. Employees must leave by the front door or have the manager open the backdoor to let them out
c.  Start periodically check the trash containers or check the trash bags before they go out
d.  Start looking at how we handle, cash control, voids, comps, promotions and employee meals
e.  A manager or owner should check in invoices and periodically check the weight of the meat and other items, especially the ones that have “Catch Weight” (is received by the pound)
f.  Start checking the portions served
g.  Do the cooks have recipes and are they following them
h.  Go back and check the total amount of the invoiced you added up and make sure that it is just food.

What we are looking for is a big hole in and hopefully the food cost. If we find it  will can get  down to a number that will give us some breathing room to work on the food cost.  I would advise doing this daily after you have a food cost

This is a handful to start with but it will give you a foundation

On my next blog I will finish up on the question “What should my food cost be”?

“What should my Food Cost be” Part 2
July 3rd, 2014 by Martin

What should my Food Cost be” – Part 2
You are now taking the second step, and that is establishing “What my Food Cost should be”.
From my first blog we ascertained what your actual food cost is. Now we need to understand what our food cost should be. Let’s digress for a minute. I want to cover some information which will give you a better understanding of what is food cost.
We will get back to the basics, because this blog is geared to people with none or very little experience in the restaurant business. These people have or are thinking to open Restaurant. It is also helpful for Students whether High School, College, or Culinary School or that person who is just starting a catering company.

What is Food Cost. Essentially Food Cost can be divided into two parts.
1. Food Cost per Menu Item.
2. Generally Food Cost for a given period (A month is typical).

1. Food Cost per Menu Item.
This is the first step in generating your Menu Item Cost.
It is going to take two items, product Item Cost (from an Invoice) or a( recipe portion cost) from you recipes or a combination of both.
Example: Let’s say you have a Plate Cost of $4.00 (Food on a Plate) and based on your knowledge of the competitors menus prices you price you charge $12.00. Plate Cost /Menu Price = Food Cost %, which in this case would 33.3%
Tip: If you know your Plate Cost you can do this (Plate Cost / Desired Food Cost=
Proposed Menu Price. $4.00 (4.00 /.33 = $12.00)

Instead of trying to figure out your pricing use your competitor’s prices, however you will have to calculate your own food cost dollar, again this becomes a starting point it will give you a foundation to work with. You do not need to play the menu pricing game right now.
What you are trying to do is to build a model to cost out your menu. I would suggest using Excel (Spreadsheets) to start with unless you have a large menu, then I would recommend purchasing Restaurant Menu Costing Software. The menu costing software will allow you to create your recipe file and create an inventory file and will cost out your menu.

Tip:
For those who are just starting out and need some helpful information and tools. I would suggest going to http://www.restaurantowner.com . There is a monthly or yearly fee, it is well worth it.
2. Overall Food Cost for a given time (A month is standard)
The concept is the same in what we did in the first Blog.
The amount of your (Food) purchases (Invoices) and divided by total net sales for
that period)

Purchases/Net Sales = Food Cost %

Let’s move on. I am assuming you have caught on the how to obtain a Food Cost %.
You may come across words like “Restaurant Benchmarks”. Basically it can be a good measure if they are from reputable source. You can google and read up on it.
How and where do we start? I will be using a Food Cost Range of generally 28% to 33% of total Food Sales
Based on the Food Cost % Number you obtained in the first blog, you can see where you fall into
Note: The range depends on the type of restaurant you have (Ethnic, Fast Food to High End Steak Houses.

You may still ask “What should my food cost be. I am going to answer that by showing you a system I worked with.
You have to realize you will be counting on you food cost sale to generate enough Gross Profit to cover payroll, rent, cost of goods sold and all of your Direct and Administrative Expenses and still have enough money to have a profit.

Here is you answer using this model (Example).

food_cost

This is when “The Honeymoon is over”.

This should have been included in your Business Plan. We will go on the assumption you did not create a business or a Pro Forma.
Usually the first question is “How can I know the sales when I have not opened”?
Good Question.
Again let me digress again for a minute if you have come this far and you do not have an idea of how to get the numbers above. You should take a minute and evaluate your position.
In many cases you have invested or going to invest a considerable sum of money, usually from a mortgage on you home or property or borrowed money from a Bank or Friends, either way you are investing your life. People have told you are a great cook and you should open a restaurant or opening a restaurant has always been a dream of yours.
The first thing you have to realize is running a restaurant is Math and you have to know the numbers. I am sure that you are a good cook and you wife, family and friends will help you, If you do not know your numbers you are destined for failure.
At this time I would you to rethink your plan or find someone out there that can help you.
It can be a friend who owns a successful business or Restaurant. You can also go to the Small Business Development Centers. Look for one near you. There is wealth of information on the internet.
I would also recommend finding a Restaurant Consultant.
This is where you have to be careful it can be like “Swimming with Sharks” . I strongly recommend to find someone local that knows the area, One last thing, do not get hung up with a consultant that is going to come in and give you all of these manuals and procedures to run your restaurant. You are not at that point now. Try to find someone that had experience in your type of restaurant.

Summary: I hope you have developed a good grasp of Food Cost. I have just given you the “Tip” of the “Iceberg”. There is so much more. I started out answering your question on Food Cost and it had to include the numbers
I am going to tell you a story. “A few years back I friend recommended me to talk to a couple of friends of his. I set up an appointment and charged them for my time.
They want to open a Yogurt Shoppe. I knew the area that they wanted to open their Shoppe and that was a “Red Flag” I went on listening. They had this company that was going to provide the Equipment and the Product. It seem like a good deal to them. I started asking them some questions, they gave me the price of these two deluxe machines.(Another Red Flag) then I ask how much for the rent and the rest of the equipment. I also ask for the size of the building and the number of seats and what they were going to charge customers and I also got the cost of the product and the cost of the machines.
With this information I was able to get a good feel to do a quick Performa and Feasibility Study. This meeting took two hours and I went over everything with them.
I ask them to come back the next day and I explained to them that based on the area, and the number of seats and customer projection, and my projections of customers they would have to have each day. It was too many, I recommend to them not to open the Shoppe. They said with both families working they felt it would work. Thank me and left.
About a year later and asked my friend about the people opening the Yogurt Shoppe. He said that is was sad, they had invested both their Railroad Retirement and also lost their Houses. I think about this a lot especially when I do consulting for people with the dream of opening a Restaurant. I know that this must be extreme however when you ask me “What my food cost should be” I have to wonder. “That being said” I have seen people with no experience in either cooking or the numbers and succeed.
I do not want to be pessimistic. This is an awesome business and when it is good it is very good and when it is bad, well you figure it out…
Again I have tried to explain Food Cost to you the way I see it.
Thank you for taking the time to read my Blog. Comments welcomed.

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