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    The 1 Percent Edge

    Follow these best practices in food cost management and lower your food costs by at least 1 percent.

    By Dean Dirks

    Escalating food prices, rising labor costs, and higher energy costs are forcing operators to become better at food cost management. Shaving 2 percent off of $5 million is a $100,000 savings, which in many cases will get an operation in the black.

    If the below best practices are followed at least 1 percent of food costs will be lowered.

    -- Analyze your pricing. Customers won't notice a change from 89 cents to 99 cents.
    -- Review the sales mix of an item you are considering to raise. Items with a 25 percent sales mix will impact the bottom line more than an item with a 1 percent sales mix.

    Ideal cost of sales model:
    -- Calculate the ideal cost of sales for each of your foodservice operations. In simple terms, the model tells you ideal food costs based on sales mix.
    -- Food costs should be evaluated by the variance from the ideal cost of sales.
    -- Based on the sales mix, one operation could be under performing, another over performing.
    -- The model allows recipes to be built, which are linked, to raw goods. When the cost of raw products changes this data, calculate the new cost of the recipe.

    -- Cost accounting is the standard in the restaurant industry, but the way retailers do food cost accounting is not accurate. If a store is using retail accounting and a customer double cups a coffee cup, the foodservice operation is $1.25 short. The standard in the restaurant industry is to use cost accounting which simply means SALES MINUS COST OF GOODS SOLD. Cost of goods sold divided by sales gets you your food cost. Basically, most convenience store people operate restaurants like convenience stores, which is a primary problem.
    -- Monthly P&L's are a must, with all expenses associated with the food service unit allocated, including credit card fees on food items, utilities, depreciation, uniforms, and other costs.

    -- Utilize appropriate and accurate Par levels.
    -- Product should always be properly organized for ease of ordering and inventory taking.
    -- Accurately inventory on the day of the order.
    -- Take into account all potential changes, including seasonality, special events etc.
    -- Only the manager should order.

    -- Check product temperatures at time of delivery. This will extend the shelf life of produce.
    -- Check the invoices off.
    -- Manage inventory utilizing FIFO (First In First Out) method.
    -- Ensure product quality upon delivery, for example, check the color/quality of lettuce, etc.
    -- Date the product at the time of delivery.
    -- Make sure all credits are received and processed.

    -- Portion correctly.
    -- Weigh every third item during slow periods.
    -- Record waste so problems can be corrected.
    -- Squeeze bottles and pans until completely emptied.
    -- Scrape cans and bags to ensure minimal waste.
    -- Make sure your prep person adequately trained.
    -- Follow correct carryover procedures.
    -- Equipment must be calibrated correctly. Check cheese pumps, coffee and cappuccino drops.
    -- Brix fountain machines every month
    -- Keep holding equipment at the proper temperature.
    -- Recipe cards in place.

    Inventory Procedures:
    -- Only managers should complete weekly inventories.
    -- Take into consideration items that may have been removed from a case. If there are three blocks of cheese left in a 6-block case, make sure you inventory three blocks. Some people will only inventory full cases.
    -- Transfers should be properly documented and accounted for.
    -- Inventory products wall to wall rather than skipping around.

    -- Monitor your average check and hourly sales, and react to unexplained trends.
    -- Have all items been rung up correctly?
    -- Employee meal policies should be in place, known by all, and tightly monitored.
    -- Control the number of sauce packets given in the drive thru.
    -- Cashiers should log in so performance can be monitored. Track deletions, voids, and shortages.
    -- Check invoices for correct pricing.

    Food cost control requires all of these procedures and policies to be followed hour by hour and day by day. Traditional QSRs (quick service restaurants) are obsessive about food costs and in most cases, controlling these costs predicate the success or failure of the restaurant.

    If you have a question for Dean, please email us at [email protected].

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