Food cost management is essential for the professional chef to be successful.  Every chef is judged on a financial basis by his/her food cost. If your food cost looks good then you are in great shape, but if your food cost is bad you could be in a heap of trouble.  If you have read the 40 Thieves of Food Cost then you know that solving the problem can be very complicated as there are a host of things to evaluate in order to determine the source of the problem. The original version of this food cost problem solving tool was written in 1972. Here is an updated version of the Forty Thieves of Food Cost:

Things To Look For If You Have a Food Cost Problem

Purchasing

food cost - leave a mark

  • Purchasing for too high a cost – no bid system to get best price
  • Buying from only 1 or 2 vendors – no competition for best price
  • Purchasing more than needed
  • No detailed Specifications – quality, weight, type
  • No purchasing budget
  • No audit of invoices and payments
  • Too many vendors
  • Read more detail

Receiving

  • Theft by receiving personnel
  • No system for issuing/tracking credits
  • No system for checking in orders
    • Billed for items not received
    • Invoiced weights different than received weights
    • Shipped & billed for items not ordered
  • Lack of facilities and/or scales
  • Perishable foods left out of proper storage
  • Read more
Download Forty Thieves of Food Cost - an updated version

Storage

  • Foods improperly placed in storage
  • Storage at wrong temperatures and humidity
  • No daily inspection & rotation of stored goods
  • Unorganized storage areas
  • No physical inventory system
  • Lack of single responsibility for food storage
  • No control or record of foods issued from the storeroom
  • Storage areas not secured
  • Theft

Preparation

  • Excessive trim on vegetables, seafood & meats
  • No check on raw yields
  • No secondary usage of trim items
  • Read more

Production

  • OVER production!!!
  • Improper cooking method
  • Cooking at the incorrect temperature – excess shrinkage
  • Cooking or holding products for too long a period of time – poor batch firing
  • Not using food production schedules or Prep Sheets
  • Not using/following standard recipes
  • No waste log used for items thrown out
  • Read more

Service

  • No standard portion size
  • No standard size utensils for serving
  • No records of food production
  • Carelessness (spillage, waste, cold food, re-fires)
  • Poor production planning during the transition from busy to slow periods
  • Inadequate or poorly trained “wheelman” to control the ticket flow and give “all-days”
  • Read more

Sales

  • Unrecorded sales: “no charge” or cash not turned in, unauthorized comps to friends/family/regulars
  • “Open food” abuses (get rid of this key if possible! Or allow only with mgr approval)
  • No tracking of “comps” and giveaways
  • No tracking of re-fires, waitstaff/cook errors
  • No sales records to detect trends
  • Poor pricing of menu items
  • Incorrect pricing keyed into your register system (Micros, etc.)
  • Poor sales mix
  • Employee meal costs – over production or unauthorized meals
  • Not running specials on items that were overproduced
  • No credit for marketing events
  • Read more

Inventory

  • Counting Sheet-to-Shelf instead of the best method of Shelf-to-Sheet
  • Failure to utilize discontinued menu products before they expire
  • Miscalculations in your inventory program extensions
    • for example: you enter 1 case of shrimp and it calculates it as 1 pound
    • zero dollar value for items in inventory
  • Items are not being counted
    • especially true for new products and “out of sight” products
    • counting inventory by sheet to shelf method instead of shelf to sheet
  • Out of date pricing on your inventory calculation software
  • Not verifying the accounting data before final posting!
  • Read more detail

Accounting

  • The Chef didn’t verify the General Ledger
  • Charging your paper/equipment products against food cost of goods
  • Products from other venues are being charged against your account (for operations with multiple venues)
  • Transfers and credits not processed correctly

The original “Food Costs and the 40 Thieves” was from “Cooking For Profit” by Robert C. Petrie 1972

Food Cost Problem Analysis

Salmon_On_A_Stick.jpg

So there are many variables to deal with when trying to analyze a poor food cost. If you have done all the basic legwork, making sure your waste isn’t too high, double-checking the accuracy of portioning by your crew, checking the pricing on key menu items to be sure that they are priced appropriately, then it is time to move on to working through the forty thieves step by step. One area chefs often neglect is checking out your accounting system.

There are multiple ways in which the accounting system could screw-up your food cost. First thing to do is to go through your general ledger and make sure that everything in it is actually a food item you are being billed for. Make sure that paper products, equipment and so on are not being billed against your cost of goods for food.

Next, check the cost extensions on your inventory. For instance, if one case of shrimp cost $300 make sure that if you have 2 cases in your inventory that it calculates correctly to $600. I frequently find issues in our accounting system where I’ll put in 2 cases and it will cost it as 2 pounds, or vice versa. So check all your extensions to see if they look correct.

Scan down the page through the cost extensions and look for very high numbers and very low numbers then verify that those numbers are correct. Especially check everything which has a $0 value. I frequently find items which have an inventory balance but which have no cost associated with it due to some glitch in the process or system. And check all items which have a 0 quantity to verify that indeed you did not have that item on hand during inventory. This is especially true if you do not do the inventory yourself as others tend to miss items, especially new items.

Next, check the pricing on key proteins to see that they are up to date on the inventory system. This includes meat, fish, and dairy as well as specialty products which are expensive. And check any new items which have been added to your inventory to see that they were counted.


 

Check Your Sales Mix

You could be doing everything correct and driving cash to the bottom line, making the business successful, and still have a bad food cost! Let’s say that by some strange fluke one month your restaurant serves only grilled cheese sandwiches for $5.00 with a food cost of 20% and a margin of $4.00. And then the next month you sell only lobster for $50 with a 50% food cost and a margin of $25. Each month you sell exactly 1000 meals. So, the first month you have a food cost of 20% (you’re a star!) and you have earned $4000 in margin ($4 x 1000). The second month you sold 1000 lobsters, you have a 50% food cost (you suck!) and have earned $25,000 in margin. Would you rather have $4000 or $25,000? A high food cost isn’t always a bad thing. Knowing your sales mix will help determine if your food cost is off simply because people are buying more expensive items but dropping more money to the bottom line.

Perhaps It’s Time to Get The Hell Out!

If you have taken several months and have thoroughly gone through the forty thieves, attended to all the issues you find, implemented proper procedures, verified your sales mix and accounting system, heightened the training of your staff, and yet continue to not be able to meet your budgeted food cost then here’s what to do… Move on! Some companies set unrealistic budgets based upon what they want to earn and not upon what is actually doable for the menu concept they want to use.

One place I worked at tightened the food budget a little every year, even though the past 3 chefs and 6 years had never seen the budget attained. In this instance, the “food cost problem” is with poor management at the highest level of the company not knowing how to set attainable budgets. And not understanding that unattainable goals coupled with budgetary beatings does more harm to their company than the ½ point they are trying to save. I moved on, and they recently filed bankruptcy. If you work for such a place… safe yourself! Get out! Put in your one year, give proper notice, don’t burn bridges, and leave. Let them draw blood from someone else…the restaurant coroner will be at their door soon enough.
 

Download this page as a free PDF


 

Comments from before Site Migration

Add a Comment!

GRAU [120.51.84.208]    [ Sep 02, 2014 ]

Thank you very much for the information I real all the pages related and found great information for our project.

Please keep adding information

RANDY BURNS [96.53.206.74]    [ Feb 17, 2014 ]

   Great article Chef David, absolutely true.

FRANCISCO ARAYA [94.56.246.198]    [ Mar 30, 2013 ]

Thanks chef for this good article.

ESTRULOVITS [64.66.16.96]    [ Mar 28, 2013 ]

good tips  now to get a job that i can use them

CHEF JO [75.34.178.27]    [ Mar 28, 2013 ]

This information is invaluable. It is said that G-d sends what you need at the appropriate time.  My thoughts had been on this very subject and then I saw your site. Praise Him!  As a new small business owner in professional chef services, this will help w/some of its learning curves.

CHEF ALAIN BRAUX CEPC CMB [12.97.225.66]    [ Mar 28, 2013 ]

Thank you very much Chef David for this wonderful source of information to control food costs in my operation. It’s a lot work but at least I know now what to look for.

Chefly yours, Chef Alain

ANURAG    [ Feb 20, 2012 ]

dear chef’s

one of the major sub sections is the efficency of equipments as per the requirements.

elaborating on right capacity equipment.

right and timely maintenence of equipments.

thanks

 

  • Nico Skeba

    What about using software for food cost management? http://costbrain.com among others seem to offer that in a digital form or is it better to stick with excel sheets?

    • If your company can afford a software solution then that is generally preferred to Excel, assuming that the software is reliable and user friendly. Also, most (maybe all) software solutions allow you to export to Excel incase you need to make other adjustments.
      I’m unfamiliar w/ CostBrain. It appears to have some good features…but I don’t see inventory control or the ability to sync w/ your POS system as one of it’s features.