Restaurant Food Cost Control – Part 2

Food Cost Control for Restaurants – Part 2

Courtesy Tulalip Resort. See image licensing info

This is part 2 in a two part series on the 40 Thieves of Food Cost.
There are a total of nine major areas in your restaurant food cost control SOPs that you need to be able to manage well and have solid procedures for. In the first video we went through and discussed the first five categories of control:

• • Purchasing Procedures
  • Receiving Department Procedures
  • Storage Procedures
  • Prep Standards
  • Production Standards

Now in this segment we’re going to be discussing the last four which are:

• • • Service Problems
    • Sales Problems
    • Inventory Procedures
    • Accounting Procedures

If you haven’t watched the first video I highly suggest you go back and do that first. Alright so let’s dig in.
Below is the Whiteboard Chef Management video which has the same content as written on this page.

• • 1. Service Problems
       • No standard portion size
         Now this could be either you don’t have a standard portion size in your recipes or you’re not spot-checking your crew to make sure that they are following the recipes.
       • Carelessness
         Such as waste, cold food, re-fires from the guys fooling around or not paying attention.
       • Poor Production Transition Planning
         So when we go from a very busy time to a slower period of service there can be a lot of excess food prepared because the crew is jacked up because it’s busy, they’re firing lots of stuff and all of a sudden business drops off. Your leaders need to be aware that that is about to happen and need to control the amount of production during those time frames from busy to slow.
       • Untrained or Inadequate Wheelman
         If you have an ala carte restaurant where you’ve got a person that calls the wheel, maybe sets plates, and then the rest of the kitchen is cooking from different stations, an inadequate wheelman can really affect your food cost. Plates will go out slower, you might have more food comps, the kitchen crew might be disorganized, you might have more misfires, food gets done too quick or too slow, sits in the window, that sort of thing. So having a really solid wheelman is definitely something that impacts your food cost in an ala carte restaurant.
    2. Sales Problems
       This is front-of-the-house or POS system issues
       • Unrecorded Sales
         This can be areas where your servers are taking advantage of you, or maybe even your assistant manager, by giving away free food to friends and family, people they are trying to impress, or possibly discounting menu items in order to get a bigger tip out of the deal. So trying to find ways to manage your people and watch for that kind of a problem.
       • Open Food Abuses
         In a perfect world you would have no “open food” key. But in most operations perhaps the best case scenario is to only make it available through the approval of a manager or supervisor so that you don’t run into abuses/cheats by the staff. Another problem with that key is if you’ve got $1,000 or $2,000 in open food sales then you don’t know the cost of goods on those sales. So it can skew your sales mix percentage and your food cost percentage.
       • No Tracking of Comps
         If you give away a lot of comps in a month it’s definitely going to affect your food cost and you need to know what that value is so that you can have a corresponding relationship between food cost percentage and cost of goods.
       • No POS System
         Or not properly using your POS system, or not accessing the reports available in it. If you’re only using a POS system to print tickets for the kitchen then you need to dive in and learn to use the POS reports that the system has available. If you’re a small place that doesn’t use a POS system you need to look at trying to get one because it will certainly help by giving you fantastic, actionable info.
       • Incorrect POS Pricing
         I’ve seen this a few times. You increase the prices on the menu but you forget to increase it in the POS system, therefore your guests are charged the wrong amount. Or you might have 2 very similar keys, or renamed keys with different prices and servers use both keys, or one key is cheaper so they use it to discount something to a guest and get a bigger tip because of it.
       • Poor Sales Mix
         This is a huge conversation in and of itself! And it’s not necessarily even a poor sales mix, just a high sales mix. There’s a completely different whiteboard discussion on the topic of Sales Mix so check the links in this paragraph because if for instance you sell nothing but lobsters one month your food cost is going to be jacked up because of it but you’ve made more money as well.
    3. Inventory Procedures
       There are a number of areas in the whole inventory process which you absolutely need to be on top of because this is probably the first area to look at if you’ve got a messed up food cost percentage.
       • Counting Sheet to Shelf
         This is really bad. So you’ve got your inventory sheets and going right down the list and then looking in your storage areas for each item as you read from the list. Totally the wrong way to do it! If your crew is taking inventory this then way make them stop because you will miss things for sure. If it’s not on that list then it probably isn’t going to get counted. The only way to count inventory is from shelf to sheet. Counting shelf to sheet means I’ll count everything on the top shelf, then I’ll count everything on the next shelf, followed by everything on the shelf below that one, and go through and find it on the inventory sheets as you inventory each shelf. That’s the only way to count inventory correctly, otherwise you’re going to miss things.
       • Inventory Software Miscalculations
         This happens especially if you use Excel for inventory calculations, but does also occur in professional inventory software such as Red Rock. I always find errors in either the way that people have entered the numbers or in the way that the system is calculating the extensions (which is a data entry problem in the system). For example I come across this all the time, I’ll put in 1 case of something and it counts it as 1 pound or I’ll put in a pound of something and it’ll count it as a case.
       • No Dollar Value
         I see this a lot as well. As I’m entering counts into our program I come across items which either have no purchase price or no extension cost for its total value.
       • Inventory Data Entry Errors
         Another fairly common error is bad ten key entry. You mean to enter 1 but you accidentally enter 12 by hitting two keys at once (because 1 & 2 are right next to each other).
       • Items Not Counted
         If it’s not on your inventory sheet there’s a chance that you might miss it, even if you’re counting shelf to sheet. Perhaps you’ve got some new items that you have stashed in a special area or in the chef’s office. If it’s out of sight or some new item there’s a good chance that you might miss it on your inventory and it could skew your food cost percentage.
       • Out of Date Pricing
         When you run your food cost program for getting your period end food cost percentage all your pricing needs to be updated based upon the most recent invoices. If not then your food cost control is lacking a major component as far as accuracy goes.
       • Not Verifying Before Posting
         So let’s go through the whole procedure here on the best way to do your sheets. Let’s say that you’ve entered your inventory and you’ve got back either from yourself or from your accounting department a sheet that has all of your items along with how many cases or pounds or whatever, the cost per unit, and the extension cost (total cost) for every single item. The best way to find errors in your inventory sheets is to look for really big or really small numbers. So over in the far right hand column you usually see the extension price for each item (12 cases of X product times price) Go down the entire column and look for anything that either has a zero in it, which means there’s an error somewhere, or has a really large number and verify that the information (units on hand and pricing) is correct. Also do the same in your quantity column, looking for really big or really low numbers. It’s another way to catch issues of either 10 key problems or things that got incorrectly calculated. You need to verify all your numbers before you give it to the accounting department as approved by you for final posting.
       • Different People Taking Inventory
         Inventory should always be done the same way but it’s almost inevitable that different people will somehow count things differently. They might count cases of shrimp instead of pounds of shrimp. All of your expensive items should be counted by the pound (beef, seafood, dairy products, cheese, etc) These items should always be counted by the pound because case sizes change. One month you might have a case of shrimp that’s 50 pounds and the next month it might be thirty pounds.
    4. Accounting Procedures
       • Verify the General Ledger
         Verify all general ledger charges to your various operations before final posting. Accounting is often reluctant to let you see the general ledger but it’s your numbers, you’re the one that is going to get patted on the back or whipped for the food cost percentage that you have so you need to see the general ledger to verify that their system is working correctly and that they’ve done their job correctly. What the general ledger will tell you is things like whether or not you were charged for paper, equipment, or other non-food items against your food cost. Those items should be billed against other budgetary codes, not food. If you’re being charged for paper and equipment against your food cost that’s definitely going to change your food cost percentage. The general ledger will also tell you if a different venue (assuming you’ve got more than one venue, say banquets or a second restaurant) if their product was charged against your food cost or against the wrong venue. If your restaurant was charged for the 20 cases of chicken for banquets it’s going o hurt your COGS!
       • Transfers and Credits
         Check that all transfers & credits are being processed correctly. We use Excel for transferring product a lot of times and I caught an error once where one pan of polenta was transferred to me for $700! The Excel formula was wrong, but I fixed it before final closing for the month.
         You need to verify all the transfers and credits that the system and which other people have entered it into the system.

So that’s a wrap on restaurant food cost control and the Forty Thieves of Food Cost. If you would like to dive deeper into the whole topic or get a free pdf download of it then check out the links below where you can find links to the forty thieves of food cost which actually has all of part 1 and part 2 and goes into even deeper detail than what I’ve put in the whiteboard discussion. There are also links below for sales mix and how to track that.

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