Using Inventory Software So Your Profits Won't Suffer
As a manager working in the fast-paced restaurant industry, you can attest to the fact that is always something to do.
Whether it's customers that need tending with to-go orders, conflicting co-workers, or perhaps the back-of-house functions like employee scheduling, there is always a lot going on.
To add to the list, another important responsibility that cannot be neglected is inventory management.
In the restaurant industry, there tendH to be food products and other inventory items that become damaged, burnt, lost or expired. Sometimes, these products are not accounted for or logged into the system, which results in waste and ends up costing business grandly in product costs.
Another contributing factor to food waste is due to ingredients lost through unused recipes and dishes.
But how does one track inventory and ingredients? Is there a way to accurately calculate food costs?
Why remain puzzled by these questions and add to the extra stress? Especially when we are faced with the conflicts of the jotting it down in the logbook and let's just face it, with our highly advanced and fast-paced society, the old pen and paper just doesn't cut it anymore in the restaurant business.
Electronic inventory systems can track and maintain the numbers with just a fraction of the work and time, ultimately making your logging process easier.
How to Calculate Food Cost
You may find yourself asking how to calculate the percentage of cost is and how to achieve the ideal number.
This basic equation is the cost of items used, divided by your restaurant's total sales. By taking the percentage and using this proportional equation in an effective way, you get the actual cost of any dish and proper proportion size.
Figuring out what your best percentage of cost is will prove to be a fantastic starting point.
Restaurant professionals have said and recommended that your average percentage of cost should be around 30%. So during this explanation, this will be the number we will use.
You will also want to monitor the averages closely to see if there is any discrepancy between your ideal percentage of cost and your actual food expense.
The percentage of cost is based on what you are spending on quality ingredients and how much you are selling the meal for.
However, not all dishes served include the exact proportioned amount of ingredients each time. Also, accidents may occur, like food spoiling or being overcooked, so you will have to account for that food as well.
So the restaurant's actual food expense will have to include the beginning and ending recorded stock.
While factoring in your stock, also add in any purchases that are bought after the last record of your stock. It's imperative those purchases do not go overlooked and should be tracked closely.
This will give you a more detailed point of view of what your food cost percentage is. Interestingly enough, your food cost is typically higher than the food cost percentage. Regardless, the goal is to make sure that it is not significantly higher, as this would disrupt the purpose of monitoring both areas of spend.
If this is the case, it would prove that portion sizes are off-balance or that there is unnecessary food waste, both of which can be easily prevented.
Food Cost Percentage = Total amount spent on ingredients divided by food sales
Actual Food Cost Percentage = (beginning inventory + purchases made subtracted by the ending inventory) divided by food sales
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Now, remember, your food expenses consistently will be somewhat higher than the percentage of cost, but the main goal to achieve is to keep them as low as possible.
If this is the case, it would prove that portion sizes are off-balance or unnecessary food waste both of these can be easily prevented.
Now, let's take a look at how to write out the equation.
Percentage of cost = Total spent on quality of food and ingredients and dividing it by your food sales
Your sirloin steak and baked potato entree is $18.00, but your total invested cost is only $6.00. So you would divide $6.00 by $18.00 this will leave you with a percentage of cost of almost 30%.
But let's say that someone accidentally left a steak out of the freezer and the spoiled steak must be disposed of. This now makes your percentage of cost go up because of the wasted food.
These example equations can and will determine what the appropriate menu price should be. During these equations, it not only shows you how much you are spending on food, but it will also show you how much food is wasted so you will achieve a greater money margin. This will put you on your way to becoming a successful restaurant owner.
By diligence, you can study your restaurant's cost of food, which will show you what modifications need to be made to your prices. You may need to swap out some ingredients you are currently using or possibly the quantity of some items that you typically purchase in large amounts. It will make you notice if there is any discrepancy between your percentage of cost and what your actual cost of food is.
The Importance of Tracking Ingredients
Yes, that is the question. What is the importance of tracking recipes be?
Let's start with the taste. When everybody doesn't follow the same recipe, the dish can suffer in flavor and presentation.
Your repeat customers may be surprised with a new and different flavors and some may be offended. But if you have recipes for your workers and if your cooks and chefs follow your recipes precisely, you can guarantee that your dish will remain the same.
How we can lose money when not following a recipe? Alongside of the flavor being different, what also can be a downfall with this is the money loss that can be included with not following a recipe.
Daniel makes a bowl of Goulash. Daniel decides he needs to follow the recipe as the head chiefs, managers and what the paper recipe instructs. He follows this recipe exactly and makes a beautiful dish of Goulash, a famous and traditional dish for this restaurant.
The next day, Jessica decides to make the same famous and traditional dish, except for one problem, she doesn't follow the recipe.
She doubles the amount of beef used in this example recipe and triples the number of spices.
Now, one pot of Goulash is calling for 1 lb of 100% lean ground beef in the recipe and it costs a total of $3.80 per pound. Daniel uses the precise and right amount, making the amount of money invested in ground beef $3.80 but Jessica doubles this amount, making you invest $7.40 and lose $3.80 that wasn't necessary.
The same goes for the spices and other ingredients. Daniel uses the right amount while Jessica triples the amount. And like a magic trick, your money just disappeared into thin air, leaving your profits dry.
Strategizing Profit Growth
Once you have accounted for your restaurant food cost, by using the food cost equation above, you can now look for ways to increase your profitability.
Here are some very strategic things as a restaurant owner to consider
- Raise your menu prices slowly - While using the above equations you will be able to determine if the prices of your menu need to be increased. If this is the case, you do not want to increase them fast where your customers will notice and stop them from coming. Adding small price increases a customer may not even notice to different menu items, but it can help you reach your food expense goals.
- Buying in large quantities can be profitable or not - You can definitely save money by getting your supply in huge quantities if you do it correctly. Unfortunately, some owners have the mindset of buying too much of an item at once they think this is a good thing and are being responsible, but what they do not realize is by doing this they are risking the extra food going bad before using it. If that is the case, this option would not be profitable. So be careful and mindful of how much you are buying at once.
- Portion size control - If plates are being returned with only half of the food eaten, this could mean that your portion size is too large, and by this, you are wasting money. Use measuring cups, food scales, and smaller plates when doing portion control so they are always the same.
- Watch your prices on your ingredients - Prices vary, this is why you need to do your restaurant's food cost percentage calculation on a regular rotation. Say a particular brand of ingredient is getting more expensive, you will have to decide if you need to reduce the amount you use, switch brands or you may need to slightly increase your menu price to reflect the rising price.
- Portion size control - Here are some ideas on how to portion control. Measure out portions by using measuring cups, food scales and smaller plates when doing portion control so it is always the same.
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Need a hand?
I think we can all agree that running a restaurant isn't a smooth and gentle ride but with electronic inventory systems, you can have a few less bumps in the road and take a rest from that long journey. When you and your staff choose electronic inventory systems you can forget haggling over the books!
You can raise those profits and lower those costs by calculating your inventory. You can keep on top of logging your products, tracking those recipes, calculating those food costs and much more, you can do this process either bi-weekly or a monthly process.
With the ease of mind, you receive once dealing with digital systems, you can be sure to have less stress and keeping on track with your business. No more arguing over who did this process last, no more struggling over when and what to do, with digital inventory systems you don't have to worry about those complications, these electronic inventory systems can keep you up-to-date and stress-free.
Don't forget the time it takes to write in the inventory, going through every individual item. These systems understand your precious time that needs to be spent with workers, recipes, cooking food and most of all, understanding and communicating with your customers.
Forget the ink and paper, so you can have more time to do what you love making food you're passionate about and sharing it with others!