December 05, 2011
Written by: Ian Said
The food is great, the service fabulous and the restaurant is busier than ever but are you wondering why the bottom line isn’t all it should be? Check your FOOD COST!
Here are possible Food Cost problem areas:
Pricing is an important aspect of your revenues and customer counts. Prices that are too high will drive customers away and prices that are too low will kill your profits. Pricing is not the simple matter of appropriate markup over cost; it combines other factors as well. Prices can be either market driven or demand.
Cost is the basic building block of menu pricing, so you need to understand how to track food cost in order to price your menu for maximum profits. Before you price your menu, you need to cost out each menu item. This information can come from your standardized recipe, or you can create a separate cost sheet that lists all the items on the menu.
Although you recipe file will change over time, it should always contain certain basic pieces of information. Make sure that you keep track of these changes and keep you file up to date.
Once you have standardized recipes in place, you can determine the per plate cost of every dish. In order to do this, you need to know the basics ingredients cost and the edible yield of those ingredients for each dish.
Menu pricing is a major component of your food cost equation. The more you can charge your customers, the lower your food-cost percentage. Pricing may seem like a mathematical exercise or a lucky guess, but it is neither of these. Pricing is based on a markup of cost, which is figured by the determining food cost, sales history and profit margin.
How indirect factors can increase Profits
Certain factors can give you a competitive edge, allowing you to charge more than the competition for your products. For instance, if you operate a steak house that serves prime beef and all the other steak houses in town serve choice and select, you are able to charge more for your product because of the higher quality. Other factors may allow you to charge more (or less) as well e.g. If you have off street or valet parking, you offer amenities that allow you to charge higher prices than some of your competition may be able to.
Calculating Entrée and Meal Food Cost
Armed with cost information, you are now in a position to establish your menu prices. Remember, however, that prices will also have to take indirect factors into consideration.
Food Cost Percentage Pricing
This is probably the most widely used method of menu pricing and more than likely it will be the way you price the majority of your menu items. To calculate cost percentages, use target food cost percentage and actual item food cost.
Menu Sales Analysis
Menu sales analysis, or menu scores, track how many of each menu item is sold. Looking at this information, together with food cost and menu prices, can give the food service manager a great deal of information.
Analyze and Classify Your Menu Sales Mix
Once you have an effective menu design, analyzing your scales mix to determine the impact each item has on sales, costs and profits is an important practice. If you have costs and waste under control, looking at your menu sales mix can help you further reduce costs and boost profits. You will find that some items need to be dropped altogether