In restaurant management ‘cost control’ refers to an ongoing practice of taking steps to reduce operating expenses in an effort to increase profitability. The primary objective of food cost control is, specifically, to identify and reduce the prices of the various foods and beverages offered at your establishment.
To put it another way, the objective of controlling food costs is to identify a method that will maximise benefits while simultaneously minimising costs. Cost management is not an activity that you complete once and leave; rather, it is a way of thinking that you integrate into everyday life to do effective restaurant management.
To manage food costs in your restaurant, you need to first understand what is included in these costs and what other restaurant management costs are counted separately.
Why You Should Monitor Your Restaurant’s Food Costs?
One of a restaurant business’s largest operating costs is the investment made in inventory. Due to constantly varying sales figures, controlling food expenditures and inventory costs in restaurants is challenging yet very crucial.
Your inventory costs and food costs are significant budget line items. Your bottom line is directly impacted when you order incorrectly or overspend on food. Fortunately, there are various methods for reducing food expenses that you may use in your restaurant operations.
What Are Different Kinds Of Food Costs?
To put it simply, food cost is the total amount of money you spend on buying raw materials of food from your vendors till the time those ingredients are cooked & served to your customers. Although it isn’t as simple to calculate this in a restaurant, there are a few terms that you should know along with their formula to find an estimated cost or figure of the expense made.
1. Actual Food Cost
The depletion of inventory over a given time period in a restaurant is called the actual food cost. It is also popularly known as the Cost Of Goods Sold (CoGS).
The formula for actual food cost is:
Starting inventory value + Total value of new purchases – Ending inventory value = Actual food cost
2. Food Cost Percentage:
The “food cost percentage” refers to the ratio of total food expenses to total income expressed as a percentage. The number is used by restaurants to assist in the pricing of their menu items.
The formula for Food Cost Percentage:
Actual food cost * 100 / Revenue generated = Food Cost
3. Ideal Food Cost
The term “ideal food cost” refers to the cost that is predicted for a certain time period based on the recipes utilised and the total number of times each item on the menu is purchased. The ideal food cost is often referred to as the theoretical or the desired one. It is deemed so because it does not account for actual inventory depletion.
The formula for Ideal Cost Percentage:
Ideal Food Cost * 100 / Revenue generated by food sales = Food Cost Percentage
How To Reduce Food Costs?
1. Checking Inventory
Without the ability to compute food and inventory costs, you cannot limit the expense of food. Checking Inventory means keeping a track of the ingredients entering, being used, and retained in your kitchen. Inventory management is crucial for restaurants because it helps you place more cost-effective orders for food, drinks, and supplies, which increases your revenue.
2. Monitor Cost Variances
The food cost variance is the difference between your desired and actual food cost percentages. It is a test to see if food and inventory costs are under control; the lower the number, the better.
When the optimal cost, as established by your dishes, and the number of food items consumed from inventory match up, you will know you have successfully kept your costs in check.
3. Tracking Ingredient Prices
Knowing whether food prices are expected to rise or fall and keeping track of them pays off. You may update your menu so that your recipes contain more reasonably priced substitutes by keeping track of ingredient pricing. While prices are reduced, you might take into account less expensive meat pieces, such as chicken thighs, and provide more egg possibilities.
4. Forecasting Sales
Gaining insight into your past sales allows you to spot trends and forecast future business for better restaurant management. This contributes to better handling of all aspects of operations, such as ingredient procurement, meal preparation, staff scheduling, etc., which ultimately results in less food waste and lower food expenditures.
5. Do Some Preps Yourself
Readily Chopped vegetables stored & sold in those little plastic boxes are actually far more expensive than fresh and raw vegetables. To save money, buy veggies and fruits from the market and cut them afterwards according to your needs. This will take some time, but it will undoubtedly help you control your costs.
Food cost reduction requires dedication, but it is doable. To appropriately price your menu, you must first examine all of the factors that influence your inventory procurement and your ideal cost percentage. Taking small steps like these will help you control food costs to a large extent.
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