Do You Know What Your Food Cost “Should” Be? – Why It’s Important You Know

One of our surveys revealed that cost control, food cost in particular, is a top priority of many independent operators today.

Most operators indicated that they track their food cost each week, or at minimum, every month. They know that keeping close tabs on their food cost can alert them to potential problems when the cost is higher than expected.

Spikes in cost percentages set in motion the usual investigation process of reviewing controls for monitoring waste, receiving procedures, cost increases, theft, etc. Yet, even with proper controls, some operators are never able to “hit” their target food cost percentage.

Maybe your “food cost target” needs reviewing. When was the last time you costed out your menu? Whether you use recipe costing software, spreadsheet, or even handwritten computations, you should keep the cost of each menu item up to date. Once you know your food cost in each menu item, take one more step and compute your ideal food cost based on the sales mix report from your POS.

Depending on your menu, cost percentages can fluctuate materially from menu item sales fluctuations particularly on high-cost dishes like steaks or seafood. But that doesn’t mean you have a food cost problem.

A cost control problem is when there is an unacceptable difference between the ideal and actual cost for a given period.

A 2% variance for a restaurant that does $30,000 a week in food sales amounts to $600 a week. That’s over $30,000 a year! However, if the targeted cost is inaccurate then you’ll be left scratching your head looking for a food cost problem that doesn’t exist.

Here are some tips on how to know what your ideal cost should be:

  • Accurately cost out each menu item.
  • Make sure that each menu item has its own POS key. (so you can track the unit sales of each item)
  • Create a spreadsheet that calculates the cost of each menu item times the number of items sold from the POS report to give an ‘Ideal Cost’.
  • Compare the Ideal Cost to the Actual Cost calculation from your P&L.
  • For many operators who regularly compare their “Ideal” to their “Actual” food cost, a variance of greater than 1% of sales indicates a food cost problem.

Article shared from Restaurant Owner.