You know food costing is important BUT how do you impress that on your kitchen staff?

How To Do Food Costing for your kitchen staff?

You know why food costing is important:

  • It’s the best way to manage profits
  • Food costing protects your inventory against over plating, theft, spoilage and waste
  • Actual vs. theoretical. You know it in your head but what are the real numbers
  • Keeps on top of your vendors, watches their pricing
  • Accurately prices your recipes to reflect any price creep

You already know the answer to that if you’re looking at food costing software. It gives you a handle on what you spend and what you should be spending.

The real question is why is it important for your kitchen staff to understand the principles behind food costing? Yes, I’m sure your chef understands the concept but unless you are the chef/owner and you watch every ingredient with an eagle eye…

  1. Kitchen staff are proud of the plated food they produce.

  2. They want it to impress the customer.

  3. And sometimes, in an effort to please, they over plate.

If your chef is proud of what s/he’s sending out of the kitchen in an effort to make the plate look bountiful they may add a bit here and there. They’re thinking it’s not a real issue. But you know that over time EVERY LITTLE BIT adds up to MORE MONEY SPENT.

So how do you make your chef understand the implications?

With food costing software the answer is right in front of them:

Here is our original serving recipe. The Actual and Target food costs align beautifully at about 33% and your sales price at $22 for salmon and sides is reasonable for your area:

 

Now the chef thinks the plate looks skimpy so s/he ups the salmon from 8 oz to 12 oz. Hey, what’s 4 oz of fish? And another 2 oz of greens. That can’t cause too much trouble, right? WRONG!!

Our Yield Cost is up almost $3. And our food cost percentage is up more than 10%!!  Gee Whiz. And there’s no way you can raise the selling price to the target of $31.88.

Multiply that cost loss by the number of servings you sell a year. Now multiply that by all the other items that are overplated.

Put reciProfity in front of the chef and let the chef play with it. It’s like a game. Change the amount of an item and watch the price, yield and food cost percentage rise and fall.

Trust me, a few minutes with the software and your chef will get the message!

Why Don’t You Ever Stop Working?

 

My sous chef and I went for Mexican food with some friends last Sunday (obviously) and someone got the most amazing chiles rellenos.

 

Of course, my sous and I immediately started talking about ways we could incorporate some of these flavors into our food, especially the ridiculously delicious smoked tomato salsa.

 

We could put it on our fish tacos, it would be an excellent counterpoint to the cilantro ranch dressing. We could use it in a reimagined eggs Benedict.

 

This went on for 15 or 20 minutes until one of our friends said, “Oh my god, why don’t you guys ever stop working?”

 

It’s true; we don’t. And neither do any of the good cooks I’ve ever worked with. If we’re out at a restaurant, we’re constantly looking for things they do well that we can learn from, or for things they do badly that we can avoid doing (or gloat about, if we’re feeling smarmy).

 

I’m friendly with the chef at a great local sushi restaurant. My knife skills are rock solid, but his blow mine out of the water. So of course I jumped at the chance to have him teach me some Japanese techniques.

 

Years and years ago, when I was a young line cook at a restaurant in New York, our chef brought a whole wild boar down to the kitchen. We all stood around staring at it with our mouths wide open. This was one of the top-rated restaurants in the city full of incredibly talented cooks, and not a single one of us had any idea how to start butchering this beast.

 

The ancient Dominican dishwashers came out of the dishpit, laughed at us for a minute or two and then had the boar skinned and portioned into primals in about an hour.

 

You better believe that we watched their every move. Knowledge comes from unexpected places and you’d be crazy to pass it up.

 

That’s what I love about this business: you’re never done learning. It’s up to us to always be observing and asking questions, and to never turn it off.

 

Our significant others may not love it, but it’s how we stay on top.

Software usability so that you really DO use it!!

I’ve worked with thousands of food service operators. After explaining what our software does, I often hear this: “I need it, but…” followed by one of these two objections:

“It takes too long to get it right, assuming we do get it right”
or
My people won’t adapt to technology”

Let’s call it usability.

So although I’m not a programmer, I do work closely with development. And I constantly push them focus on two things:

– Simplicity

– Ease of use

When you analyze an app, POS system, or any other technology for purchase in your operation, pay special attention to usability. You are in a business where there’s never enough time, turnover is the norm, and technology adaptation can be bumpy. You don’t have endless resources to dedicate to analysis, integration, training, implementation, etc.

It’s all about usability: that means not chasing every bell and whistle, but really focusing on the core objectives of what you want to accomplish. And it means finding solutions that you can adapt and integrate seamlessly and painlessly. All of that adds up to usability.

I’ve told you there would be tips with my emails; these tips are some of the features that increase reciProfity’s usability. These may very well be what enables a successful deployment.

The Joys of Small Suppliers

My meat supplier is an obese, cigar-chomping man with an unpronounceable name and a staff of maybe 6 guys.

His favorite hobbies include eating meat, talking about meat, and yelling at me about the Yankees, all of which he does without the cigar ever leaving his mouth.

He doesn’t have a website, a secretary, or an accounts receivable department and his office is basically a broom closet.

Sure, he doesn’t do much butchering himself anymore but he knows everything about every cut he sells and I bet he could still break down a side of beef faster than I can make a béchamel.

This guy is easily my favorite supplier.

I called him yesterday with a question about the size of the fat cap on their beef brisket and he went into the storeroom himself to check the product and get me an answer.

There’s none of this “please hold while I transfer you to some guy in the warehouse who also doesn’t know the answer,” no best guesses from uninformed sales reps, and no wondering if the full order is going to show up.

He stands behind his product and his service, and it shows.

This is why I (and plenty of other restaurants in this town) are happy to pay his slightly higher prices instead of working with the bigger, cheaper meat companies.

 

The quality of his product is also the best, but that’s to be expected from a guy like him.

 

Take cash to the bank, not percentages

You’ve already heard us screaming about how having accurate food costs is absolutely crucial to your profitability (and guess what? If you’re still using Excel or the back of a napkin to cost out your recipes, you DO NOT have accurate food costs and you desperately need to check out ReciProfity).

 

So now that you have all that great raw data, what do you do with it?  If you’re calculating your selling price by multiplying the food cost of each item on your menu by 3.3 to get a 30% food cost, that’s a great starting point, but you’re still leaving lots of money on the table.

 

The key to profitability is making sure that your actual sales mix, and not just your menu, averages out to your taget food cost. If your menu averages out to a target 30% food cost but 80% of your sales come from items with a 40% food cost, that’s a problem.

 

It’s like having the fastest grill man in the city but a veg guy who’s just out of culinary school and can’t keep up. The whole line is going to be in the weeds. Similarly, an unbalanced menu will never maximize profits. Each item needs to work in concert with all other items to create a sales mix that just plows money into your pocket.

 

The trick is adjusting your prices based on your real sales mix every month (ReciProfity makes this really easy), not based on your static menu.

 

Here’s how to turn your menu into a serious money maker:

 

At the end of each month, print out a sales mix report and categorize every single menu item into one of the following categories based on its sales volume and profitability:

 

  • Winners: high sales, high profit margin (maximum 28-35% food cost depending on your sector).
  • Plowhorses: high sales, low profit margin (over 28-35% food cost depending on your sector).
  • Puzzles: low sales, high profit margin
  • Losers: low sales, low profit margin

 

Do a little tweaking:

 

  • Look back at your Plowhorses. Are you sure that some of them aren’t actually Winners in disguise? If you’re selling Dover sole with beurre noisette for $45 and it costs you $17, that’s a pretty nasty looking 37% food cost. But that $28 gross profit is probably higher than most of your other items so that’s a pretty sweet sale to make. Since we take cash to the bank, not percentages, go ahead and put that bad boy in the Winners
  • Look at your high profit categories (puzzles and Winners). Do any of these items have obscenely high hidden costs associated with them that aren’t calculated as part of the food cost? An example is house-cured meats like pastrami that need 3 weeks in the fridge. The added electricity and cost of holding inventory can turn it into a low-profit item. This can also happen to items that require intensive prep relative to other items. Make sure these items are in the correct category.

 

Now let’s go through each category and see what we can do to optimize this menu:

 

  • Your Winners are what pay your rent. Your customers love them and they put money in your pocket. You probably don’t have to do too much with this category since right now they sell themselves. Just be careful that, as you jigger around the rest of your menu, the Winners don’t get hidden or you might see some of them turn into puzzles. This is why it’s important to repeat this process every month or whenever you change your menu.

 

  • Plowhorses bring customers through the door but you groan every time they’re ordered because all you see is a table full of people who aren’t really contributing to your bottom line. You can’t take them off the menu because your customers will rebel. But Plowhorses are a great opportunity. You can:
    • Up the price and turn it into a This works well in more expensive markets and higher-end businesses with a less price-conscious clientele.
    • Cut the food cost. Reduce the portion size or streamline the prep process. Just make sure this doesn’t mess up the product and turn it from a workhorse into a bum, or worse, turn off customers who come specifically for that product. Alternatively, eliminate waste (use ReciProfity to calculate differences between actual and ideal food cost to identify where the waste is), or find better prices from a new supplier.
    • Use it as a loss leader. You know that great bar a few blocks away that sells huge, delicious burgers for 6 bucks a piece? That burger isn’t actually making them any money, but it’s good enough to drag people in who then spend lots of money on high-margin items like sides and beer. That’s why the bar has a gorgeous copper draft system in full view with rotating microbrews on tap and why the waitresses push fries so aggressively. If this item is really what makes people beat a path to your business, don’t change it. Just accept that these items will be over your target food cost and need to be balanced out in your sales mix by other items with huge margins. Figure out what your “fries and microbrews” are and how to sell more of them (more on this in the Puzzles section).
    • If none of those tactics work, bury the item. Hide it in the middle of a group of other, more profitable items. It’s still there for customers who really want it but it won’t squeeze out the sales of your Winners and will free up prime menu real estate for your puzzles.

 

  • Puzzles are items that you wish you could sell more of. Coffee, desserts, cocktails, and appetizers are almost always considered puzzles since they have fantastic margins and you can always sell more of them without canceling out sales of other items. They’re most likely what’s keeping you in business, especially if some of your entrees are loss leaders. Other less pleasant puzzles are dishes that might be close to the chef’s heart but never really caught on with customers. Here’s what you want to do:
    • Have your floor staff push the items hard. This doesn’t mean that you’re turning your waitresses into used car salesman, just that you’re making it as easy as possible for your customers to spend more money. You’d be shocked how many customers won’t order a coffee after dinner until somebody suggests it. Make sure the waitress is that suggester. Don’t ask if the table would like dessert, just drop the dessert menus as soon as the table is cleared. Offer cocktails and aperitifs as soon as guests are seated. Point out the high-margin appetizers before the table has even started reading the entrees.
    • Check the item’s placement on the physical menu. Is it buried in the middle of a busy section on the periphery of the page? Switch it with a workhorse that’s hogging the spotlight. Put it in a box. Highlight it. Move it to the top left of the menu, where the eye goes first.
    • Rewrite the description. Remember that even though you know the dish inside and out, customers have no idea how it looks or tastes. All they know is what you tell them. Change “fried” to “crispy” and add some flowery adjectives if that’s your style.
    • Sometimes you just need to make it better. You might love the dish, but you might also be too close to it to be able to keep your opinion impartial. Don’t beat yourself up, we’ve all been there. Do a tasting for a few other restaurant people who you trust and use their honest feedback to improve the dish.
    • If all else fails, kill it. Lots of puzzles are very close to the chef’s heart, so this can hurt. But if you can’t sell the item, you just have ingredients taking up valuable fridge space and most likely contributing to waste. It’s irrelevant how much money this item could potentially make you if nobody’s buying it.

 

  • Losers are what nobody wants on the menu; not you, and not your customers.
    • There’s only one real tactic here: be ruthless and clean house.
    • The only reason to keep some of these Losers around is if they contribute to the business in a different way, like a hilariously named cocktail in a dive bar that makes the menu end up on Instagram or the only item for people with certain dietary restrictions, like McDonald’s Filet-o-fish.

 

 

This process might seem like a lot of work, but these techniques are what take your profitability to the next level. Avoid the temptation to just multiply food cost by 3.3 and you’ll leave your competition in the dust. Check out the reciProfity demo here to see how our new, cloud-based software makes you money and saves you time.

Menu Engineering Blog Post

 

You’ve already heard us screaming about how having accurate food costs is absolutely crucial to your profitability (and guess what? If you’re still using Excel or the back of a napkin to cost out your recipes, you DO NOT have accurate food costs and you desperately need to check out ReciProfity).

 

So now that you have all that great raw data, what do you do with it?  If you’re calculating your selling price by multiplying the food cost of each item on your menu by 3.3 to get a 30% food cost, that’s a great starting point, but you’re still leaving lots of money on the table.

 

The key to profitability is making sure that your actual sales mix, and not just your menu, averages out to your taget food cost. If your menu averages out to a target 30% food cost but 80% of your sales come from items with a 40% food cost, that’s a problem.

 

It’s like having the fastest grill man in the city but a veg guy who’s just out of culinary school and can’t keep up. The whole line is going to be in the weeds. Similarly, an unbalanced menu will never maximize profits. Each item needs to work in concert with all other items to create a sales mix that just plows money into your pocket.

 

The trick is adjusting your prices based on your real sales mix every month (ReciProfity makes this really easy), not based on your static menu.

 

Here’s how to turn your menu into a serious money maker:

 

At the end of each month, print out a sales mix report and categorize every single menu item into one of the following categories based on its sales volume and profitability:

 

  • Winners: high sales, high profit margin (maximum 28-35% food cost depending on your sector).
  • Plowhorses: high sales, low profit margin (over 28-35% food cost depending on your sector).
  • Puzzles: low sales, high profit margin
  • Losers: low sales, low profit margin

 

Do a little tweaking:

 

  • Look back at your Plowhorses. Are you sure that some of them aren’t actually Winners in disguise? If you’re selling Dover sole with beurre noisette for $45 and it costs you $17, that’s a pretty nasty looking 37% food cost. But that $28 gross profit is probably higher than most of your other items so that’s a pretty sweet sale to make. Since we take cash to the bank, not percentages, go ahead and put that bad boy in the Winners
  • Look at your high profit categories (puzzles and Winners). Do any of these items have obscenely high hidden costs associated with them that aren’t calculated as part of the food cost? An example is house-cured meats like pastrami that need 3 weeks in the fridge. The added electricity and cost of holding inventory can turn it into a low-profit item. This can also happen to items that require intensive prep relative to other items. Make sure these items are in the correct category.

 

Now let’s go through each category and see what we can do to optimize this menu:

 

  • Your Winners are what pay your rent. Your customers love them and they put money in your pocket. You probably don’t have to do too much with this category since right now they sell themselves. Just be careful that, as you jigger around the rest of your menu, the Winners don’t get hidden or you might see some of them turn into puzzles. This is why it’s important to repeat this process every month or whenever you change your menu.

 

  • Plowhorses bring customers through the door but you groan every time they’re ordered because all you see is a table full of people who aren’t really contributing to your bottom line. You can’t take them off the menu because your customers will rebel. But Plowhorses are a great opportunity. You can:
    • Up the price and turn it into a This works well in more expensive markets and higher-end businesses with a less price-conscious clientele.
    • Cut the food cost. Reduce the portion size or streamline the prep process. Just make sure this doesn’t mess up the product and turn it from a workhorse into a bum, or worse, turn off customers who come specifically for that product. Alternatively, eliminate waste (use ReciProfity to calculate differences between actual and ideal food cost to identify where the waste is), or find better prices from a new supplier.
    • Use it as a loss leader. You know that great bar a few blocks away that sells huge, delicious burgers for 6 bucks a piece? That burger isn’t actually making them any money, but it’s good enough to drag people in who then spend lots of money on high-margin items like sides and beer. That’s why the bar has a gorgeous copper draft system in full view with rotating microbrews on tap and why the waitresses push fries so aggressively. If this item is really what makes people beat a path to your business, don’t change it. Just accept that these items will be over your target food cost and need to be balanced out in your sales mix by other items with huge margins. Figure out what your “fries and microbrews” are and how to sell more of them (more on this in the Puzzles section).
    • If none of those tactics work, bury the item. Hide it in the middle of a group of other, more profitable items. It’s still there for customers who really want it but it won’t squeeze out the sales of your Winners and will free up prime menu real estate for your puzzles.

 

  • Puzzles are items that you wish you could sell more of. Coffee, desserts, cocktails, and appetizers are almost always considered puzzles since they have fantastic margins and you can always sell more of them without canceling out sales of other items. They’re most likely what’s keeping you in business, especially if some of your entrees are loss leaders. Other less pleasant puzzles are dishes that might be close to the chef’s heart but never really caught on with customers. Here’s what you want to do:
    • Have your floor staff push the items hard. This doesn’t mean that you’re turning your waitresses into used car salesman, just that you’re making it as easy as possible for your customers to spend more money. You’d be shocked how many customers won’t order a coffee after dinner until somebody suggests it. Make sure the waitress is that suggester. Don’t ask if the table would like dessert, just drop the dessert menus as soon as the table is cleared. Offer cocktails and aperitifs as soon as guests are seated. Point out the high-margin appetizers before the table has even started reading the entrees.
    • Check the item’s placement on the physical menu. Is it buried in the middle of a busy section on the periphery of the page? Switch it with a workhorse that’s hogging the spotlight. Put it in a box. Highlight it. Move it to the top left of the menu, where the eye goes first.
    • Rewrite the description. Remember that even though you know the dish inside and out, customers have no idea how it looks or tastes. All they know is what you tell them. Change “fried” to “crispy” and add some flowery adjectives if that’s your style.
    • Sometimes you just need to make it better. You might love the dish, but you might also be too close to it to be able to keep your opinion impartial. Don’t beat yourself up, we’ve all been there. Do a tasting for a few other restaurant people who you trust and use their honest feedback to improve the dish.
    • If all else fails, kill it. Lots of puzzles are very close to the chef’s heart, so this can hurt. But if you can’t sell the item, you just have ingredients taking up valuable fridge space and most likely contributing to waste. It’s irrelevant how much money this item could potentially make you if nobody’s buying it.

 

  • Losers are what nobody wants on the menu; not you, and not your customers.
    • There’s only one real tactic here: be ruthless and clean house.
    • The only reason to keep some of these Losers around is if they contribute to the business in a different way, like a hilariously named cocktail in a dive bar that makes the menu end up on Instagram or the only item for people with certain dietary restrictions, like McDonald’s Filet-o-fish.

 

 

This process might seem like a lot of work, but these techniques are what take your profitability to the next level. Avoid the temptation to just multiply food cost by 3.3 and you’ll leave your competition in the dust. Check out the reciProfity demo here to see how our new, cloud-based software makes you money and saves you time.

The Cost of Goods Sold Confusion

From our resident expert on Cost of Goods Sold , Matthew Starobin,  comes this timely article in Modern Restaurant Management Magazine

In a nutshell, if you don’t know your REAL Cost of Goods sold you’ll never really know how much you are making, or how to increase your earnings.

It can’t all be “in the chef’s head”. What happens when prices go up? Or when you don’t account for trimming and shrinkage? Read the article and get yourself enlightened!

Modern Restaurant Management Magazine

Modern Restaurant Management Magazine

Everybody is replaceable

I had to fire one of my cooks recently. It was tough, because he’s a really smart young kid who’s been with me for almost 3 years. I’m not gonna lie, the way I handled this situation was a textbook example of how NOT to deal with a problem employee.

“K” had no kitchen experience when he started with me but his instincts and tirelessness immediately made him stand out. I started spending more and more time training him and quickly gave him more responsibility. He went from peeling onions to running the grill station in just a couple months and was happily cranking out hundreds of covers without breaking a sweat.

He became my go-to guy. He didn’t mind putting in the 16-18 hour days, carrying hundreds of pounds of food up 5 flights of stairs to a client’s event space, or keeping the newer guys in line. He knew all my recipes and all my quirks- exactly what size I like the tomatoes diced in our pico de gallo, exactly how strong I want the horseradish aioli. I eventually started letting him run his own team when we had multiple catering jobs on the same day. That’s not something I do lightly.

Then the nonsense began.

He started showing up late, hungover, or even still drunk from the night before. He would call in sick and then be seen partying that same night (this is a small city and and everybody knows everybody in our business). He got lazy and started taking way too many smoke breaks. One time I even saw him chatting on his phone when service was starting in 10 minutes and his station wasn’t ready.

One day he pulled a no-call-no-show.

Now, I’ve immediately axed other cooks for doing even half the things that “K” did. But for some reason this kid had gotten under my skin. Maybe I saw in him a bit of myself at that age, or maybe I thought that after all the time and effort I put into him, it would be a personal failure to let him go.

Most likely, I thought that through all of his screw-ups, he still played a role that couldn’t be replaced. I hated the idea of finding a new cook, training him,  getting used to him, and rebuilding what I had with “K”.

So I sat him down for a chat. I let him know that this was the “come to Jesus” meeting and that if he didn’t shape up, he was done. He choked up a little bit and told me that he really wants this job and he promises to get his act together.

And he did. He went back to being my reliable, talented right hand. For about two weeks.

Then the lateness and laziness started all over again. I completely lost my cool this time and really let him have it. He apologized and promised to get better. And I gave him yet another “last chance”.

And again, and again, and again, until the word “last chance” stopped having any meaning at all. By this point he knew that my threats were empty and that he had free rein.

It actually took another 3 months of this before I finally let him go. And you know what happened? We got through it. The rest of my team stepped up and filled his shoes without skipping a beat and I brought on a new guy who’s doing great.

Most importantly, my crew is more motivated than ever without K’s disruptive influence. Instead of covering for somebody who’s not pulling his own weight, they can really shine.

I wish K all the best. I’m sure he’ll grow out of this phase and find success, but it won’t be with me. Mostly, I thank him for teaching me that a last chance needs to really be a last chance.

From the Restaurant Kitchen – Rules vs. Guidelines

 

When does your staff need a long list of incredibly specific rules, and when can you trust in their innate professionalism to make the right call based on your guidelines and expectations?

 

My team has a RULE that raw meat can never be on the same board as veg. But we have a GUIDELINE that we prefer not to accept Euros (we’re in a country that doesn’t use the Euro but is surrounded by countries that do).

 

If I see a cook toss a raw chicken thigh onto a board where he’s shredding lettuce, there’s no excuse in the world that protects him from the fire and lighting I’m about to rain down on him.

 

But when a tourist comes straight to our food truck from the airport and she only has Euros on her, my staff isn’t going to make her walk away hungry. They know that I might not love accepting foreign currency, but I really hate disappointing customers because of slavish adherence to arbitrary rules.

 

This dichotomy shows up everywhere in our business:

 

-Do you insist that your kitchen crew wear hairnets, or do you trust them to come to work properly groomed?

-Do you use transparent trash cans to monitor waste, or have you instilled the “NO WASTE” mantra into your staff for so long that they wouldn’t dream of throwing out usable product?

-Does your floor staff have a script of how to greet each table, or do you trust their charisma and instincts and let them improvise?

 

There’s no right answer.

 

Rules can make excellent guardrails for a fast food joint with a young staff and a high turnover rate. But there’s no faster way to demotivate an experienced, professional crew than by not trusting their judgement (sometimes).

CostGuard Food Costing and reciProfity Cloud Food Costing Software

If you are a current CostGuard Food Costing Software user and want to know why you should switch to reciProfity Cloud Food Costing Software we’re here to tell you:

  • Cloud based Food Costing Software! You can work from anywhere on any device that has a browser! Use iPads, Macs, etc. Licensing is per user, not per device.
  • Book of Yields is included in reciProfity cloud food costing software; you can select a Book of Yields item and all its conversion and prep info will be imported.
  • More pricing flexibility
    1. A single inventory item can be packed in any number of ways. reciProfity will price it properly when you select an alternate vendor with a different pack.
    2. Prep recipes have multiple units and can have shrinkage
  • Lots of changes to nutrition
    1. USDA 2017 rules including formatting, added sugars, etc.
    2. Added fields for labels: number of servings, serving size, weight, added sugar.
    3. Assign inventory groups as ‘non nutritional’ so items in those groups (such as packaging) don’t appear as nutrition exceptions.
  • Lots of changes in Inventory and Recipe Managers:
    1. Select/deselect columns
    2. In-line editing for many of the fields
    3. Options are remembered
    4. Drag and crop column names for multi-level sorting
    5. Filter for blank, e.g., what inventory items don’t have a vendor?
  • More key features for enhanced user experience
    1. Drag and drop ingredients when editing a recipe
    2. Save and stay in recipe (actually everywhere, but recipe was the most requested)
    3. Longer name fields
  • Data Optimization
    1. After converting your data, you can merge items. So where you have 2 different ‘sugars’ in CostGuard because they are packed differently, you can merge them into the same ‘sugar’ in reciProfity.
    2. You can also merge groups. So if you import new items from a supplier and include THEIR groups, you can merge that group with a current group. You won’t need to edit each item.
  • Better tools to get the most out of your data
    1. Search Engine logic is used widely to provide intelligent results: inventory manager, recipe manager, recipe entry, etc. You don’t need to click ‘full text search’ for a different set of results.
    2. Recipe Analyzer report; sorts your selling recipes by percentage in and out of the money. It’s like the Recipe Pricing Report, but is a clickable and sortable list of the recipes.

The Magic of Restaurant Software and Food and Recipe Costing

No, restaurant recipe costing is not magic. It’s just restaurant math. And this is where restaurant software comes in super handy. reciProfity is restaurant software that does restaurant food costing math for you. So it seems like magic!

If you’ve been running restaurants for years and doing restaurant food costing you’re likely already profitable and are using reciProfity to cost out your recipes and cut down on your admin work. But if you’re newer to the game, these articles will teach you how to conquer the profitability puzzle.

Here’s a quick primer on restaurant math: Spend 30% of your revenue on food and drinks to sell to your customers. Spend another 30% on your staff. Spend 20% on everything else: rent, electricity, gas, insurance, taxes, linen, maintenance, repairs, and light bulbs. Roll 10% back into the business to make it better and put 10% in your pocket. You’ve earned it.

To get this math right, it’s absolutely essential to have an accurate Food Cost. This is the most basic purpose of reciProfity. In other businesses this is called the Cost of Goods Sold (COGS) or Cost of Sales. Your Food Costing can be expressed in two ways:

  • As a number: exactly how much money do you pay for the ingredients in a recipe?
  • As a percentage: what percent of a recipe’s sales price goes to paying for its ingredients?

 

[activecampaign form=3]

Here are some other terms you should know before we get into menu pricing strategies:

  • Fixed Costs, or Overhead, are the expenses connected with opening and operating your business everyday. This includes rent, electricity, gas, insurance, and anything else that stays the same (or almost the same) regardless of your sales volume.
  • Variable Costs are expenses that change directly proportionally to your sales volume. For our purposes, these are the same as Food Cost.
  • Payroll exists somewhere between Fixed Costs and Variable Costs. Even though your payroll costs vary depending on how busy you expect a service period to be, they can’t be expressed as an exact proportion of revenue so it’s not really a variable cost.
  • Gross Margin is the difference between revenue and food cost. In other words, it’s your profit AFTER paying for food but BEFORE paying your fixed costs. Also called Contribution Margin or Gross Profit.
  • Net Income is your profit after paying BOTH fixed and variable costs. From your accountant’s standpoint this is the same as your EBITDA: earnings before interest, taxes, depreciation, and amortization.
  • Breakeven Point is the amount of revenue you need to exactly cover all your fixed costs, variable costs, and payroll. In other words, it’s the amount of sales that results in exactly zero net profit/loss. Here’s how to calculate the amount of sales you need to do in order to hit your breakeven point:
    Breakeven Sales=Fixed Costs/Gross Margin %

Simple Example to illustrate these terms:
You pay $10 for a rib-eye steak and sell it for $30.
Food Cost: $10
Food Cost%: 30%
Gross Margin: $20

Once you begin to add recipes in reciProfity you’ll begin to see how we help you determine your food cost % and match it to a target.

If you see an Actual Food Cost % that is above your Target you’ll start thinking about how best to manage that.  We’re getting you off to a good start here.

Would you change the price you charge? Or modify your ingredients? Or have a talk with your supplier?

 

Next up: what your target and actual food cost % really mean. And how they differ depending upon the category of your recipes. Stay tuned!