Seven Steps to Food Cost Control

Cost Control in Business is, To be profitable; companies must not only earn revenues, but also control costs. If costs are too high, profit margins will be too low, making it difficult for a company to succeed against its competitors. In the case of a public company, if costs are too high, the company's may find that its share price is depressed and that it is difficult to attract investors. Cost controls starts by the businesses identifying what their costs are and evaluate whether those costs are reasonable and affordable. Then, if necessary, they can look for ways to cut costs through methods such as cutting back, moving to a less expensive plan or changing service providers. The cost-control process seeks to manage expenses ranging from phone, internet and utility bills to employee payroll and outside professional services. What is a cost structure? The expenses that a firm must take into account when manufacturing a product or providing a service. Types of cost structures include transaction costs, sunk costs, marginal costs and fixed costs. The cost structure of the firm is the ratio of fixed costs to variable costs. Cost Is Boss

What’s like doubling sales, only better? What if, instead of trying to increase sales, the focus instead shifted to significantly increasing profits? Consider that the hotel with a five percent F&B profit margin keeps only a nickel in profit for every dollar in sales. To make $100,000 in profit, it takes $2 million in sales. Reducing unnecessary costs by one percentage point (for example, reducing food cost from 35 to 34 percent), would cause profits to go up by one percentage point (in this case from 5 to 6 percent). Profit would go from $100,000 to $120,000. Without reducing costs by that percentage point, the hotel would have to increase sales by $400,000 to get this same $20,000 increase in profits. If it were able to reduce food costs by five points, the effect would be the same as doubling sales to $4 million. Looking at it another way, a five-point decrease in food costs would create a five-point increase in profits. In the example, profit would go from $100,000 to $200,000. Since it took $2 million to get the $100,000 profit, it would take $4 million to double it. No magic—just math. What if it were possible to take actions that have the exact same impact on profits as doubling sales would have, but without the need to increase staff, buy or prepare more food, add storage or production capacity, or add space to the dining areas to accommodate the new traffic—within 90 days? Start by imagining food and liquor as piles of cash. Imagine the kitchen and storage areas are full of cash lying around. Is it secure? Could it end up in pockets or stomachs? Could it be used carelessly and wind up in trash cans or drains? Could too much of it go onto a guest’s plate? Could the vendor be delivering a different amount than on the invoice every now and then? If this were cash, there would be checks and balances up the wazoo. But since it’s just food, little or no attention is paid. And that’s where the five percent goes. Imagine what the losses would be if cash in the hotel were treated like food. Still not convinced? Dump the trash on the floor and assign a value to it. Try to determine how much of the “cash in the trash” didn’t need to be there, such as things that didn’t need to be trimmed as much and things that didn’t need to be burned or overcooked or overprepped. How about things that didn’t belong in there at all, like flatware and china and ramekins? Then take the amount of unnecessary cash in the trash and extend it out over the entire operation for a year. By itself, the cash in the trash could add up to five points. Food and beverage procurement and control systems are the long-term solution. It is important to note that systems focusing primarily on procurement do not help reduce food costs associated with misuse. Only systems that both handle complex F&B procurement and incorporate strong, integrated culinary controls can help deliver these savings. In subsequent articles, we’ll explore some of these systems. Bill Schwartz is president of System Concepts, Inc. (SCI). Based in Scottsdale Arizona, SCI is the developer of the FOOD-TRAK Food and Beverage Management System. He can be reached at bills@foodtrak.com. Seven Steps to Food Cost Control Seven Steps to Food Cost Control 1.  ORDERING  -  The  first  step  is to  order  right.  Having detailed  recipes,  designing purchasing   specifications,   doing  comparative  shopping  based  on those  specifications,   and comparing  quality,  price  and  service,  etc.   Oh  yes,  don't  order too  early  in  order  to  avoid spoilage, wasted storage space and lost interest on your money.  Don't order too late, so premium costs and delivery charges accrue.  I remember being told standing orders were a bad habit.  2.  RECEIVING - The fundamentals are obvious: count; weigh;  inspect for condition and quality;  verify  against  the purchase order;  keep the receiving area clean and  uncluttered;  limit access  to  the  receiving area;  train the person receiving and make him or  her responsible.   Get credit memos from the delivery driver.  3. STORING - Is the method and place of storage for the various items appropriate for the item?  Is  it  secure  from  pilferage?   Are  the shelves strong enough for  the  product,  allow  air circulation and easy to clean?   Are all items stored at a temperature appropriate for that product? Are  items  dated  (with year,  in some cases) and priced?   Is the storage area orderly  and  clean? Should shelves be labeled and maybe even stocking quantities noted?  4. ISSUING - What is issuing based on?  Who has access and or authority to issue or take things  from  the  secured  store  rooms  and  walk-ins?    Are  issues being  made  in  appropriate quantities   and at appropriate times?   Is there a relationship to volume or reasonable par  stocks?  Are  issues being accounted for?   Is a perpetual inventory or sign out sheet designed  specifically for your operation or a particular store room in use?  5.  PREPARATION  - I'm not so clear about the details here any more because it has been a  long  time  since  I  worked in a kitchen regularly.   Phrases that come  to  mind  include:  trim properly;  use  trimmings for stock pots and other recipes.  Proper tools, sharp knives,  clean and neat  working area,  enforcing a policy of following recipes,  and having photos of finished  products  available and used regularly are also critical.   Enough said,  as I suspect my readers know a lot more than I do about this!  6.  COOKING - Various considerations here, again my readers know more than I.  Proper temperatures,  proper  cooking times,  following recipes carefully,  using photographs of finished products, correct size, material, and type of utensils and cookware, clean work area.  7.  SERVING  - Serving is not only about portion control,  it is also about decisions made regarding  portion  size and presentation.   With a buffet,  it is obvious. Proper  serving  utensils, proper holding/serving equipment, right presentation order, plate sizes, etc.  In a bar its easy, too.  Jiggers  or  other  measuring  and control devices and very strict discipline.   I  take  it  back,  the discipline  isn't  easy  especially  in tight labor markets.   Dining room service should  be  easy  to control  using good kitchen supervisors,  trained cooks,  photographs for both cooks and  servers, etc.    Watch  what  comes  back  from  bused  tables  to  see  if portions  are  proper.   Marketing decisions  may  drive  large  portions  but if the patrons are not eating it  or  taking  it  home,  the portion size or the recipe should be reconsidered.   Proper china for each item served is important for both presentation and portion control.  Work   hard   on  your  cost  controls  and  be  consistent  about them.   One   element   of controlling  food  cost covers all seven categories:  thorough training. Give your staff the  ability and knowledge and confidence to do their jobs properly and to your specifications. Inconsistency and  failure  to enforce procedures will drive costs skyward.  Failure here is like throwing  money away.