Are your food cost margins punishing your customers?

Delivering consistently good dishes, is one of the key factors in securing return customers, which is an important part of running your business. However, so is controlling your costs and ensuring you’re delivering your food cost margins.

How can you manage the two without compromising on either? John Wood explains…

Inconsistent Food Margins

Many restaurants, hotels, and catering businesses are guilty of cutting costs and sourcing cheaper products to ensure they can achieve their targeted food cost margins. Some of the keys contributing factors to suffering from inconsistent food margins are:
  • Varied sales mix of more dishes that are not achieving your targeted margin.
  • Increasing ingredient costs, especially the silent food cost killers (see “Silent killers” later in this blog).
  • Poor portion control and nothing in place to monitor/manage this.
  • Higher levels of wastage.
  • Poor purchasing and stock control/rotation.
  • Either dishes that have not been correctly costed OR recipes that are not linked to a live pricing system.
Without correct standards, live costings, an ingredient price monitoring system, and a regular review against all of these there is a high risk that the margins will fluctuate from month to month. Typically when this happens, chefs that do not have rigid process/system in place to alert them to the worst performing dishes tend to (at best) guess what the issues are. Therefore they do not know which dishes need to be adjusted/removed to immediately make a difference to the overall performance. (There’s an article here on using menu engineering to analyse the performance of your dishes). Businesses and chefs tend to do one or all of the following:
  1. Reduce stock levels, by using up products they have bought and purchase less.
  2. Search for a cheaper product from their suppliers, typically this is protein and normally means a lower quality.
  3. Reduce portion sizes
Reducing stock levels is just a false short-term strategy and distorts that month’s figure. This inevitably just pushes the problem onto the next month and if monthly stock takes are carried out this will show up in the figures anyway. Searching for a cheaper product is one of the most common and easiest approaches and many suppliers will stock cheaper sub-standard products to the one you currently use. Reducing portion sizes is another easy option. The latter two are going to “Punish your customers”.

What are “Silent Killers”?

A common practice when chefs and managers manually cost recipes is to focus on the protein or the main component of a dish, add a small amount for garnish, sauces etc. and then either multiply by 3, 4 or 5, depending on what margin they are aiming for and how much VAT/TAX needs to be included.
However this is not a reliable measure for calculating your food costs. According to a number of International surveys, in the first 8 months of 2015 fruit prices have risen by 10.4%, vegetables by 5.5%, when meat, poultry and fish averaged out at 4.5%! Your garnishes, sauces, side orders are the “Silent killers” as these are the ones that typically are just guessed.

So what do I have to do?

Erratic food cost margins (both in a positive and a negative direction) are not a good way to run a business and when this appears this just highlights the lack of systems and processes that are in place. Normally ‘knee-jerk’ reactions to this cause peaks and troughs in your figures. NO business should fluctuate much more than 1-2% around your targets each month. At Kitchen CUT we understand these issues. That is why we have created a simple, easy-to-use system that deals with all of the above issues in an intuitive, cloud-based system designed by chefs for chefs. Some of the key features that will give you transparency and control are:
  • Sub recipe/recipe costings linked to your live prices.
  • Automated flow of ingredient price updates through your sub-recipes then into recipes.
  • Automated costed menus linked to recipes.
  • Automated alerts on all your recipes and menus NOT achieving your targeted margins when prices are updated.
  • Automated alerts on price increase on all your ingredients.
  • Pictorial and video specs on all you sub recipes and recipes for consistency.
  • Clear method and service guidance for chefs and service teams.
  • Menu engineering reporting against your sales to give you theoretical margins that can be tracked daily/weekly/monthly.
  • Automated stock taking- linked not only to your live ingredient prices but all your recipes as well (no more guess work)
There are many other great features, tools and systems in Kitchen CUT that will not only help you control your margins, but many other cost and time saving benefits as well – all in one simple, cost effective solution to all of this.

So are you going to continue punishing your customers for your inability to manage your margins? Do you need to have access to an easy way to manage this that does not takes hours of daily administration?

Take a free 30 day trial and find out how we can help you make the most profit while also ensuring your customers are getting an enjoyable dining experience from a consistent product delivery.

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