Why do my food costs fluctuate?

Kitchen CUT Founder John Wood responds to one of the industry’s most frequently asked questions regarding cost control and looks at why this is often a challenging and sometimes confusing subject…

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Identifying the issues

Perhaps one of the most important questions you should be asking is ‘What is food cost?’.  Once this is clear, it will be easier to see the key reasons why your margins will fluctuate and they are not always to do with the chef. However, if you cannot pin-point where the issue is you will not be able to make sensible, calculated financial and operational decisions to reduce these fluctuations.

Transparency

One of the key features of Kitchen CUT is that it allows you to have that ‘transparency’ in all parts of your business so that you can see exactly where the issues are as they are happening, so that you can make small adjustments to bring this back in line before the end of the month.

Those erratic margins create a ‘knee-jerk’ reaction at the end of each month, which basically is all too late. The chef and operations team then responds by cutting back, searching for different suppliers/products, looking at portion sizes and chasing waste to bring the following month back in line. This works, however it creates a roller-coaster effect on margins throughout the year and could be detrimental to customer experience!

So what are the reasons?

Here are some of the key reasons, but not limited to, why people get these fluctuating figures.

• Sales Mix: Probably the most common issue, but one that is very difficult to measure without an easy to use process and system- Kitchen CUT has a unique Menu Engineering Programme that can link to your sales data giving you detailed reports to highlight these issues. This will allow you and team to make changes that can hugely improve that very quickly.
• No costed recipes/menus: Again very common in nearly all the businesses we visit. Even those that have costed their recipes, do not have them linked to their live pricing which deems that useless after at least one month with increasing supplier prices.
• Wastage: Every business has a food waste problem. There is always a level of operational wastage, that people forget, which in some cases as high as 8%. There is also general wastage/spoilage that can run into very high figures. You can read about controlling food waste in your business in one of our other blogs.

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• Supplier prices going up: Typically, supplier prices go up and last year was no exception, with some proteins reaching 15% increase and even fruit and vegetables increasing on some items up to 10%. Kitchen CUT shows you this and sends you alerts on these prices, so that you can either discuss this with your suppliers and/or change products on your recipes. Either way you can keep a close eye on your food inventory and actual food cost.
• Theft: Not nice to think that this is possible, but unfortunately it is human nature that if you lay temptation in front of people they will take/eat or drink things. Many cases staff /colleagues and even customers might not view it as theft and think they are entitled to it! Are you secure and vigilant enough?

Profit is King!

Even though in nearly every food operation the teams look at GP and Food Cost Percentage and quite often we hear chefs and owners say:

“We don’t have a problem with our margin percentage!”

However, profit is the most important part of business and it is this that the bank manager/share holders/owners are really interested in. You can not run a business on margin % alone.

Achieving food cost/gross profit % is just one measure in running a successful business, making profit is even more important.

By using Kitchen CUT’s easy Menu Engineering tool, you can extract you daily sales data from your EPOS and have that linked to your recipes and menu costs.

This will produce a detailed and easy-to-read report on how each dish is performing, so that you can make educated, calculated, financial decisions on what you need to change to increase your profits, even from the same amount of customers.

You can read more about Menu Engineering on one of our previous posts by clicking HERE

If you’d like to find out more, sign up for a free trial, or contact our sales team. 

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