Food cost control is an absolute must for restaurant businesses with several branches. Due to scale any deviation of food cost percentages will have a major impact on gross profit. To know whether your food cost percentage is too high, you substract the ideal food cost percentage from the actual food cost percentage.
The closer to zero the result is, the better your control over food cost is. If the difference between the ideal and actual food cost is equal to zero, your theoretical cost equals your actual consumption.
In other words, the number of portions sold multiplied by the cost per portion in a given period should be equal to the depreciation of the stock in the same period. If the food cost percentage is not zero, it means that something somewhere is not going as it should. Problem: a certain amount of waste is hardly unusual. But small amounts grow big and push the gross profit down.
There is always a fresh supply of goods, and before you know it, the staff loses its due diligence in dealing with food. By accurately keeping track of the value of wasted products, you discover when and why waste happens. This insight helps you to find a solution. Solution: Use a system to register food-wasting, such as returned dishes, breakages, mistakes in the kitchen, expired products.
You can use pen and paper, but a digital system is far superior. It allows for follow up on evolutions and it will give insight into why excessive waste occurs. Apicbase offers a professional stock management module with the possibility to register wasting , on tablet, smartphone or laptop. Problem : A lack of portion control is one of the main causes of food cost deviations.
Portions in a recipe are fixed. The recipe is what you use to calculate the ideal or theoretical food cost. With proper portion control, the volume of ingredients used in a finished dish is the same as in the recipe, and thus the actual cost should match the theoretical cost. If portions vary, your actual food cost will be all over the place, and your food cost variance can never be zero.
Same goes for the preperation. If the mise en place is done on gut feeling, the food cost cannot be checked. This is dangerous, because you can never know for sure if a dish is profitable or not. A good tip is to divide ingredients and semi-manufactured products into portions in advance. When service is in full action portion sizes are be secured. Sound familiar? Your supplier puts the order in cold storage, says a quick hello in the kitchen and then leaves? Your supplier may not have any bad intentions, but mistakes with deliveries happen all the time.
If there are products missing, if the quantities are wrong, or if the wrong item was delivered, you will only find out during the mise en place, resulting in a lot of hassle and last-minute orders.
Solution : a reception procedure prevents unnecessary loss of time and money. Always check the articles on the order form and compare them with the purchase order. Digitise the receiving of goods with Apicbase.
When a delivery is made, you open the order module. This will show you the purchase order for verification. Order and delivery are linked to enable quick tracking of errors. Problem : unfortunately, theft from stock happens and causes your food cost to skyrocket. Additionally, regulation regarding minimum wage is an external source of labor costs increases.
The inventory method that is implemented in a company has an impact on a company's gross profit. The FIFO first in, first out inventory method uses inventory that is purchased first earliest in the production process, causing cheaper materials to be used in the current period.
Inventories that are purchased at earlier dates are typically considered to be purchased at a lower price due to inflation. LIFO last in, last out uses the most recently purchased materials first, resulting in higher material prices, decreasing gross profit. A southeastern Ohio native, Justin Johnson is a finance professional with accounting and financial planning experience in various manufacturing industries.
He discovered a love for writing as student at Pensacola Christian College and after learning many lessons in the workplace, he enjoys writing business and finance pieces. By Justin Johnson. Sales Changes Changes in sales is the most visible item that influences a company's gross profit.
One of the simplest factors that can lead to declining margin is higher costs of goods sold. Over time, your suppliers naturally want to increase their own revenue and margins. Their own costs to produce or supply may go up.
These factors may lead to them negotiating or simply charging you higher rates on goods. If higher COGS negatively affects your gross profit margin, you may have to negotiate harder or look for alternative providers. Lowering your prices to generate sales can also reduce gross profit margin. Some companies routinely offer discounts and promotions to attract buyers. While you may get a sale, large price cuts minimize the gross profit you get on it. Over time, maintaining a strong brand image allows you to maintain stable price points, or even increase prices.
If you constantly discount, you run the risk that customers get comfortable with the lower price and won't pay top rates.
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