Food Cost

A major part of prime cost is food cost. Food cost can be calculated as follows:

Net food purchases/ Net food Sales
(Net means after the change in inventory)

Costing out the menu is crucial to controlling food costs. The easiest place to begin is at the bar due to price control. From there, move on to the food. Each category should be broken down into more useful ratios. Have the chef or sous chef cost out the menu since they deal the most with the product. A few tips to help lower food costs are:

  • Raise prices.
  • Cost out the menu and price the high cost percentage items accordingly.
  • Control portion sizes.
  • Minimize waste in the kitchen. Track waste as well.
  • Spot-check prep staff. Make sure the pre-cut portions weigh what they are supposed to.
  • Link the chefís pay to a pre-set food cost percentage. Set up an incentive deal for the chef.
  • Set up Purchase Order System.
  • Negotiate prices with vendors for bulk buying. Take vendor discounts when offered.
  • Organize the storage room and keep inventory to a minimum.
  • Purchase based on a budget.

If food cost is a consistent problem, an operator should start taking inventory weekly. At one particular restaurant, the operator requires his kitchen staff to know daily food cost. He ignores inventory and uses purchases over sales. He even makes the kitchen track each entree sold. So if only one lobster is sold, the staff better not order lobster the next day. Any operator can take this one step further by tracking daily sales and purchases. A dollar budget can be set based on projected demand. For example, if an operator expects to do $50,000.00 in food sales for the week, the chef should be given a budget of how much to spend. If the operatorís food cost goal is 30%, they can order $15,000.00 worth of food ($50,000 x 0.3). If the operator tracks purchases daily, he or she can let the chef know how close he is to the budget.