The Eight-Step Approach to Controlling Food Costs

The Eight-Step Approach to Controlling Food Costs

in Nov 13, 2018

What can you learn from the ‘Eight-Step Approach to Controlling Food Costs’? 

Because food-service profit margins are so thin, restaurant managers must carefully control every cost and eliminate all possibility of waste. Chief among the sources of cost and waste is food, which can represent up to 40 percent of food-service costs. This detailed training program is designed to show managers how to control their costs, but it goes beyond that to create a focus on cost control and waste prevention throughout the food-service operation. The eight steps apply to any type of restaurant, although specific techniques may apply only in certain types of food service.

The Eight-Step Approach to Controlling Food Costs 

By: J. Bruce Tracey Ph.D.

Food cost impact areas in the Cornell University study:

  1. Ordering
  2. Pricing/Costing
  3. Receiving
  4. Storing
  5. Issuing
  6. Production
  7. Portioning
  8. Cash Collection

Q: What can you learn from the Eight-Step Approach?

A: Control what you can control. This may be a little oversimplified, but not by much.  Look at #8, Cash Collection. Some of the recommendations for this step include “Make sure sales terminals are programmed correctly” and “Check cash reports daily“. That seems like something every restaurant operator should automatically be doing already, right?  Not too bad, pretty easy to control.

How about #7, PortioningIt’s recommended that you “Adhere to price and portion specs” and “Pre-portion whenever possible.”  Again, this makes complete sense, and these are things a successful operator can control without spending too much time once a system has been established.

In Food Cost Impact Area #3, Receiving, it states that a restaurant should “Assign receiving to a specific employee” and “Check invoices line-by-line.” Now we’re starting to get into things we can control with good management and oversight, like assigning a person for receiving. But what about that second one, checking every invoice, line-by-line? That’s getting into a lot of manual, time-consuming work. Time that could be better spent on other parts of your business.

What about area #1, Ordering?

Now here’s where we can really take a deep dive into some time-consuming tasks. The Cornell study recommends you “Order only what you need” and “Take advantage of market forces (competitive pricing).”  This is where we go back to control what you can control.

Many of the steps in the Cornell study can be implemented manually by a strong management team, but some, like checking competitive prices, are extremely arduous without taking advantage of technology or other services.  And this is an impact area that can have a major effect on controlling your food costs.

When it comes to checking prices on all the goods you buy, making sure invoices match the prices you were quoted, and ensuring that your deliveries match your orders, you cannot be expected to do this the old-fashioned way without sacrificing time spent in other areas of your business.

Market research shows that restaurant operators spend an average of 1,108 hours per year, per restaurant, manually ordering and receiving products from their vendors.  That’s over 21 hours a week. With an average labor cost of $13.00 per hour, that’s over $14,104 in annual costs (per location) just to manually order and receive products. *

You can take control over your food costs

To take advantage of the great insight introduced by the Cornell University study, make sure you seek out the best service, process, partner, or technology for your restaurant that will help you manage the food cost impact areas that will become a drain on your time, productivity, and profitability (i.e., checking prices.)

To get started, you can always download some of the tools and guides offered by Cornell University’s School of Hotel Administration by clicking here.

Good luck we know you’ll do great!

To read more about the study from the Cornell University School of Hotel Administration, please click here.


Talk with a Sarbari expert today and learn how we can help your restaurant or foodservice operation gain more control over Food Cost Impact Areas #1, #2 and #3 (Ordering, Pricing/Costing, and Receiving). Click here

 

Source: 16th Annual Restaurant Technology Study

 

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