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Wednesday December 3rd, 2008 |
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Managing the Jump in Food Costs - By Ken Burgin |
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In the last 12 months, supply costs have soared. Some dairy prices have increased 50%, soy bean and corn prices have jumped, and let's not start on seafood, beef and green vegetables. Why? |
Some dairy prices have increased 50%, soy bean and corn prices have jumped, and let's not start on seafood, beef and green vegetables. Why? Asia's rising affluence and demand, increasing use of ethanol in fuel (often made from grain products), and drought in many parts of the world. But the reasons don't help reduce the squeeze on your margins.
Which of these Action Steps could you use in the next 10 days?
Cost balancing. New low-cost items may be needed on the menu to counteract increases in high-cost items. If veal prices have gone up, a better sales script could persuade customers to add a side order of (low cost) greens or salad. Create a popular dish from dried beans (eg nachos) to balance the cost of expensive seafood. You get the idea...
Price changes. They may be needed, but done with care and backed up with plenty of information for the staff who will be handling customer questions. Some items are more sensitive to price changes than others - do you know which they are? If a price increase is unlikely to reduce volume, make the change now.
Eliminate 'dogs' and 'saboteurs'. Dogs are those high-cost items that don't sell much but are kept on to add variety or extra lines on the menu. Saboteurs are the high volume items that steal sales from the rest of the menu because they are underpriced. Eg chicken schnitzels are hugely popular, but if wrongly priced they will destroy your sales of steak, seafood and other chicken.
Boost dessert helpers. Let's face it, many great desserts are basically sugar, air and water. Lighter desserts are in, and there are high-quality flavour bases for mousses, panacotta and gelatos that need very little skill or labour to make. Dessert food costs of 15% can help balance steak item costs of 38%.
Double check portion cuts. Do you really sell the correct 24 portions from that fancy Torte, or was one eaten by staff, one was too small to sell and the last two were dry and unsaleable? If it cost $24 and you sell it for $5 per portion, that's 20% food cost and $96 profit on the whole item. If you lost 4 serves, food cost is now up to 24% and the profit is only $76. Etc etc etc.
Use electronic pricing scales. Just like they use in a deli, for an instant check on portion costs. If no-one uses a typewriter, why do they still rely on old-fashioned scales? The cost of this equipment has fallen, and should be ready to use in the kitchen at all times. How much do those 5 scallops really cost? Place them on the scales, enter price per lb/kg and prepare for a shock. Still planning to charge what you do? Modern scales are a great combination with good Recipe Software - the truth at last!
Help suppliers cut their costs. Check order sizes, delivery times, product specifications - a good vendor should help you work on these and pass on the savings. I was recently told of a club that cut the cost of fruit and vegetables 9% by having them delivered after lunch instead of in the morning.
Challenge some myths. Who says 30%, 33% or any other figure is the 'correct' cost percentage? There are only 100c in a sales dollar, pound or euro, and they have to cover everything. If your wages and rent are high, something else has to give. The manager who gets the best pay can create great flavours, fast service and a happy team with food costs well below 30%.
Profitable Hospitality offers management and cost-control systems (Manuals & CD-ROMs) for restaurants, cafes, hotels, bars and clubs. The systems are based on the extensive consulting and operating experience of CEO Ken Burgin, and enable busy owners and managers to set up complete operating and cost-control systems in minutes, not months. Profitable Hospitality also runs regular management training workshops in the areas of kitchen profit & efficiency, restaurant marketing and functions management. A free monthly e-newsletter keeps you up to date on the latest industry management issues. www.profitablehospitality.com.
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