Food Cost Control for Restaurants

Other times, operators may simply be unaware of the varying product specifications that are available, therefore, they many not be taking advantage of potential opportunities. Operators should be sure to pay particular attention to case sizes, package sizes and the use of split cases. By merely adjusting these packing specifications, operators can experience significantly lower landed costs. It is worth noting at this point that when determining key item specifications, care must be given to how a particular specification will affect the edible portion cost. What might appear to be a better price for a particular product based upon a spec change might, in fact, be more costly in the end. Meat grades and fat percentages are a good example of this. This is of critical importance to operators with Prime Rib as a key item.

Step Three: Manage the price paid for each key item. Depending on what the item is, operators may be able to negotiate contracted prices for key items. Whenever possible, it is recommended that operators negotiate contracted prices for key items to simplify the purchasing process. A good contracted price might not always bring the landed cost of the product in below bid pricing at a given point in time, but on an annualized average the contracted price should have a net positive effect on purchasing. Because key items inherently represent significant purchasing volumes, an operator may be able to negotiate with a broker or manufacturer to get manufacturer price deviations that will be passed on through the distributor. This method of negotiation should be examined to see whether it is possible, as it rarely has negative impacts on the distributor and, therefore, has fewer potential downsides. If a price deviation is negotiated through a broker or manufacturer, it will typically be available through the vendor of your choice. Therefore, even with manufacturer price deviations in place, an operator may still want to bid out the item to several distributors to keep their mark-up on these items in check. For many operators, bid pricing is the method of choice for purchasing decisions. This method is also commonly referred to as “cherry picking.” While this method can work, operators are required to actively examine bids and stay vigilant that distributors are not passing their lost profits from bids onto other, non-bid items. If an operator negotiates a purchasing contract with a particular distributor, they need to look at both a market basket report, as well as the pricing structure for the key items under the contract. A cost plus contract could seem to be a great deal, until you realize that a particular vendor is unable to be competitive on certain key items because of their particular market share and case movement sizes.

Step Four: Complete a yield analysis for all key items whose edible portion cost is different than the “as purchased” cost and for all key items that are utilized in sub-recipes or prep recipes. Key items that are utilized in these two ways can translate into significant, unnecessary food cost expense if yields are not tracked and managed to ensure consistency. Once acceptable yield standards have been established, continuous monitoring of yields should occur to ensure compliance to production and purchasing specifications. The most common issue with yields among the key item category for operators occurs with meats. Meats that are cooked off prior to portioning or that are broken down in house can often times have huge yield variances that can play havoc with food cost. The following paragraph deals with managing menu item profit margins with respect to key items, but before establishing accurate menu item costs, accurate yields need to be established to determine the accurate edible portion costs.

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(0) Comments • Permalink • 09 19 2008

• Joe Dunbar
• Reprinted with permission by Food Cost Solutions
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