to shop elsewhere. If a supplier is honest with you and the request is reasonable, then this is your call, maybe it’s just expensive to deliver in your area.
When is food cost not a food cost?
We have just added waste, shipping and few other costs onto your food bill, but it can work the other way round. Your business is food and people need to eat. Sometimes either or both of these events mean that the food is not being charged for. A key take home here is to work out where that cost needs to sit in your books and a way of getting it there.
Press night
You invite a few members of the press or some bloggers around for a private event to showcase your latest venue or menu. These people are not expected to pay but the food is still coming out of your pocket. You may put the cost of the food down as public relations or something similar on your expense statement.
Staff meals
This is a staff cost, to be more specific, this goes down somewhere near the bit in your books where you write the payroll costs. If you didn’t have staff, you would not have staff meals. It is certainly not just a cost that goes with the restaurant trade, any business can be paying for canteens or subsidised food.
Prizes
Offering a free meal for a local charity competition is a good thing to do. It is not a discount or even a free voucher, this is a charity expense, the other two are forms of cash.
Lab samples
At first you would think this is a kitchen expense and should maybe even go down as a food cost. Yes, it is a kitchen cost, but just like cleaning materials, this does not go down as food. If you take and hold samples for storage or direct lab testing, then these need writing off your stock and putting down as hygiene, compliance or lab costs.
With all of these you need to make sure you record what has gone out of stock, the cost of the food and where it is going in your accounts. This is going to be a bit harder with prizes, so you could just look at your target costs are on what the guests order and write that down.
Development
When a recipe is being designed there needs to be some practise and even experimentation to get the final dish consistent and as you like it. Such cost should be written down as development.
Keep it simple stupid.
We have only reached touched the surface with costing and already it could look a daunting subject. The good news is that you are probably ahead of most restaurateurs in your understanding of how to build and apportion cost, but there is still more to come. How far you take this can only be gauged by how much time you have upfront and how complicated you want to get. Just because the numbers and assumptions can become complex quickly, this does not mean that you cannot build things in a methodical and standard manner. If you can work out how to plod through a costing exercise, step by step, this becomes a repeatable process.
The basic steps of putting your menu cost together are:
1 Write the recipe out FULLY.
2 Make sure you have an accurate current wet cost for each ingredient and that any inbound costs are collected too.
3 Put the recipe into your planning tool and out will come your cost.
If you only do the above, you have nearly everything in place. The key to getting better measurements is understanding how costs behave. You can heavily overburden yourself if you start putting too many parameters into your costs. Keep is as simple as you can and you will be rewarded with less stress and a better understanding of your numbers.
Test, test, test
The true test of any costing process is to check how accurate it scores. You have been running your kitchen for a new menu for over a month and you have implemented a basic system for calculating cost and coding for non-food use. In theory, if you add up the value of your stock, diverted expenses (e.g. staff meals) waste and menu items sold, this should add up to the value of supplier invoices? If it doesn’t then you need explain the difference, which is called the variance. The goal is to be able to account for a delivery of ingredients all the way until they have been zeroed out in the store room.
We take in a delivery of 20lbs of minced beef to make home made burgers.
1 All stock is weighed on arrival and checked against the delivery note.
2 The recipe calls for 8oz units for each burger and you have sold 30
3 Staff meals have accounted for 4 burgers
4 A single meal was taken apart and photographed
5 You have 1lb down in waste and no residual stock
What happened to the other 1½ lbs? Each of the 5 items are a control point. If paperwork is not carried through or the kitchen is too busy, you will lose visibility of your costs. Anything could have happened to the ingredients, there may even be some left in a container in another fridge. If the recipe has slipped to be roughly a chefs hand full, you could very well be looking at just shy of 9oz per burger and that’s more or less covered your shortfall. The recipe is probably the one consistent driver of volume here as you would have hoped the paperwork would have caught the other elements. To maintain consistency you have to test all your assumptions again and again.
If you can turn any weight into a number of portions instead, you are ahead of the game. By this I mean, we make burgers out of the meat on arrival. If you have 40 burgers all made up, then your recipe is instantly accurate. If not, then it’s time to revisit your costings.
Modifying recipes and the cost implications.
Very simple rule, any change to a recipe should be a new recipe. Every time you tweak a recipe you are changing the ingredients in there. This doesn’t take too long before your first version on one menu is a completely different dish as it has evolved. As the list of ingredients moves about, so does your costs. You can very easily end up trying to hold this recipe within a price without seeing the creep of cost.
Keep your old recipe as you may need to go back to it. This is a further benefit as you know somewhere in time when you had the optimal recipe developed and now you can go revisit if needed. This also allows you to record and restore any seasonal variations of a recipe to your latest menu.
By keeping separate recipes the overall objective is to be able to build a cost, which then can help you price the menu. Any changes in ingredient cost over time can be identified only if you are keeping the recipe clean.
Sunk costs
Here is one favourite myth that needs to be dispelled. When you have bought food for the kitchen, cost doesn’t matter if it doesn’t get used. Just get some money back for it, that’s better than nothing. Creating ridiculously low priced specials does not send out a good message to customers and is really a symptom of the attitude towards inventory. Do you really want these food costs to hit your gross margin when you have overstocked the larder?
