Presentation on theme: "Controlling Foodservice Costs. Calculate food cost. Calculate food cost percentage. Explain the effect that changes in food cost and sales have on food."— Presentation transcript:
Controlling Foodservice Costs
Calculate food cost. Calculate food cost percentage. Explain the effect that changes in food cost and sales have on food cost percentage.
The actual dollar value of the food used in a foodservice operation Often referred to as cost of food sold
Includes the cost of food sold to customers Also includes the value of food that is given away, wasted, or even stolen
To reduce food cost Reduce portion size. Replace the item with a lower cost alternative. Feature menu items with higher profit margins (lower costs). Raise menu prices.
To reduce food waste Monitor portion control. Monitor food storage and rotation. Monitor food purchasing (buy appropriate amounts). Minimize production errors.
Waste Over ordering Over production Theft Food to Bar transfers Food transferred to other units Employee meals
Opening inventory + Purchases Total food available – Closing inventory Cost of food sold
Opening inventory$5,000 + Purchases+$30,000 Total food available$35,000 – Closing inventory–$4,000 Cost of food sold$31,000
To accurately calculate cost of food sold, managers must take a physical inventory.
Opening inventory Dollar value of the physical inventory at the beginning of an accounting period Purchases Dollar value of all food purchased (less any appropriate subtractions) during the accounting period Closing inventory Dollar value of the physical inventory counted at end of the accounting period
Method One Move the decimal two places to the right..35 = 35% Method Two Multiply by x 100 = 35%
Allows managers in one restaurant to compare their food usage efficiency to that of previous time periods Can be used to compare the food usage efficiency of one restaurant to another Allows comparison to the restaurants budgeted food cost percentage or other standard
Is the proportion of the restaurants sales that is used to pay for food Means out of each dollar A 35% food cost percentage means that out of each dollar of sales, the restaurant pays $0.35 for food. Must be controlled by management
Food cost is a variable cost, so it should increase when sales increase and decrease when sales decrease. If controls and standards are in place, food cost will go up and down in direct proportion to sales. If controls and standards are not in place, it will not!
A food cost percentage is computed using both a food cost (the numerator) and sales (the denominator). An equal percentage increase (or decrease) in each of these will result in an unchanged food cost percentage.
Where: A = Food Cost B = Sales C = Food Cost Percentage 1. If A stays the same, and B increases, C decreases. 2. If A stays the same and B decreases, C increases.
3. If A decreases, and B stays the same, C decreases. 4. If A increases, and B stays the same, C increases. 5. If A increases at the same proportional rate that B increases, C stays the same.
Original cost of food$1,000 Original sales$3,000 Food cost percentage33% With 10% increase in sales and food cost New cost of food$1,100 New sales$3,300 Food cost percentage33%
Original cost of food$1,000 Original sales$3,000 Food cost percentage33% With a 10% decrease in sales and food cost New cost of food$ 900 New sales$2,700 Food cost percentage33%
If food cost percentages are allowed to drop below the restaurants standards, the guests perceptions of value may be negatively affected.
Step 1 – Copy the ingredients from the standardized recipe card to the cost card. Step 2 – List the amount of each ingredient used. Step 3 – Indicate the cost of each ingredient as listed on the invoice.
Step 4 – Convert the cost of the invoice unit to the cost of the recipe unit. Example Milk purchased by the gallon for $2.80 Yields eight recipe-ready (EP) pints at $0.35 each. ($2.80 ÷ 8 pints = $0.35 per pint)
Step 5 – Multiply the recipe unit cost by the amount required in the recipe. Example Recipe amount required3 pints Cost per pint$0.35 Ingredient cost$1.05 (3 pints x $0.35 per pint = $1.05) Step 6 – Add the cost of all ingredients.
Step 7 – Divide the total recipe cost by the number of portions produced. Example Total recipe cost$ Total recipe yield50 portions Cost per portion$2.91 ($ ÷ 50 portions = $2.91 per portion)
As Purchased (AP) method Price of an item before any trim or waste are considered Exampleunpeeled, whole potatoes Edible Portion (EP) method Price of an item after all trim and waste has been taken into account Examplepeeled, cubed potatoes
Butchers tests To measure loss from deboning, trimming, and portioning meats, fish, and poultry Cooking loss tests To measure loss from the actual cooking process Conversion charts Tell the expected or average loss of an item from (AP) to (EP)
As Purchased (AP) refers to products as the restaurant receives them. Edible Portion (EP) refers to products as the guests receive them.
1. The cost of employee meals should be (subtracted/added) to the cost of food before computing a food cost percentage. 2. A restaurants food cost percentage should increase when sales increase and decrease when sales decrease. (True/False) 3. Which best describes food cost as an expense? A. It is fixed B. It is semivariable C. It is variable D. It is noncontrollable 4. A managers job is to reduce the food cost percentage as much as possible. (True/False) 5. The formula to find a restaurants food cost percentage is sales divided by food cost equals food cost percentages. (True/False)