How much is that hoagie in the window

How much is that hoagie in the window? Student Objectives:          • Define the term food cost • Perform simple percentage food cost calculations • Define the term formula pricing • Describe the term product specification and relate its role in maintaining food cost • Define the term minimum standard • Define the term par stock and describe how it is related to food cost • Define the term portion control and discuss how to implement effective portion control • Define physical inventory and describe its importance in controlling and defining food cost • Demonstrate the ability to calculate food cost and percentage food cost  I What is food cost? Food cost is the cost of food prepared for and consumed by the customer In a broader sense, it is part of The Cost of Sales which refers to the cost of all products, both food and beverage, consumed by the guest  A Food costs are traditionally expressed in both dollar amounts and as a percentage of sales For example, if your operation’s monthly sales were $75,000 and your food costs were $25,000, what would your percent food cost be for that month? (33.3)  B Actual food cost dollars are essential to keep track of, but food cost is a variable expense that rises and falls with the volume of sales  (i.e., its size is relative to the volume of sales) A percentage food cost can be a reliable indicator of performance and should remain consistent regardless of sales volume  C There is no “magic number” when it comes to food cost percentage  Percentage food costs are what your operation decides for them to be  Your operation’s targeted food cost will vary depending on the market segment you serve, your volume of business, fixed expenses and overhead, other variable costs, desired profit and your sales and pricing strategies  D Percentage food costs are valuable to the foodservice manager because – they can readily be compared to previous reporting periods, budgets and industry averages for operations that fall into similar categories (i.e quick-serve Mexican restaurants in central Texas with an annual sales volume of $750,000 to $1,000,000) In this way the manager can gather quick feedback for comparison and can judge optimal performance II Controlling food cost The menu – When costing and pricing the menu, each individual item is not “formula priced” according to the targeted food cost If this was the case, given a 30% targeted food cost, a glass of iced tea that costs your operation cents to produce would only sell for 20 cents  A – Consequently, if your operation used formula pricing for a shrimp cocktail that costs $5 to produce, your selling price would be $20 (not a likely price point) – Pricing strategies are designed to derive an average food cost from all items on the menu and the frequency of sales for each item in the menu’s product mix II Controlling food cost  B Purchasing – Specifications (specs): All of the food, beverages and supplies that your operation has selected to meet certain minimum specifications to ensure the quality and consistency your customers have come to expect when they visit your facility B Purchasing  These specifications are in writing, and will determine the cost of goods being purchased from outside vendors 11 Customer ordering  a Ensure effective communications procedures are in place between the line cooks and the service personnel  b Remove any barriers (physical or otherwise) to efficient service and correctlyproduced customer orders 11 Customer ordering  c Monitor line or service personnel who are frequently involved in menu items being misfired, improperly prepared, improperly served or sent back by the customer 11 Customer ordering  d Line and service staff need to be a welltrained team focused on customer satisfaction III Six tips for controlling food cost  A Frequent line checks: conduct a line check prior to each meal period or day segment Some things to look for A : line check, Some things to look for  Taste the food  Check the holding temperatures  Make sure recipes are being followed  Ensure minimum specifications are being used  Ensure proper portion control is in place  Check line pars against forecast  Inspect in-line storage and refrigeration for organization  Check back door security III B Employee training  Observe employees at work  Note where minimum standards are not being met  Schedule retraining on those standards  C Schedule regular meetings—Have frequent kitchen meetings Daily, post shift meetings are good forums for  Discussing all the shift events and offering praise  Reviewing what went wrong, involving the staff in discussing solutions  Updates on food cost status from previous day D Menu analysis  Review your product sales mix daily  Track your best and worst selling items  Investigate the worst selling items D Menu analysis  If all specs and procedures are being followed, determine if item(s) should be replaced on the menu by successful specials  Check your menu for infrequently-used items and recipe ingredients and try to find a way to remove them Simplify your inventory!  Stay on top of vendor price changes; it may impact your menu, recipes and menu pricing E Establish security systems  Meat and alcoholic beverage storage is locked  Perpetual inventories are reconciled  Back door remains locked E Establish security systems    Managers are highly visible Employees are accounted for Trash runs are periodically and randomly accompanied by a manager F Monitor systems  Management follow-through – Check inventories – Due line checks – Follow up on all employee and maintence issues F Monitor systems  Managing by example – Be highly visible  On floor  In back of the house Be consistent in how you deal with customers and employees, “ Are you thinking what is best for the business when making decisions F Monitor systems  Maintain ticket and transaction control, audit frequently:  Check for: – A beverage for every guest – An entrée for everybody – Randomly compare table contents to what is on check/ make note of variances and settle all disputes at checkout F Monitor systems  Investigate all till variances at all POS systems and reconcile – Why is there a variance – Who is responsible for the error – Was food being prepared without a ticket – Is there a possibility of wrong doing or just an honest mistake [...]...  6 This value of the closing inventory is then used with the food revenues for  the same time period to determine the cost of goods sold (C.O.G.S., or  food cost) E Controlling inventory  7 The dollar value of closing inventory of any given accounting period is  also the value of the opening inventory for the next accounting period  8 The formula for determining food or beverage cost is expressed... scales are in place and portion control is being followed  10 Food preparation staff needs to be well trained E Controlling inventory  1 Complete physical inventories should be taken frequently  2 Most foodservice operations take inventory at least twice a month  3 The end-of-month (EOM) inventory reflects the end of an accounting  period and is the inventory that is entered into the monthly... and offering praise  2 Reviewing what went wrong, involving the staff in discussing solutions  3 Updates on food cost status from previous day D Menu analysis  1 Review your product sales mix daily  2 Track your best and worst selling items  3 Investigate the worst selling items D Menu analysis  4 If all specs and procedures are being followed, determine if item(s) should be replaced on the menu... Check line pars against forecast  7 Inspect in- line storage and refrigeration for organization  8 Check back door security III B Employee training  1 Observe employees at work  2 Note where minimum standards are not being met  3 Schedule retraining on those standards  C Schedule regular meetings—Have frequent kitchen meetings Daily, post shift meetings are good forums for  1 Discussing all the. .. to minimum specifications must be monitored with each delivery B Purchasing  6 Price is not always the determining factor Service, flexibility, consistency and trustworthiness of the vendor must be taken into consideration B Purchasing  7 Sometimes food cost can actually be too low Remember that specifications are carefully outlined in order to achieve customer satisfaction and expectations If the. .. customer satisfaction III Six tips for controlling food cost  A Frequent line checks: conduct a line check prior to each meal period or day segment Some things to look for A : line check, Some things to look for  1 Taste the food  2 Check the holding temperatures  3 Make sure recipes are being followed  4 Ensure minimum specifications are being used  5 Ensure proper portion control is in place... beverage cost is expressed as follows:  Opening Inventory + Purchases = Total Available - Ending Inventory =  Cost of Food E Controlling inventory 9 A useful mnemonic tool for the student to recall this formula is “OPEC” Example: Grey Goose Café Month Ending 05/30/2001 Cost of Food Opening Inventory $2,000 + Purchases $6,000 = Total Available $8,000 - Ending Inventory $3,000 = Cost of Food $5,000   Cost... line cooks and the service personnel  b Remove any barriers (physical or otherwise) to efficient service and correctlyproduced customer orders 11 Customer ordering  c Monitor line or service personnel who are frequently involved in menu items being misfired, improperly prepared, improperly served or sent back by the customer 11 Customer ordering  d Line and service staff need to be a welltrained... Purchasing  3 Most operations put their product “specs” out to bid or enter into a buying agreement with a trusted, reputable vendor B Purchasing  4 Prices may fluctuate with the seasonality of items and other supply and demand situations  Try to determine pending price fluctuations in advance through discussions with your vendors and apprise management of any pending price changes B Purchasing ... loss  statement (a.k.a financial statement); other inventories are for proactive  control by management E Controlling inventory  4 All food items are entered into a record and that record is extended to reflect the aspurchased value of all food items (A similar inventory is taken for all products related to alcoholic beverage service.) E Controlling inventory  5 Physical inventory sheets should ... value of closing inventory of any given accounting period is  also the value of the opening inventory for the next accounting period  The formula for determining food or beverage cost is expressed... foodservice operations take inventory at least twice a month  The end-of-month (EOM) inventory reflects the end of an accounting  period and is the inventory that is entered into the monthly profit... value of the closing inventory is then used with the food revenues for  the same time period to determine the cost of goods sold (C.O.G.S., or  food cost) E Controlling inventory  The dollar value