10 Principles of Food Cost Control

Tags: #Food, #FoodCost, #FoodCOS, #COS, #FoodandBeverage, #F&B, #Profitability, #WasteManagement, #HospitalityCode

Controlling food costs is one of the most important keys to running a profitable restaurant or F&B Unit because of its direct impact on profitability.

A profitable F&B venue typically generates a 25%-40% food cost depending on seasonality, the source of food items, type of food they serve in their venues. When you add labour costs, these expenses consume 50%-75% of total sales. Due to its impact, it is one of the first things you should examine if your venue is losing profits. There are several rules and principles you should follow to keep track and control food cost which we will review it in this article.

Taking aside the food cost there is other two big cost centre; Beverage cost and Labour cost which I will cover in another article.

Food Cost = A percent of sales that determines how much money we make or lose on what we sell.

Food Cost % = (Beginning Inventory + Purchases – Ending Inventory) / Food Sales

Or we would like to simplify

Food Cost % = Total Food COS / Total Food Revenue

and the formula to identify Ideal Food Cost;

Ideal Food Cost % = Ideal Food Cost / Total Food Revenue

In today’s world especially Brexit on the horizon, pound getting weaker increased both the value of food purchased outside of the UK as well as transportation costs. Due to these economic challenges, food costs rising and customers spending less. Considering the rise of independent restaurants in London especially, we need check menus to ensure they are profitable. According to a research, while opening thousands of new venues, thousands of independent restaurants fail each year and nearly 92% of them because they did not manage food costs wisely. Therefore, know your food costs. What a plate is being sold for on a menu versus what it costs to prepare it can save a business.

10 Key Principles of Food Cost Control

Regardless of the type of venue you have, there are a number of basic principles that should form the foundation of any management’s efforts to control food costs. I will cover key 10 principles for the best control of your food cost; 

1. Suppliers Selection

While getting supplies through one or two suppliers may result in quantity discounts and pricing built through years of a professional relationship, oftentimes it is even cheaper to have more than one vendor. This is because having one vendor can mean you are subject to any fluctuations or changes in their cost structure. Having more than one supplier, or at the very least knowledge of more than one, gives you the flexibility to quickly shop around for the best price. This set up allows you to monitor external variables and be a proactive buyer instead of a reactive one.

Most of the times weather patterns, seasonal ups and downs, supply chain anomalies can easily affect the cost of your food and supplies. You might not be able to predict these variables, lessons learnt from the past and previous experiences could help you to anticipate future supply and demand anomalies and proactively act on it before prices are prohibitive or supply is limited.

2. Goods Receiving Controls

This is where Food Cost control starts for the operators. It is critical that whoever receives your purchases checks;