Controlling Food Cost and Where Your Extra Cash Goes

In an article written in 2009 by Jim Sullivan, he raises the question of how restaurants are controlling their cost.  Incidents of broken dishes, lost silverware or negligent handling of food, i.e. food spoilage or burnt food that must be thrown away might be recoverable items – but at what cost?  The article seems to point out that these mistakes are driven by staff attitude or an unassuming notion that “restaurants are gold mines and the owners must be swimming in mounds of cash”.  Unfortunately, this could not be further from the truth.  In fact, every fork, spoon, knife, napkin, disposable goods and food is accounted for in the operational cost of that restaurant and the profit margins on every dollar depend on controlling those cost.

garbage can

On average most restaurants, from full service to fast-casual dining make 5% to 15% profit on the dollar.  Some restaurants make much more than this, while others make much less.  Your average staff member would not be aware of these truths, but they should be made aware there negligible contributions.  One of the hard truths is that only a nickel of every dollar is all that an average restaurant makes in profit after they make payroll, food/liquor cost, operational cost and rent.  And when things like leaving the cooler door open allowing food to spoil or burning food, accidentally throwing away silverware or breaking dishes… that nickel profit has been reduced to pennies or less and now your spending money.

Training and properly educating staff will help to initiate some hardcore cost cutting measures.  However, you must first help your staff to understand the counter current relationship between cost-control and menu merchandising.  Remember, it was said a nickel is made in profit from every dollar.  So, if for example a burger plate cost $5 and after you subtract the cost of sourcing, storing, prepping, garnishing and serving with a napkin, ketchup, etc… you now don’t make $5, you only are making 25 cents.. Ouch!

To further demonstrate this significant relationship between cost and merchandising, say you have a server who drops and breaks a glass that cost the restaurant $1 to buy. Or a staff member eats $1 worth of fries that they did not pay for?  Or the staff over-portions $1 worth of napkins or to-go containers?  You now have to sell FOUR burger plates at $5 to make enough profit for either the broken glass, stolen fries or extra napkins and to-go containers.  This number exponentially goes up with higher pieces of merchandise, say a $10 plate being broken.  Eventually a restaurants gross margins will shrink and profits will be lost.

Here are some cost awareness basics pointed out from the article:

  • You don’t take “top line sales” to the bank. The top line is not the goal line. Gross margins are the most important number in your Profit and Loss statements.
  • Make the invisible visible.  Post and highlight for your staff to see your restaurant’s monthly expenses, like utility bills, advertising, services.
  • Use cleanliness and safety as a barometer. Ensure the basic disciplines of cleanliness and safety are in place in your operation.  For training assistance, please consider f4tllc.

Finally, for there to be well-controlled operating cost, set appropriate expectations.  If you elevate the importance of cost-control to the level of food safety in your restaurant you will have a much more effective efforts, and don’t be afraid to fire those whose actions fail to support your efforts.  Thank you for reading.

Live Healthier… Live Safer.


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