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.


How Third Party Service Providers Keep your Restaurant in the Balance

Third-party audits provide an invaluable component to the safety of the U.S. food supply system. Multiple independent companies like Food4Thought (F4T LLC Services) and audit programs provide literally thousands of independent checks and balances to the food supply system with no direct cost to taxpayers.  

They are best described as professional service; a consultation activity that the facility can take advantage of the recommendations in full, in part, or not at all. The deficiencies observed in the audit report can be resolved to the satisfaction of the facility or the buyer of product from the facility through pre-arranged agreements or program enhancements. Examples would include announced or unannounced visits; reports to all interested parties; and follow up to resolve deficiencies through a variety of reporting methods.

These audits are voluntary tools of the food manufacturer and are not meant to replace regulatory inspections. Usually, audits do not include microbiological sampling; however, a representative review of microbiological test records is part of the program evaluation. As a voluntary activity with no legal status, the audits depend on openness and disclosure to accomplish their full function. They are not meant to uncover deceit or fraud.

The food industry utilizes audits in a number of ways to supplement food safety programs as a manufacturer of food, the distribution of input or output, or a purchase of an ingredient, packaging suppliers or finished products.

The standards and the experience of the entire organization is part of the transmission of best practices to each and every facility involved. Third party audits can provide a new set of eyes to view the operation, without the natural familiarity that occurs over time with regular staff in the day-to-day routine.  Additionally, third party audits also provide an opportunity to recalibrate a facility’s own self-inspection, part of a standard food safety program requirement. The over-all message is amplified in the saying ” an ounce of prevention is worth avoiding a pound of pain”… i.e. to your business, to your establishment and most certainly to your customer.

Live happier… live healthier… and live safer.
Food4Thought, LLC ~
Anthony H. Jackson III