Why once a month is not enough

Most conventional cost control system are centered around the end of the month. You calculate your inventory, submit it to your accountant and they come back with good or bad news.

The problem with relying on this approach is that the earlier you see issues the easier they are to compensate for.

Say you are cutting your steaks an ounce or so heavy. If you are using expensive cuts this can add up very quickly. However, if you are calculating a running foodcost you will see this issue immediately, when the loss might amount to a hundred dollars rather than at the end of the month when it could add up to thousands. The hundred dollars will be easy to make up without sacrificing the value. You can simply cut them a tiny bit smaller. When it is thousands it is beyond a simple adjustment, and will cut directly into the bottom line.

Increasing efficiency and dropping foodcost with prepared products

Don't misunderstand this post. It has nothing to do with cans of base you buy from that company that has been serving restaurants and institutions for....

The thing is there is much to be learned from these companies. They have making products that are basically the same after months in the freezer down to a science. The trick is that you can use the same techniques with good products and recipes and come out with great time savers that you can pop out of the freezer.

Capitalize on fluctuations
Ours is a business that is always in a state of flux. We have busy days and slow days. Our prices on products have peaks and valleys. Most restaurants hope to catch the average on the plus side.

I take this downtime and keep the staff busy making their lives easier when we are weeded. Pizza and pastry doughs can be made up, portioned and frozen. Bulk stocks can be made, reduced, and frozen to enrich quick line stocks.

Also look at product prices. Many items fluctuate wildly when supply goes down or when the purveyor is overstocked. Make your fresh marinara in the summer when you are getting tomatoes for 15 bucks a box. When your purveyor bought an extra 50 cases of filo it might be a good time to put some spanikopita in the freezer.

I am definitely not suggesting that this should replace fresh real cooking, but would suggest that when you suddenly need hors d' oeuvres at 7:30 the spanikopita from the freezer will probably come out better than what ever the line happens to have available.

What to do with all of your extra money...

Ok, we all know this is sort of a joke, but seriously, when you run an effective cost control program you will have more money available to work with.

I split this money right down the middle. Half of it goes to the bottom line (read wallet) and the other half goes back to the restaurant. I tend to use this approach a lot (like when I automate my management tasks).

This money can be used for employee incentives (parties, prizes, what ever), as they are the ones that were careful enough to make it happen.

I also give it back to the customers. If you want sustained profitability you need to not only make money but also provide a value. Accurately controlling your costs can make this possible. If I have a dish that is very popular and is hammering the foodcost (read lamb shanks, etc) I'll make it a little more special. Maybe add some black truffle dumplings, roasted baby vegetable stew, what ever. That is what a good cost control program does, allows you the cushion to be a little more creative.

Purchases to sales: the live foodcost

I fully believe that it is critical for your restaurant to close each month with a full inventory and accurate foodcost numbers. We all hate doing it, but this is a business. With that said you can get a good idea of the effectiveness of your cost control program by calculating your purchases to sales foodcost at least once a week. This number will let you know how close you are to your budget and what adjustments you need to make to hit your goals.

There are two ways to calculate this. One is to use a program like Chefstat which will calculate your running foodcost automatically. The other is the good old fashioned method, with a calculator. To calculate this number simply add up your total sales for the month (sales) and your total purchases for the month (purchases). Then divide your purchases by your sales and multiply this number by 100 to get your percentage.

Example: purchases($8,993) / sales ($29,605) = foodcost (0.3037) x 100 = 30.37%

Factors to consider
Keep in mind that this number is not going to be as accurate as when you calculate your inventory. It is more of a quick peek at the overall health of your restaurant.

One key is the more stable your inventory the more accurate it will be. You need to consider the fact that any large purchases (like say you bought 200 pounds of frozen lamb racks on special) are going to throw this number off.

Should you calculate your foodcost?

I am always surprised by the amount of misinformation on the internet. I see many sites that promise some system where you don't need to worry about the foodcost or inventory. They claim these things will work themselves out with their secret.

Some preach focusing on business levels, and that is important, but a lot of unprofitable business is a lot of work for nothing. One says that you can just track your purchase to sales, and your inventory is irrelevant. That may be true when you have one freezer full of beef patties and another room of buns, but is simply false in a creative restaurant.

The bottom line here is that managing a profitable restaurant is work. There are definitely some tools that make it easier (like Chefstat) but it is still up to you to keep on top of it.

Chefstat Goes Live

The Chefstat cost control system went live today. It was the culmination of years of work.

The project started around 8 years ago when I figured out how to customize Excel and streamline a lot of my responsibilities in the kitchen. This grew into a full bore Access application that pushed the limits of what Access could handle but truly showed the potential the system had.

After developing this first Access app I retired from my production position and concentrated full time on developing easy to use restaurant management software.

I knew this was a crowded field, but always took competition as a challenge. The bottom line was that the competition focussed on chain restaurants (why make one sale when you can sell 100 units) while my passion was and always will be in small independent restaurants.

Finally the results speak for themselves. Chefstat is alive, helping make managing restaurants easier for people worldwide!