How To Accelerate Your Profit by Tweaking Your Food Costs. – Part Two

How to get those food costs down.

This post is part two of a two-part series aimed at helping you understand how important food costs are to the profitability of your business. -And how to accelerate your profit by tweaking your food cost.

As you would have seen in part one, food costs make up around one third of your business costs. For this reason, even a tiny saving in food costs can have a massive impact on your profit.

In part one I showed you how just a 10% reduction in food costs could increase profit by up to 70%.

While the variables will change from business to business, this example does show you why reducing your food costs needs to be such a priority.

Once you’ve figured out your food costs, the next step in the process is reducing these costs. And in this post I’m going to show you how. . .

First things first

Like so many things in hospitality, there’s unlikely to be just one big opportunity sitting there for you to reduce your food costs. If there is, great, do it today! But it’s far more likely that your savings are going to be made by saving lots of small amounts; which collectively add up to a lot.

Get your staff involved

I’m a big fan of open-book accounting. By giving your staff a good understanding of how the economies of your business work, they’re more likely to appreciate the importance of reducing your food costs.

Good staff love a target, and you need them to be invested in the process on an ongoing basis. –You may even want to incentivise them to achieve these targets.

Portion control

It’s pretty easy to understand why portion control is important right? –If your serves become too big, it’s costing you money and margin. And even tiny over-portions can cost you a fortune in the long run.

Not only does it cost you more, but large portions may in fact be reducing your sales revenue.

Let’s say you have a reputation for really large entrees; you may find that couples end up buying just one to share. Whereas if the portion size was a little smaller, they would happily buy one each.

One way to help control portion size is to make sure that every item on your menu has its own ‘menu item spec sheet’.

These sheets give a break down of the recipe, a photo showing exactly how the dish is to be plated, as well as any other information that may be useful to your staff, such as allergens, wine matches or recommended accompaniments.

It’s recommended that these sheets form part of your training programme, and your staff refer to them regularly to make sure they’re sticking to the required portion size.

Pre portion – Mise-en place

Wherever possible try to pre-portion your ingredients – especially the expensive ones!

That salmon sandwich that’s supposed to have three slices starts costing you a lot of money if your staff starts using four slices. –These things do happen and they quickly establish themselves as the new norm.

If you were to pre-portion that salmon you could be pretty confident that the right amount is used every time.

Or, use scales, spoons, scoops and jugs to make sure portioning is exact. –Just like bars do when they’re controlling drink pours and mixes.

Measure your wastage

Do you know how much food is going to waste? What’s going in that trashcan is profit, and there might be a lot more of it than you think.

Wastage in your kitchen typically comes from trim, food spoiling and mistakes; and most of these can be easily reduced.

A great place to start is to use a separate bin for food waste and to measure the weight of this at the end of each service. This has two key benefits; the first is that it will draw your kitchen staff’s attention to the volume of wastage. And the second is that by measuring it, you can now set targets to reduce it.

Use your wastage

Think about how leftovers, trim and off-cuts can be utilised instead of throwing them out.

Using vegetable ends, fish frames and bones to make your own stock is an obvious one, but there are bound to be a ton of other innovative ideas in your kitchen.

One client of mine sold a lot of paella, however there was always some left over at the end of the day. His solution was to use the leftover paella to make Arancine. In this example, he was able to turn wastage what was reducing his profit, into a profitable item.

Substitute ingredients

I’m not for a moment suggesting you cut the quality of your ingredients or menu items! However, it is worth reviewing every item to see whether ingredients can be substituted for something cheaper.

For example, the price of great quality fresh fish can vary a lot between species. Why not go for the cheaper option if the flavor, freshness and cooking properties are all pretty similar.

Another client of mine was serving a delicious salad, made almost entirely of relatively expensive ingredients. This salad was served as a side and included in many of his dishes.

As a result, this salad was pushing the food costs for these dishes into the danger zone. By halving the portion of expensive ingredients, and mixing through some shredded lettuce, he was able to halve the cost of the salad ingredients, and his customers were still receiving a delicious side.

Track what’s selling

It’s likely that sales levels are changing seasonally and by day of the week; so it’s really worthwhile making sure you’re keeping a close eye on what’s selling and what’s not.

By doing this you can forecast your demand, and in doing so reduce the risk of over-prepping, and over-ordering.

I recommend to my clients that they use daily prep-sheets, based on forecast demand, so that everyone knows how much to prep.

Build strong relationships with your suppliers

There’s huge value in maintaining strong relationships with your suppliers and working with them to keep your costs down.

They may be able to suggest better ways of ordering to maximise volume discounts and reduce delivery charges.

And, that intimate understanding of your business may encourage your suppliers to let you know when cheaper options are available.

Insist on quality

Make sure your staff are thoroughly checking the quality of ingredients when they arrive and don’t be afraid to reject anything that doesn’t meet the mark.

By accepting poor quality ingredients, especially fresh produce and protein, it’s likely you’re going to be reducing the yield from that item and increasing the wastage.

IN SUMMARY. . .

There’s no silver bullet when it comes to reducing your food costs. While that would be nice, it’s fortunate that there are so many areas you can look to to make some savings.

And remember, the small savings you do make with your food costs multiply many times over in terms of profit.

Going through a process to reduce your food costs can take a bit of work upfront, but it will provide you with a huge return on your efforts. What’s equally important though, is to keep on monitoring, and keep on looking for ways to trim those costs.

In this scenario, the café is turning over $800,000 in revenue. That’s about $2,200 per day.

We can see in the first column that their food costs $280,000, which is 35% of their turnover. And their operating profit is $40,000, which is 5% of turnover.

But look what happens in the second column when our café saves 10% on their food costs!

By reducing their annual food costs by $28,000, or just $77 per day, they’re able to increase their profit by a whopping 70%.  Taking them from a $40,000 profit to a $68,000 profit.

Imagine if they were able to make some similar savings to their staff costs and fixed expenses too!