If you own a restaurant, it’s obvious you’re more focused on money. How much is going in, how much is coming out, equipment costs, advertising costs, and so much more! However, there’s often a single trick that most restaurant owners don’t think of when it comes to money. This trick concerns the most important thing to a restaurant:
Food and food costs.
Most restaurants tend to focus on bulk costs. They know that 40 pounds of hamburger meat make a certain number of patties and that it costs a certain amount to buy every day. However, it’s the food costing that makes you look deeper into your restaurant revenue.
So what is it, and how can it help? We’ll discuss it today!
What Is Food Costing?
Food costing lets you break down how much each individual food item is worth to you by ingredient. Going with the burger example, let’s say a restaurant calculates that 8 ounces of beef cost $1.30. The bun costs $0.25, the tomato slice costs $0.50, and the cheese costs $0.30. The 2 potatoes to make the fries cost $0.75. If all of that is added together, one burger and fry meal costs $3.10.To profit from the food costing, the restaurant would need to charge more than $3.10. Try this formula by calculating the cost of an individual item from the bulk orders and then adding the ingredients together.
If you are charging less than the cost to make the meal, you are losing money.
You can take the money you pay for a full inventory at the start of the week, add midweek purchases, and then subtract the dollar value of your ending inventory from the total. Divide that by your total food sales, and then you get the percentage. That’s how much of your revenue goes towards paying for ingredients. By dividing your total food costs by your total food sales, you will get your ideal food cost. If the ideal cost is lower than the current, you are losing the difference in revenue.
Most restaurants don’t do this, but yours should. If you can get a handle on your restaurant revenue, you can make sure that you are staying out of the red.
Here are some ways food costing can boost your bottom line:
You Can Make Changes
If you have the math and the numbers in front of you about your food costing and the missing revenue, you can start making some real changes. You can make smaller portion sizes, change the menu price, or even buy your food from cheaper vendors. Of course, you don’t want to reduce your food’s quality by buying cheap ingredients, but if you can find the same ingredients for a lower cost, go for it.
Your customers might react positively or negatively to this change, so keep an eye on how they act and then change accordingly.
You Can Charge More For The Same Food
Suppose you find out that you are underselling certain food items and missing out on revenue. In that case, you can easily bump up the menu price using the formulas to figure out how to bring in that lost profit. Admittedly, the price changes will be relatively small, but you can calculate how much you are earning.
If you bump up the price of your sandwich special by $2.00 and sell 30 per day, over a month that’s 600 dollars in revenue for you.
That’s also $7,200 per year, just from one menu item, so imagine what your profit could be if you changed them all?
You Can Talk To Your Suppliers
Most restaurant suppliers don’t give you any standard price charts – the prices are what they are, and that is it. However, this oddity means that your prices can be negotiated. If you know exactly what your food is costing you and what revenue you are missing out on, then you can talk to them.
You can show off the numbers and then ask for price relief on essential items. If you guide the conversation correctly, you can save a lot of money on your food intake. If the suppliers don’t budge on price, then see about finding some new ones. If you can find cheaper employers that will give you the same food quality, don’t be afraid to use them!
You Can Better Manage Food Waste
Every restaurant consulting company will tell you that restaurant food costs only get increased because of waste. If you know how much food is costing you, you can prevent waste before it even hits the plate. One of the best ways to do this is by not over-ordering food items that you might not use.
Sure, it’s good to have some extra food if things go south and more people order a dish than expected, but that should be the exception and not the rule. By ordering less, you can save money and also prevent food from going to waste.
You can also take inventory and look for patterns of what food is running low and what food items are piling up. If this repeats, then you might need to order less of some things and more of others. By tweaking your budget due to the patterns in your restaurant, you’ll be able to see the money saved in real-time.
Analyze Your Food Costs
It might seem like a lot of introspection and analysis of costs and math, but taking advantage of food costs can provide you with a lot of saved money. Plus, you also have a good look at what revenue you are losing due to undercharging for menu items. It’s a deep look inside of your business, and you might be surprised with what you wind up finding.
Food costing can improve your revenue over time, and if you keep up with it, you will be raking in money while your competitors are wondering what your secret is!
Now that’s awesome, isn’t it?
Do you need help with analyzing food costing for your restaurant business? At MBB Management, we provide you with all the tools and experience you need to boost your revenue with food costing. Contact us today, and our team will schedule an introductory meeting with you.
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