First Anniversary and Seasons Greetings

One year ago, my wife and I were discussing the excellent information available on blogs. We were bookmarking these sites constantly. She asked me if I had considered setting up a blog. I spent the next day researching the process and created a simple post which I loaded onto my brand new blog the next day.

During the first year, I have received much more from my blog readers than I ever imagined. Thank you everyone for your comments!

Many people have contacted me by phone and email. I have stripped the emails of any names, company information and email addresses. The comments are otherwise left in the words of the readers:

Thank you.
Purchase Manager/Cost Control


Thanks
PS The Blog is great. Keep it Up!!!!!
Vice President-Director of Purchasing


You are an engaging writer. I do like it.
I subscribed to foodservice.com as well as it is a great market resource.
Purchasing Manager



I am thinking of some leads for you. I'll be in touch
Account Executive


All is good, Your DAN letter is great. In this fast paced business climate is hot.
I still submit that you'll find the hidden profits in the garbage can by the
dishwasher, and change the locks on the meat and seafood cage often. With low wages
and transient help you loose a prime rib your loss is multiplied by 3.
Toll roads , are they a target area for your busness?


I just came across your blog URL listed in the HFTP Membership and Resource Guide.
I would like to include a "Helpful Link" in ProLinks in the Food and Beverage
Community, listed as "Food Cost Control Blog." I think you have some great content
that would be a benefit to our subscribers.
Please let me know if you have any objections or further questions.
ProLinks Manager


I came across one of your articles (Forecasting 502 - Complex Operations) on
the web and am writing to see if you are interested in submitting items for
publication at our hotel industry news service.
Editor


Nice newsletter, I will forward it to my associates.
I hope things are going well for you and that you are keeping busy.
All is well here.


Enjoyed the page / blog.
I am not sure where I will find the time to revisit your page, but I do
intend to.


I couldn’t agree more with the first things I saw
How much time is wasted in a Fbev operation worrying about Styrofoam cups
or whether soda is a beverage or food item?
How fun and easy Fbev controls can be?
Can you beat the rush of a good horse race and a long shot trifecta?
If you ever need any help in this area, give me shout.


I am the Controller at XXXXXXXX Golf and Country Club and a member of HFTP -
thank you for sending me this information - we are currently reviewing our
food and bar costs and looking for ways to improve! what GREAT timing!
thank you!!
Controller


What a great job!! I really enjoy reading your blog! I am going to make it
required reading for all of my managers.
Nicely done!!
Vice President of Operations


I was reading your article on food cost control and found it interesting.
I would like to learn more about your food cost control methods.
Where would you suggest I begin?


Your work on the internet and through your blog is fantastic.
Would you ever do a consutling job for a very busy golf club in Southern
California? Our food cost control could use improvement.
General Manager


I would like to subscribe all of our chefs & stewards to your site.
Is that OK? & if so, how can I do it? Thanks.
Corporate Executive Sous Chef


Thanks Joe
Corporate Executive Chef


I am a culinary student at the XXXXX. I found your blog very interesting,
and was wondering if you have articles/websites/links where i can learn
the concept of food costing right from making the standard recipe to how
portion sizes are determined and prices fixed. I have tried many websites
but they always fall short of providing the complete info. Your help will
be greatly appreciated.


Hi Joe - great blog you're building - thanks for sharing your ideas.
The link to ForecastingPrinciples.com was a find - I'm constantly trying to
work out ways to present the fascinating results of statistics to chefs,
business owners etc. When you can find a way, they deeply appreciate the
insights, but we work in a world that's very short of numeracy skills!

I have a way of presenting the concept of Breakeven Point that usually gets
100% comprehension, and I'm working on more. Linear correlation and
Regression Analysis is next (gulp)...
Keep up the good work -


I have been regular reader of articles on websites for hoteliers for many
years. Among many of them I found your publications concernig food service,
that are very interesting and useful. I am sure they have special value
for hoteliers. I am a person connected with hospitality industry coming
from Poland, a country where hotel industry started to develop only some
years ago. From my own experience I see that there is a lack of different
professional materials to present and future hoteliers (books, articles etc).
To fill in this gap I created an internet website – educational website to
Polish hoteliers. In my opinion your articles could also enrich resources
of this portal. Respecting copyright I turn to you for giving your assent
to publish your articles on my website. To reach to large number of our
hoteliers I would translate your texts into Polish language. It could be
also a good publicity of your name and company in my country especially
that not so many people here read foreign hospitality websites.


Great post today on tip pooling.


Well said – I have been preaching Keep It Simple Stupid in all aspects of
finance for a couple of decades now – whilst I was VP Finance and thus CFO
of the XXXXX group of hotels in Europe in the ‘90s we wrote off food inventory
altogether to focus peoples minds on revenues, sales mix and procurement.
And we moved to annual beverage counts. It had the advantage of taking cost
out of finance too. Still far from accepted practice though. Trouble is hotel
management and hotel management schools are like lemmings; very little
thinking goes on.


Not a potential assignment for you, just and old timer who enjoys reading
your articles in "Hotel News Resource". I am reminded of the good policies,
procedures and practices of when I started with XXXXX in 1957 as a management
trainee. Unfortunately over the years I did not see enough compliance with
its and other companies' hotels around the world. I was not primarily an
F&B guy but always found that to be the fun part of operating hotels and
where you could lose the most money.
Keep up the good work.


I'm so happy to write to you.
Let me tell you about me, I'm a young man in the cost control department
in a restaurant chain which serves pastry, sandwiches, pizza and beverage.
I like the food cost so much and I'm egar to learn more and more.


I worked as a Cost Controller for Hotels in Turkey since 1996 and a few days
ago I met your site by chance. It is a very helpful site that have a lot of ideas.

Thank you very much for such an educative approach.
Chief Financial Controller


I love your blog!
I’d like more info on how you used CAPM in regards to menu analysis.
I have a Masters in Econ so I can follow the math.
Do you have any examples?
What do you use for a risk free rate?
How do you determine an expected return?
What do you use to get your betas?
I would appreciate any help or insight you’re able to give.


I received all three of your emails very close together so I’m only replying
to the last one. Thank you for taking the time to help me. It’s been a while
since I looked at CAPM and I hadn’t ever considered applications outside of
finance. Fortunately I kept all of my old texts and I think I have one
co-written by Sharpe so I can get up to speed on CAPM theory pretty fast.
Your suggestions on how to handle the variables are the key for my application
so again I appreciate your insight!

I’m going to give it a go here soon. I have created a program in Access that
will give me ideal costs which probably would have been my first big hurdle.
My second hurdle will be the linear regression. I don’t have any econometric
or statistical software. However, it looks like the project is simple enough
for excel to work. At this point it looks like I just need to gather data!
Thanks again!


Your recent article on Market Segmentation - Best Practices that was published
in Hotel News Resource is a very nice story. We would love to run this article
in our next edition. Is this something we could do with your permission?
Publisher


Just read your article on Food & Beverage Perpetual Inventory Stratified
Random Sampling and found it very interested.
You see, my uncle just made an important restaurant acquisition in London
Uk, and although he told me that he has outsourced an auditing firm to audit
the business prior to signing the purchase agreement he tolfd me why dont
you give me a hand and run a parallel effort to see what you came up with,
his main concern is obviously wether the business is worth what the current
owner says its worth.
You see the thing is that although I have studied Business administration
and cost accounting in Cambridge, I was never inclined or very keen to
follow the auditing line of business, but I,m in trouble now as I need to
show my uncle I can help him.
I dont intend to be abusive, just looking for another good Samaritan, but if
one doesnt ask one might never know, my question is:
Would you Mr Dunbar have by any chance a restaurant audit procedure with
sampling tests formats and any other tools or methodologies that can be send
over email, that I can use in order to help my uncle and perhaps even give
him some sound recommendations.
Do apologise once again if I have bothered you in any way improper.
Kind regards and thanks


I just found your blog and I must say I really enjoy reading.


Hi
and...thanks for putting me on your e mail list.
I am preparing budgets for an Association in the XXXXX and the F & B budgets
which I have been doing for this particualr Association are beginning to
become an issue with the Board.
Thanks for your assistance. I would appreciate any help you can offer.


I would like to arrange for 2 new subscriptions to your monthly newsletter
on food cost control.


Would it be possible to add 2 more to the list?


Haha those suggestions are invaluable. I searched for hours and couldn't
find resources nearly this helpful. Thank you so much for taking the time to
reply. You seem to have a really wonderful mind for restaurant management -
I was very impressed with some of the articles of yours I had the privilege
of reading. Good luck to you, and thank you again.


We came across your article "What shoud our food cost be?" and are requesting
permission to reprint its content in our global hotel & travel news resource.
Publisher


I would like to begin receiving the Dunbar Associates Newsletter if possible,
as well as two of my colleagues.
General Manager


You've got several blog entries on forecasting, and I'm wondering if you'd
allow me to combine them into an article and post them on my site.


I am wanting to subscribe to your publication as well as sign up my other
department heads and managers. How do I do this?
Vice President, Food,Beverage and Event Management


I am the editor of XXXXX, a free educational magazine that is published for
the employees of the hospitality industry in the XXXXX, and would very much
appreciate being given approval to publish your article "The Food Cost
Percentage - Decomposed" in our upcoming issue.


Joe, this stuff is great . Thank you.


Thanks – I am printing this out to not only read but keep as reference.
Thanks too for the encouragement – I can feel things fitting into place
(understanding coupled with execution).


I recently came across one of your articles in R&I magazine and then saw
your blog. I was impressed with its content.
I have a site, XXXXX, which is a place for franchise columnist - a sort
of Blogspot for franchise bloggers (consultants, owners and buyers).
Our readers are very interested in financial and accounting advice for
franchise owners of restaurants. I think they would be intensely interested
in what you have to say.
Writing a column for franchise owners can increase business leads and it
can also drive more traffic to one’s own site.
Editor


I am interested in speaking with you regarding our company’s menu program.
I got your contact info from an e-mail flyer you sent recently. I look
forward to hearing from you.


I’d love to start off a column in your name on XXXXX with the article below.
I think there would be many franchise owners interested. We could put a link
to your site on the bottom, with a copyright in your name.
I’d be happy to assist you in doing this and putting some information about
you in the blog / user information area.
Editor


Please continue the newsletter emails.
Thanks
Assistant Director of Food & Beverage


I find your blogs to very interesting and i read them often. I have been out
of management for a few years and now I am back in management and I was
wondering if their are any books, cds, or literature you could recomend me to
get up to speed on F&B costings?


My GM, is a regional GM for other clubs and would like to put them on your
mailing lists, he thinks your articles are great, as I do too. Let me know what
I need to do to set this up.


I read your article in the recent addition of Restaurant News Sept edition. May
I inquire about your position in this industry? I am new to the industry. Looking
forward to hearing for you.
Thank you


I have found your blog and your site very interesting and very helpful. You
really express great ideas. Through your writing you helped me solve some cost
control problems I had.
I am a Food & Beverage manager in a new 150 room resort hotel in Greece and
I face most of the problems described in your blog. The most difficult of all is
the cost of breakfast and dinner buffet for aprox. 200 guests on halfboard basis.
I haven't succeeded so far to understand where all that expense for the main kitchen goes.
Thank you
FB Manager


We receive your emails on a regular basis. You have some very well written articles.
We would like to find out if you would be interested in submitting articles for our
publications. Also, if you're not receiving our newspapers each month, I'd be happy
to add you to the list.
Publisher


I have just started to receive the Hotel Resource newsletter via e-mail and I have
really learned a lot from some of your articles! I actually have them hanging on my
wall in my office!


I'm writing a story about restaurant prices, and I was wondering if you
could spare a few minutes to chat on the phone. If so, send a number and a
good time to call-- perhaps late this afternoon or tomorrow?


We are a newly opened restaurant in Boston, Ma. It has been difficult for us
to determine what the industry averages should be in relation to Gross Revenue.
I know that you have no idea who I am, but I would really appreciate the answers,
as it seems that no one is really interested in giving me the bottom line.
Many thanks in advance.


I thoroughly enjoy reading your articles, for they are written clearly and in a
fashion that one can understand.
I live and work in NO VA. I am a Franchise Business Consultant to a major Restaurant Company.
My units (33 in all) are located in NO VA, WV, as well as MD. My area of
responsibility; and my units are located in urban environments, such as downtown DC,
to the affluent areas such as Fairfax County, Loudon County VA.
Should you ever have time, I would like to invite you to lunch in one of our units,
Consultant


I stumbled across your blog and wanted to let you know how much I enjoyed reading it.
Certainly agree with your analysis of the restaurant business and have encountered many similar
experiences with clients.
Just wanted to touch base with you and share some thoughts.
Best Wishes and continued success in your business.
Restaurant Consultant


I have read with great interest your articles on Food Cost Control and have enjoyed
your style and way off explaining in clear language.


I'm sure you'll hear from me. I need help with understanding food cost and
control. I am a new Head Chef and I want to get it right the first time. I
am excited at this given oppurtunity, but a little nervous too at the same
time. Also confident and cautious, I was never great at numbers but I'll do
my best.


Thanks you for such an informative article, it really got me thinking of what
I need to do here at my limited service property.
As you are well aware limited service hotels give food away in the daily continental breakfasts.
Are there ways in which we can cut our costs yet ensure quality products for the guests each morning?
Is there a program in which we can budget “X” amount per guest?
Thanks again for your insights…


I'm Currently employed in the restaurant industry as a cook. Before becoming
interested in becoming a chef and restaurant owner, I was studying engineering
at the University of Illinois, Champaign-Urbana. After some time working in a
few fine dining restaurants, I come to realize there is more to cost control then
what can be learned in a kitchen. Fortunately I have excellent math and computer
skills, thanks to my education in science, to learn the math behind the industry.

Can you please point me into the right direction. I would like to find the good
reading material that goes in depth with the math, theory, and application of
Food and Labor cost controls. Is not too much much of a request? I have never
requested such material from a stranger. I am an aggressive independent student,
and spend my time in bookstores reading of the hospitality industry. Oh, I also
love math and statistics.
Any help would be appreciated.


We are a small chain of 62 units in 6 states. As most people in our
industry we feel we do a pretty good job at controlling costs while building
sales. The one thing we always know is true, is that each day with an open
mind we can learn from others. With that said we were wondering what you
could offer our chain that would be beneficial to our operators.
Please feel free to give me a call to explore any opportunities.
Vice President


DO YOU WORK WITH ANY VEGETARIAN/ORGANIC/NATURAL FOOD RESTAURANTS.
THANK YOU IN ANTICIPATION.


I like your email newsletter. Can we link from our cost control book website?


Please confirm my free subscription to your e-newsletter.
Thank you
General Manager


Hi. I have your email address as a contact. What services do you provide?
Where are you located? I would like to see and / or here what you offer and
see if it is what I am looking for. Thank you for you help.


I'd like to offer you a link exchange.
I like your blog and I'd love to link to it from my website so that my users
can enjoy your blog, and yours my website.

Strategic Food Cost Issues

Many companies take a serious look at central production. The prospect of better consistency and the opportunity to run larger batches lure too many of these companies into a trap. Recently, I observed the final meetings for a single unit operator expanding to a new commissary with capacity to handle production for 5 additional units. The owner wanted a new control system to handle the increased demands of his expanding business.

Unfortunately, it was far too late to offer my views on commissary construction. The long term lease was signed, construction was nearing completion and heavy equipment installations were in progress.

The new commissary opened and the organization is bleeding red on the bottom line. With the commissary draining funds each month, the chance of starting any of the new units is remote. Break even sales volume seems out of reach despite strong growth. So what went wrong? This was a successful single unit operator enjoying better than average unit volume for the region and decent sales growth.

The strategy here is flawed.

Creating the capacity to handle production for 6 units with only one unit operational is suicide. The new monthly fixed costs are too high, production workers spend too much time walking around the mammoth kitchen. Freezers and walkins designed to handle five times the current volume have raised the monthly utility bills. The fleet of vans has increased to handle movement between locations. Sales barely cover the fixed costs and wages.

Rather than wasting the owner's precious time (he works 16 hour days - 7 days a week), I told him he needs to focus on volume rather than food cost control. His sales are too far below break even to worry about incremental food cost improvement.

I'll be working with a different company in the same region. They just opened a new unit in this hot growth area. Sales are double their average unit volume and the operators are feeling the strain. Fortunately, profits and cash flow are robust.

Food Cost Control - Alphabetic Approach

Manufacturing companies often segregate their parts inventories into A, B and C groups. The parts in Group A are used in high volume and are expensive. Group B has two types of parts. The high volume, less costly parts would fall into the B group. Also, expensive parts used in lower volume would be in Group B. Finally, Group C parts would include the largest number of members. These parts are inexpensive and used in low volume.

Why stop with only three letters?

I'd recommend segments for product shelf life and I wouldn't use Group B for two profiles. Let's use Group A to include highly perishable, costly, high volume items. If a costly, high volume item is purchased frozen, we'll use group B. Group C will include all costly, high volume items which are shelf stable.

Following this approach, we'd use groups D, E and F to handle moderate volume items. The perishables would be coded to Group D. Frozen would fit the E profile and the shelf stable would go to Group F.

Since the 80/20 principle is in play in most kitchens, you'll be left with lots of items in groups G, H and I. Use the perishable/frozen/shelf stable structure to complete the grouping exercise.

A 1,000 item inventory will contain about 200 items in the first three groups. The next three groups will have from 150 to 200 items. All the other items will fall into the last three groups. You'll find very few items in Group C vs. Group I. Perhaps coffee and oils will be in the C group and the spices down in Group I.

When you are finished with this exercise, start to spend more time and energy with the first 5 groups. The last four groups will have the majority of items and the least amount of opportunity to favorably impact your food cost percentage.


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