Flexible Pars

For anyone who is considering the time investment for a comprehensive menu pricing/recipe costing tool (about 120 hours), I believe the payoff potential justifies the investment.

Think of the growing data warehouse on your POS server. You can put this data to use. By tracking trends on covers and guest order profiles, you can accurately predict production requirements. Go beyond simple portion analysis. The recipe model will estimate raw ingredient requirements. The better programs (for example, Food-Trak) will allow you to focus on menu driven raw ingredients.

Once you have a working recipe costing model in place, feed the model POS data. Try to upload a full year with daily files. The software will allow you to create order guides based on prior guest preference, average ingredient usage and a sales estimate. Catered events may be loaded into menu plans to complete the picture.

Rounding out the picture, you can feed the ingredient database par stock information for all shelf stable items. The result is a highly flexible ordering tool. This model will track par levels and adjust order guide quantities to reflect current sales estimates.

Flexible pars could help you eliminate over ordering of perishable items. Depending on your current spoilage and waste levels, your savings will average between 3 and 8% of purchases.

Question - Best Practices in Food Cost Control

Good Morning,

I am the Assistant Controller for a luxury property in downtown San Diego. I have volunteered to lead a presentation discussing food cost control best practices. I read your article “Essential Food Cost Control” on Hotel F&B that you wrote in June 2007 and thought I would write you. Do you happen to have a good source for obtaining industry food cost best practices? I am hoping to show a few examples of how to best control food cost.

Thank you for your time.

Brandon
Assistant Director Of Finance

Thanks for the note Brandon. I encourage you to use whatever articles you wish from my blog. Please include proper attribution and there is no charge.

I would recommend two books:

Purchasing for Chefs: A Concise Guide
Andrew Feinstein
John Stefanelli

Wenzel's Menu Maker
George Wenzel

You may want to checkout the articles on Tom Wahl's site Hotel Trends using the Food & Beverage link on the left sidebar.

Cornell University has a Center for Hospitality Research with an excellent website. You may wish to register online - its free. You will find lots of hotel articles you can download.

The 4 V's and the Pareto Principle

If you buy the notion of working smarter vs. harder, the 80/20 principle is certainly a great starting point. When a restaurateur searches for the 20% of his operation producing the 80% impact, I'd like to suggest a simple method. The 4 V's stand for volume, variance, volatility and value.

It is important to focus on high volume activities. Ranking your menu items by the percentage of total sales is a popular weekly report. Try the same analysis on your food purchases. If you monitor production of batch recipes, you could rank these by the highest volume. In every case, find the high volume items and activities.

Avoid spending lots of time on issues which do not produce a decent return for your efforts. If there is a low variance in usage, price, or any other business metric, look elsewhere. There are lots of high volume items with very little variance from your budgeted expectation. Maybe you consume lots of rolls but the usage report indicates the rolls were used properly. Find another item with a higher variance.

Price volatility is a major opportunity area. Locate all of your raw ingredients with volatile market prices. Any positive actions you take in purchasing these items will produce a benefit.

Most chefs have a handful of items stored in their offices. You may find truffle oil, saffron, cognac and other high value items. They recognize the relative value (in terms of cost per milliliter or gram) of these items.

If you focus on high volume items and activities with usage variances, price volatility or high relative value, the 80/20 principal will start improving your return on time invested.

Pareto Principle of Food Stock Control

Inventory management is time consuming and takes our focus away from building sales and providing a great customer experience.

The Pareto Principal states that 80% of the effects come from 20% of the causes. In other words: 20% of your stock items make up %80 of your stock value. By focusing on the high value 20% we can minimize the time spent on stock control, but ensure this time is spent on the things that really matter.

To implement the Parento Principle go through a full stock take and select the high value stock items that you want to focus on. You can then summarize the remaining items into a nominal cost. Next time you do a stock take you only need to count the high value items and use the previously calculated nominal value to represent the other items. You can still calculate all the key metrics like Cost of Goods and Gross Profit, but minimize the time spent on stock control.


Paul Clarke (@foodmargin)