Food Cost Formula Illustrated

I have been active using email with HT this week. His company does not track food cost using a percentage target. This is the way we were trained in my role as operations auditor with Sodexo on remote site feeding projects.

HT works on a drilling rig. Although most North American remote sites from my days in the 1980s are now cities and towns with airports, shopping centers and good roads, drilling rigs will always need support services.

We have emailed each other in order to clarify the billing policies on his contract. Unlike our contracts which allowed billing for a full manday as long as a resident attended at least one meal, on HT's jobs they only bill for the meals attended. The clarifications and a revised spreadsheet follow.

Clarifications:
Q. So 1.5 is 15% of 10. We expect breakfast to be 15% of food consumed. This is what I call a target (a goal).
A. OK

Q. The count for each meal just explains how many showed up for the meal. What if someone only came to a single meal but ate like a horse, do we get a complete manday? or only the 1.5 divided by 10 if breakfast?
A. He will be calculated at the times he would eat.

If he attends breakfast only then YES 1.5 divided by 10 for the numbers who have attended the breakfast then the number of those attending lunch and so on then we add up all and this would be the MEN ON BOARD count since there is a price for each of the meals.

Q. On our jobs, if they ate even one meal we billed the entire day. This is one part I do not understand for your project.
A. You see, that's why the lunch is the most expensive cause we would have low numbers and even near to steady numbers on all meals except for the lunch where there will be visitors.

The resulting control model carefully tracks the budget per meal applying the correct target cost per meal. This analysis shows the maximum food cost total which will meet our budget target. The actual food cost is determined by the traditional formula [Beginning Inventory + Purchases - Ending Inventory = Food Cost].

Returning to our previous example, I have added the actual cost data and a variance field.

For those of you who live and die by the FC%, you may find the meal method helpful. I like the meal method to test the impact of dayparts on the food cost results. The focus is on dollars (or your local currency) vs. percentage. Your percentage results will improve by adding this tool to your kit.

When you track your costs by meal, you will develop a food cost system which will produce a true variable cost. Fluctuations caused by seasonal issues and busy day/slow day issues will be eliminated. You may need to track your employee meals more carefully. We treated each employee meal the same as a billable meal. The idea is to track your food used based on a budgeted cost per meal.

Most POS systems will have a report which recaps the check average by meal period. These check averages will help you develop a per meal budget. Changes in customer habits (like a shift from soft drinks to complimentary tap water) are easier to track. Customer profiles will help you think through the menu pricing decisions in a strategic manner. The QSR operations have done a great job developing value meals. I have always been a fan of the table d'hote option for dinner houses.

Try tracking your costs by the meal or guest and you will see your food cost in a new light.

Calculation of Food Cost Per Man Per Day (Man-Day)

Hi Joe,

I am really grateful for your prompt answer and the time you dedicated to answer my query. I apologize for not presenting full information as I had serious doubts I would receive an answer!

Allow me to present these facts:

1-My objective is to calculate the cost per man/ day ( breakfast, lunch, dinner and midnight)

2-The known facts every day are :
a) the number of meals presented to the client which you have inserted in the first matrix
b) the total cost of the food ingredients for all meals together.

3-If the 4 meals presented every day cost = 10 then the Company base its calculation on the following ratio: Breakfast = 1.5, Lunch = 3.5, dinner = 2.5 and midnight = 2.5

Once again, I thank you dearly and look forward receiving your feed back.

Best regards
HT

I worked in the remote site feeding and support services division of Sodexo for 9 years. We tracked all of our costs per man-day. If you carefully track your cost of all ingredients each day and divide this sum by your manday count, you'll arrive at an actual cost per man-day.

The other meal level information is your standard cost data. You need to hit 10 per man-day and you have targets for each meal period. I would recommend you divide the day into two parts - Midnight/Breakfast (target is 4) and Lunch/Dinner (target is 6). You can isolate most operational problems and focus on a solution if you get closer to the actual variance.

You may find the 1.5 breakfast target is too low but the lunch target of 2.5 is too high. Of course, you could look at each meal independently each day.

On our camps, we served large beefsteaks twice a week. Workers (our customers) consumed over 5,000 calories per day. They were working hard in the frigid regions of Northern Canada and Alaska. Steak Nights were a major component of our food cost results. We knew the cost of the steaks served and the average number of steaks consumed since the impact was high.

We served buffet style meals in an all-you-can-eat format. Our guests were served the entree and sides by one of the chefs or cooks. All salads, desserts, rolls, etc. were self-serve. Beverages were self-serve.

Our team knew the cost of the salad bar, the dessert station, the beverage station and average condiment usage. The cost of the items served by our main line varied based on a cycle menu.

If your operation is similar to the one I described, I recommend using a week as your report period. Most cycle menus will begin to track a tight cost range for each week of the cycle. You will find great variations on the dinner meal period based on the day in the cycle and the cost of the protein and produce items.

Calculating Average Food Cost for Multiple Meal Periods

Hi,

Thank you for your article "Food cost basics" which is published in foodservice resources.

I have an inquiry related to food costing and I hope you could help me figure it out:

If I am serving 20 Breakfast, 30 lunch, 50 Dinner and 10 midnight meals for the same customer , how could I calculate the average food cost per person knowing that the cost of the meals are as follows : breakfast =1.50, lunch and dinner = 3.00 and midnight meal is 2.50?

I hope you can help me on that.

Thank you and best regards,

Hesham

Let's take a look at the information you supplied. This information is essential to answering your question. To illustrate my first view, I have created a quick spreadsheet:

We have enough information to calculate the average cost per meal. The spreadsheet shows the process which involves 3 steps:
A. Multiply the cost of a meal by the meal count for each meal period.
B. Add the total meals and total costs.
C. Divide the total costs by the total meals to find your average cost per meal.

Food cost percentage involves relating the average cost per meal to a sales per meal. Since I don't have this data, I have used sales prices which would produce a food cost equal to one third (1/3) of my costs (33.3%). If I had the actual sales prices, I would have constructed a second spreadsheet:

Your food cost percentage depends on your sales and your costs. For each meal period, you need to multiply the price times the count to get your sales for each period. Add the sales and divide your total costs by your total sales.