Food-Cost Fitness
Bread & Butter, October 2001

According to the National Restaurant Association's Restaurant Industry Operations Report — 2001, fullservice restaurants spend 28 percent of their revenue on food costs, and limited-service operations spend 32 percent. Reducing food costs by 2 or 3 percentage points can mean the difference between staying in the black or sinking into the red, says Jim Laube, president of the Houston-based consulting firm RestaurantOwner.com. Here's some advice on how to reduce your food costs.

A prime solution
Many operators believe that seeking bids from several suppliers for every food item will ensure competitive prices. However, Laube says this process is time-consuming and that tracking multiple suppliers is a headache. Instead, he suggests that you make one supplier your primary vendor.

Start by identifying 15 to 20 food items that you use often and are available in high quality from a single vendor. Next, notify several suppliers who can supply all of these items that you are interested in finding a primary vendor. They'll drop their prices in order to gain more of your business, says Laube. "I've had clients reduce their food costs by 10 percent or more by going to a primary-vendor arrangement," he says. Avoid using a primary vendor that has not been in business long enough to establish a solid track record, adds Laube.

Taking stock
Improving inventory control also can reduce food costs by preventing you from ordering too much of an item. In addition, it helps identify discrepancies between food sales and food usage because of spoilage, incorrectly rung items, employee theft, orders that are returned to the kitchen, etc.

Laube recommends conducting inventory once a week, and tracking your key products daily. For example, if hamburgers are your biggest sellers, add the key ingredients in your burgers to your point-of-sale (POS) system to track their stock. When a customer orders a hamburger, the POS system will record that your inventory was reduced by one half-pound patty and one bun. "This also is a great way to reduce employee theft, because your staff will know you're watching," he says.

If you find a shortage of an item, begin counting it twice a day to isolate the problem to a specific shift, says Laube. He advises scrutinizing storage rooms, the restaurant's backdoor and trash cans to pinpoint problems such as theft, waste, spoilage and cooking errors.

A warm reception
Your receiving procedures directly impact your food costs, too. Your staff may fail to notice that suppliers have delivered too much food, resulting in charges for items you didn't want. Tighten your receiving procedures by recording each order when it's placed, says Laube. Include the name of the product, the quantity, the time and date it will arrive, and the price. When the items arrive, your staff can check the shipment against the written order. Employees should call the supplier immediately if they notice a discrepancy or if the quality of the food is poor.