What "Should" Your Food Cost Be? - And Why It's Important to Know

A recent survey reveals that cost control, food cost in
particular, is a top priority of many independent operators today.

Most operators indicate that they track their food cost each week,
or at minimum, each month. They know that keeping close tabs on
their food cost can alert them to potential problems when the
cost is higher than expected.

Spikes in cost percentages set in motion the usual investigation
process of reviewing controls for monitoring waste, receiving
procedures, cost increases, theft, etc. Yet, even with proper
controls, some operators are never able to "hit" their target
cost percentage.

Maybe your "food cost target" needs reviewing. When was the last
time you costed out your menu? Whether you use recipe costing
software, spreadsheet, or even handwritten computations, you should
keep the cost of each menu item up to date. Once you have each menu
item costed, take one more step and compute your ideal food cost
based on the sales mix report from your POS.

Depending on your menu, cost percentages can fluctuate
materially from sales fluctuations particularly in high cost
items. But that doesn't mean you have a food cost problem.

A cost control problem is when there is an unacceptable
difference between the ideal and actual cost for a given period.

A 2% variance for a restaurant that does Rp. 100.000.000,- a week in food
sales amounts to Rp. 2.000.000,- a week. That's over Rp. 100.000.000,- a year! However,
if the targeted cost is inaccurate then you'll be left scratching
your head looking for a food cost problem that doesn't exist.

Here are some tips on how to know what your ideal cost should be:

1. Accurately cost out each menu item.

2. Make sure that each menu item has its own POS key. (so you can
track the unit sales of each item)

3. Create a spreadsheet that calculates the cost of each menu
item times the number of items sold from the POS report to give
an 'Ideal Cost'.

4. Compare the Ideal Cost to the Actual Cost calculation from
your P&L.

For many operators who compare their Ideal versus Actual food
cost, a variance of greater than 1% of sales indicates a food
cost problem.