Controlling Restaurant Food Costs
By David Scott Peters
How to Hit Your Target Food Costs Every Time
The prime cost for your restaurant is a key indicator of success, and I tell my members to aim for 55 percent no matter the style of the restaurant. A key system to use to achieve this target is to budget food purchases using a purchase allotment system.
The prime cost for any restaurant is the total cost of goods sold (COGS) — including food, liquor and anything else you buy — plus total labor costs.
Now, let me be perfectly clear about one thing… it doesn’t matter how you get to my recommended 55 percent. You could have a 35 percent total COGS and 20 percent total labor cost or vice versa. You can have ANY other combination that gets you to the targeted 55 percent prime cost.
So where does budgeting food purchases fall into this discussion of prime cost?
The key word in that question is budgeting. When you have a budget in place, you know exactly what numbers you need to hit to make money in your restaurant. Prime cost is a budgeted number. Let’s assume you are running a full-service restaurant that does not sell liquor, so the only cost of goods sold figure we have to worry about are food sales. Say you are running a 31 percent total labor cost. That means you MUST do whatever you can in your operations to achieve a 24 percent food cost if you are shooting for a 55 percent prime cost.
And doing whatever you can means implementing a system that makes it easy for you to control your food purchases, reduce your costs and control your cash. And did I mention that then you should hand the whole process off to a manager and not worry about whether they will order too much or too little? The purchase allotment system allows management to order what is needed to operate smoothly while staying within the budget, and to recognize and correct problems before the end of a period. And there are stopgaps in place to make sure they don’t go too over or too under.
When you implement and routinely use the purchase allotment system, hitting your target prime cost is like shooting darts and hitting the bullseye every time. So if you want to be profitable, remember, budgeting food purchases is a must.
David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in teaching independent restaurant owners how to use systems for increased sales and increased profits. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.