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An Interesting Situation: Food Cost

post #1 of 17
4/9/08 at 7:00am
Thread Starter 
Hey there folks:

This is for the professional chefs who may look at this thread. I am the Executive Chef of a high end Inn and conference center. I have held this position for just over two months. I have been away from the hospitality business for 8 years and am just now back into it with this position. In the past, I have only ever worked as an Executive Chef in fine dining restaurants.

There's the background.

The Inn that I work for has a general manager who came to me the other day claiming that last month we had a food cost of 12%. Yes...12%! The month prior it was 21% I, as the new Chef, counted everything in the place for the past two inventories. Up until I got there, some things were not counted. The drop in food cost from 21% to 12 % is apparently due to my counting absolutely everything.

Now, even a food cost of 21% seems low to me. However, this 21% turns out to be the food cost as a percentage of all of the revenues generated by the facility - not as a percentage of food sales alone. That's why it seems low.

The general manager seems to be taking measures to find another job now. I suspect he'll be gone within two months tops. What I'm worried about is a new manager coming in and keeping the books properly and the food cost will appear to go through the roof.

I have never worked in an Inn and conference center before. We do a lot of banquets and buffets. In the past as a fine dining chef, a food cost of 30% was good. A food cost of 12% seems more in line with a fast food restaurant that is run very tight. A food cost of 21% for buffet banquets? Is that about right??

I have no idea what the actual food cost is considering that they roll it into the total revenue of the operation.

Sounds strange, huh?

Marko
http://livingstoncooks.blogspot.com/
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post #2 of 17
4/9/08 at 7:10am
What was last month's inventory compared to this month's? It's gotta be huge. Plus if last month's inventory was really high, it means somewhere the purchasing was a little, uh, exuberant.
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post #3 of 17
4/9/08 at 7:25am

food cost et al

Even for buffet banquets, 21% is very low--for that matter, buffets usually run higher on food cost, but lower on labor--after all, buffets have more waste, and people overfill their plates. I haven't heard of a restaurant hitting 12% ever, so I wouldn't worry too much about management breaking your horns if they start calculating food cost properly. You can always quote industry averages, easily accessible on the net these days.
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post #4 of 17
4/9/08 at 2:34pm
I had a similar problem at a previous job. What I ended up doing was keeping my own books and compared them with the actual books at the end of the month until the accounting problems were worked out. It sounds like your GM is lumping alcohol sales and other sundries like room rentals and AV rentals all together. What you should do is determine an actual food sale amount for each event, keep a running total, and calculate your food cost at the end of the period from that number. It does not matter rather your food cost is 12% or 21%, but how that number relates to your budget. If your GM is not operating within a budget, then I think we have found the problem.
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post #5 of 17
4/9/08 at 7:47pm
What strikes me odd is that the food cost is derived from total sales of the entire facility, not food sales. Hopefully the new GM knows a few things about running a F&B operation.

We are having a major problem with food cost at the hotel I work at (31%; budgeted for 26.9%). Is it just hotels in general that have a hard time with food cost? The two previous chefs were unable to achieve this either. Right now we are without a chef and the Sous is running the entire show, but I find it rather unfair that he is doing both jobs and gets the blame because things are not up to expectations.
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post #6 of 17
4/9/08 at 8:44pm
Hey, Hotels don't have a harder time with food cost than do free standings, but food cost is always a bear...management expects us to be accountable, and we should be...at the same time, management may have unrealistic expectations--welcome to reality! Bottom line? Do the best you can, if they think you're not good enough, hey, we were looking for a job when we found this one! Food Safety and Guest Satisfaction are the keys to success--let the rest go!
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post #7 of 17
4/9/08 at 8:48pm

by the way...

"Food cost" has been replaced (in many venues) by "Product cost," a more inclusive but less representative formula of what the property is actually making. Everything can be spun, and Chefs will always want to narrow, while management will always want to expand, the interpretation of "profit." Get used to it!
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post #8 of 17
4/9/08 at 9:19pm
I didn't mean to discredit the fact that food cost is a priority to restaurants. Right now I hear get slammed with food cost from every level of management daily, so I am just interested in asking questions that will hopefully give me ideas for solving the problem at work.

I was taught in culinary school from my costing teacher that 31% is not all that bad, so does management just have unrealistically high expectations with something like 26.9?

This concept of "product cost" is a new one on me. I have an interest in pursuing hotels, but this kinda scares me.
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post #9 of 17
4/10/08 at 3:56am
Gm could be fudgen the numbers to make him self look good. Who ever gave the great advice of keeping a copy of the numbers you put in, was right on...I do that always and belive me it comes in handy when there is a problem, nothing worse than a tie guy messn with our numbers...I just left a Stadium/Connference Center banquets up the wazooo...I ran for praties 30% food cost if liquir is involved 23%-25% cost...12% sounds like some one was not doing inventory right or some one fudgen numbers trying to look like a hero.....I keep a copy of everything, invoices, inventory, schedules ect. ect. keep a monthly folder of every month, always, just my opinion

12% maybe he didnt inventory the coolers and freezer, LOL

GO RED SOX
When I stop loving what I do, I will do something else: Clint Eastwood http://NewDreamCatering.comCharleston, SC
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post #10 of 17
4/10/08 at 5:30am
Thread Starter 
I suspect the GM is playing with the numbers. It's obvious actually. 12% is ridiculous and when he told me that...I actually had to fight to keep a straight face. It's the "why" that I can't figure out!

Everything was counted by me over the past two months. Before I arrived, some items were not counted. I'm not sure why, but I went ahead and counted everything as I have always done. This month the cost came in at 12%!

Rolling the food cost together with total sales of the property is not the way to calculate the cost of food used. W all know that. So does the GM. I just wonder how stupid the man who receives the figures is, that's all.

He must be an idiot!

Marko
http://livingstoncooks.blogspot.com/
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post #11 of 17
4/10/08 at 5:57am
Well see what it is next time around. Count everything again and see what he comes up with.

It really doesn't matter that it's a percentage of hotel revenues if it's done the same way every time.
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post #12 of 17
4/10/08 at 2:20pm
maybe they never did a hard copy inventory and just did what they purchased for the week off the invoices...I've seen that done...If it was me I would ask for the hard copies of previous inventories, and claim you need some product numbers off them..I would only do that if I was given a hard time about my numbers... CRAZY IS AS CRAZY DOES.This thread has owned me all day i've called all my chef friends and told them about this one, lol.....good luck with all that
When I stop loving what I do, I will do something else: Clint Eastwood http://NewDreamCatering.comCharleston, SC
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post #13 of 17
4/10/08 at 7:02pm
Clearly the calculation is being done wrong, but maybe 12% equates to a pretty fair number when you separate out the non food related revenue. I have always used an excel spreadsheet to track all of my numbers daily. I total my invoices, enter my sales from the Micros report, enter my labor from the Kronos system, and I have a realtime overview of where I am at for the month. That way when the Ops director comes to me and asks me why my labor is high for February, I simply show him the facts and he knows that there is a glitch somewhere. That glitch turned out to be $12,000.00 in labor mis allocated to F&B from Slots. Problem solved.

26.9 percent, while not totally out of hand is a lofty goal for any regular restaurant. 29% to 33% is more reasonable, unless you are in a steakhouse, in which case you may run as high as 45%.

Being a hotel can affect your food cost in casinos, where the food outlets are used more as a marketing tool to book room nights and get players on the floor. You never get a fair shake from the marketing and rooms divisions when trying to recoup the cost of two for one entrees, free buffets, free steak dinners and such. They always undervalue the product in order to pay less to F&B.
It's Good To Be The King!
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post #14 of 17
4/11/08 at 4:22am
26.9% seems unrealistic to me. That's a number from the '70s. I think food cost is calculated diffently now than the way I was taught. We were taught to take the cost of the item X 3.5 to arrive at the menu price. You can probably get something close 26.9 on an event buffet because the food is paid for no matter what, unlike a restaurant situation where you don't know how many people will turn up or what they will buy.
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post #15 of 17
4/11/08 at 7:17pm
That formula is how you reach the selling price, with a budgeted 28.6% food cost. You take the cost of goods (or product cost), multiplied by 3.5 or 28.6% to reach your selling price. My facility (private country club) operates at a 50% food cost, so to determine the selling price of a menu item we just multiply the product by 2 or 50%.

The basic formula for calculating food cost is easy. You take the previous month's inventory, add this month's purchases, then subtract this month's inventory. This will give you your "cost of goods sold". Take that number and divide it by your total food sales to reach your food cost.

To have a 12% food cost done by this formula, you would have a sale a Crab Cake that cost you $4 to make for $35 each.
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post #16 of 17
4/16/08 at 5:59am
at work we have a target food cost of 35%, so far we have been around 40-50% because the old head chef over ordered everything.

the manager (who worked in hospital kitchens before here) has now taken over the running of the kitchen and this week we got to 39.23% and that with a lot of out of date/rotten stock being thrown out and thats in a middle end restaurant (not fancy food, but extensive and exotic al a carte menu at a decent price ($20 or £10 a plate for mains usually))

so i reckon we should hit 30% next month hopefully

just got authorization for an extra £15,000 to be spent on the kitchen... almost doubling its size by re-fitting an old changing room with toilet into a prep room and covering the space between the kitchen, this new room (adjacent) and the exterior walk in fridges and freezers.... YAY!!!!

a 12% food cost is not impossible... just takes some creativity in your specials... especially desserts...

i used to make a passionfruit sorbet at 20p per portion and sold it at £4.50 it sold well and thats what... 2250% profit... it can be done, but that dessert simply made up for some stock losses elsewhere
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post #17 of 17
4/16/08 at 10:13pm
our club runs 35percent and this year we are on a budget to break even across the board give that one a try we need to run close to 33 to help out on our end but with cost of stuff these days i cant see how the price of flour alone is almost doubled in past 4 months
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