or Connect
New Posts  All Forums:Forum Nav:

food cost % dilemma

post #1 of 15
Thread Starter 

How do you get the point across that a $15.00 item with a 33% food cost is not as desirable as a $30.00 item with a 50% food cost?

Getting pressure based solely on percentages, trying to explain the difference between percentages and profit.

No matter how much I explain that $15.00 after food cost is better than $10.00 after food cost I am met with blank stares and restatements of "50% is too high".

Both items sell equally well.


Edited by Just Jim - 9/25/12 at 2:16pm
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
post #2 of 15

If the labor is near the same and you can sell them you are right.

post #3 of 15
Thread Starter 

Labor is the same, maybe even easier.

Actually sell a high percentage of the higher cost items (steaks).

They are our money makers, but they blow up my food cost percentages.

I will happily sell the steaks over the chicken breast dinners all day long.

Food cost percentage will be high, but so will potential profit.

They would rather sell the cheaper item, which makes my percentages look good, but lowers our per plate average, and untimately our profit potential.

 

Had similar problem at my last place, and I was just a line pirate there. (3 of us pitched in and covered all chef duties, we had all run kitchens before. Fun job actually).

We had live Maine lobster for $75.00 each, at roughly 50% food cost.

During months where we sold a lot of lobsters our food cost would climb, but the owner couldn't understand that after paying for the food we had around $35.00 to pay all other costs and derive profit, whereas with the scampi we had considerably less to work with after food costs.

The owner wanted to do away with the lobster, a very popular item, to help the food cost percentage.

 

Any idiot can own a restaurant.

(don't take that as all owners are idiots, you know me better than that).

Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
post #4 of 15

Unfortunatly your chances of convincing them of the logic of the " long dollar "is lower than the food cost on a plate of spaghetti and meatballs. In all my years in the business I only ever knew  2 owners that understood it.It is a damn shame really but the reality is that most owners are bean counters and most GMs are slaves to the numbers.Both the owners I knew that went for the long dollar were years in the kitchen before being owners. If you work for a coporate owned restaurant don't even waste your time talking about. The only way to get around it is to sell enough low % items to compensate for your higher % cost items.  Sad isn't it?

post #5 of 15

Translate it into 'profit-per-plate' and then go through the numbers on which plate sells more.

It might work ....

 

The problem is they have a computer program that keeps spitting out warnings about food cost.   They likely don't even understand who to calculate food cost or plan balanced menu's.   It's just what ever the program keeps high-lighting for them.

 

A mind is a terrible thing to waste...

----

 


"Plus, this method makes you look like a complete lunatic. If you care about that sort of thing".  - Dave Arnold

 

Reply

----

 


"Plus, this method makes you look like a complete lunatic. If you care about that sort of thing".  - Dave Arnold

 

Reply
post #6 of 15

Actually, it's pretty simple.  By selling a $15 item with a 33% food cost, the profit (all other things being equal) is $10.

By selling a $30 item with a 50% food cost, the profit is $15.

Which would you rather make?  $10 or $15?

As long as you are offering both prices on the menu and not limiting your guests to the higher price range, you'll always come out ahead.

post #7 of 15
Thread Starter 
Quote:
Originally Posted by chefie View Post

Actually, it's pretty simple.  By selling a $15 item with a 33% food cost, the profit (all other things being equal) is $10.

By selling a $30 item with a 50% food cost, the profit is $15.

Which would you rather make?  $10 or $15?

As long as you are offering both prices on the menu and not limiting your guests to the higher price range, you'll always come out ahead.

My thinking exactly.

Why am I having such a hard time conveying that to the powers that be?

Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
post #8 of 15

is the place owned by an umbrella group, or the like? or is it 'mom and pop' owned?

 

my personal experience is mostly with closely knit owners. and they have a tendency to look at initial costs, especially if they are a fledgling place.

post #9 of 15

It's too high because they would much rather sell two $15 items than one $30 item.

post #10 of 15
Thread Starter 
Quote:
Originally Posted by ritual30 View Post

is the place owned by an umbrella group, or the like? or is it 'mom and pop' owned?

 

my personal experience is mostly with closely knit owners. and they have a tendency to look at initial costs, especially if they are a fledgling place.

Indian casino

Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
post #11 of 15
Thread Starter 
Quote:
Originally Posted by kuan View Post

It's too high because they would much rather sell two $15 items than one $30 item.

If ony I could get everyone to buy two dinners each :)

Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
Reply
post #12 of 15

Are they wine cost savvy?  I usually explain this situation in relation to wine cost.  If you purchase a bottle for $10 and you want a cost of 25%, you'll sell it for $40.  You made $30 on that bottle. 

 

Purchase a $100 bottle, and theres no way you'll be able to sell that with a cost of 25%, or $400, so you sell it at a higher cost of 33% ($300)  but make a higher profit ($200).

post #13 of 15
Quote:
Originally Posted by Just Jim View Post

If ony I could get everyone to buy two dinners each :)

 

Yeah.  Right.  ;)

 

Or maybe if the $30 item is selling so well why not just drop the $15 item or raise the price a buck?

 

No matter what you do you should try to reach the target food cost whatever that is.  Show that at the end of the month the food costs average out to your target or below and you should be fine.

post #14 of 15

Raise the $30 (50% food cost) menu item to $45 and the food cost problem is solved laser.gif now it is up to marketingwink.gif

 

IMHO, calculating food cost % on individual menu items is a futile effort for precisely the reason you cite.

 

Remember, food cost percentage is gross food sales divided by total food purchases times 100, where food purchases includes inventory as well as direct purchases.

 

Even food costing by plate is fraught with misinterpretation and misuse.

 

As a management tool, food cost percentage was developed by analyzing successful restaurants from an analysis of their financial records, not dissecting their menus.

 

For me, choices for menu items are based on popularity and profitability, how many can I sell at how much gross profit per ticket.

 

Controlling food cost involves purchasing only the food that sells and minimizing waste.
 

Chef,
Specialties: MasterCook/RecipeFox; Culinary logistics; Personal Chef; Small restaurant owner; Caterer
Reply
Chef,
Specialties: MasterCook/RecipeFox; Culinary logistics; Personal Chef; Small restaurant owner; Caterer
Reply
post #15 of 15

Focusing on the cost percentage is one of the biggest mistakes restaurant owners (and usually chefs) make. Repeat to them the old adage "you can't take a percentage to the bank". I've never known anyone who could deposit "33%". The choice they have is whether they want to "deposit" $10 or $15.

 

As an employee, you have an uphill battle trying to win this arguement, even though you are 100% correct. What you are argueing for is that they push items based on their gross profit contribution, meaning what is left after the food cost. More gross profit dollars means more dollars to pay labor, chemicals, lease, linens, and everything else. As you know, it just doesn't make any sense to want to sell an item that earns only $10 gross profit over an item that earns $15 gross profit, unless there is some other additional cost to sell the $15 item that yields less profit.

 

Since you are an employee and they likely aren't going to let you "win" a disagreement, you need to reference outside information. I wrote an article on my consulting blog that has been republished on several other websites and referenced in two restaurant industry books. It's not my intent to plug myself, but this article could possibly correct their view on pricing, food cost and gross profit.

 

This isn't the view of some random restaurant consultant "slash" personal chef off a forum, this view on pricing has become the preferred norm taught by restaurant consultants across the country. While your question isn't about pricing, they can better understand your point of view if they have a better understanding of how to price for profit.

 

Here's the article: http://blog.bodellconsulting.com/2008/06/26/pricing-food-why-youre-doing-it-wrong-and-how-to-fix-it/

Brandon O'Dell

 

Friend That Cooks Home Chef Service

www.friendthatcooks.com

O'Dell Restaurant Consulting

www.bodellconsulting.com

 

Reply

Brandon O'Dell

 

Friend That Cooks Home Chef Service

www.friendthatcooks.com

O'Dell Restaurant Consulting

www.bodellconsulting.com

 

Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: Professional Chefs