Food Cost: The Processes and Systems
In Food Cost: Not Just an Outcome but a Culture, we discussed that food cost is a culture created by people and supported by the fundamentals (processes and systems). The only way to have a sustainable and consistent food cost is through your culture. You cannot fix the food cost on your own. Having employees with high morale and pride in their work creates a culture that helps you manage and maintain food costs.
But having high morale and pride is not the only thing that creates sustainable food costs. In this blog, we will take a broader look at the food cost culture. I will explore how the fundamentals of processes and systems help create a sustainable foundation for the financial culture of your operation.
The Moving Parts that Make up a Food Cost
Food cost is a calculation. Successful food profits are an outcome of many moving parts working together, comprised of design, processes, systems, and controls.
Below I will explore these four areas and how they support food cost culture. Although the lists are long, it doesn’t mean they need to be complicated. In fact, the less complicated the better. The key is that there is structure and that it is followed.
Design is a broad term and consists of everything from forms to training programs. Design is the next step once the strategy is developed and it outlines the content, physical layout, and what the result will look like.
Employee: Selection Criteria / Orientation (Onboarding) / Skill Development / Training Program
Menu: Critical Path / Layout / Composition / Size
Recipes: Outline / Format
Purchasing: Bid (RFQ Sheets) / Product Specification Structure
Ordering: Count / Order Sheets
Forecasting: Spreadsheets / Criteria
Receiving: Food Safety Standards / Product training / PO to Invoice Verification
Prevent Loss: Cooking instructions and procedures / Equipment / Organization / Portion and Spec Sheets / Key Item Tracking / Waste Identification & Tracking
Analysis: Inventory Sheets / Menu Engineering Tool / P&L / Productivity Tracking
Processes are basically how we get the work done and the steps involved. Again, they do not need to be complicated they just need to be effective.
Employees: Selection Criteria Steps
Menu: Critical Path / Menu Engineering / Competitive Analysis
Recipes: Ingredient Selection / Product Yields / Costing / Approval / Verification
Purchasing: RFQ / Bid Analysis / Leadtime / Minimum Orders Purchase vs Buy
Ordering: Who, What & When – Frequency / Pars (as guidelines)
Forecasting: How – Utilizing Year over Year / Recent Trending calculation, events, etc.
Receiving: Inspection / PO to Invoice Verification / Control / Issuing / Direct issues vs central controlled storeroom
Prevent Loss: Aging Inventory / Cooling / Cooking / Storage Labeling /Dating / Food Safety / Shelf Life / Equipment Care / If this, then that – If you have too much of this, then you use it in that
Analysis: Inventory Counts / Usage Reports / Menu Engineering / P&L
Sales: Identify high-margin items for the Sales Team
The systems are the manual and automated tools that we use to accomplish the work. They save time and provide information critical to the operation. There are numerous software solutions available and the key to selecting the right one is truly understanding the problem you are trying to solve. Otherwise, you could over-invest in a system that is beyond your needs or spend a great deal of time and implementation on a system that falls short.
Employees: Skill Development and Training Program
Recipes: Recipe System (Automated or Manual)
Purchasing: Bid Sheet Comparisons / Purchasing system
Ordering: Purchasing System / Recipe Program or Manual
Forecasting: Automated or Manual / Par Levels – Ordering – Production – Prep
Receiving: Automated purchasing / Recipe or Receiving system / Manual entry
Prevent Loss: Structure / Ingredient Selection / Product Yields / Costing / Cooking
Analysis: Purchasing System / Recipe Program / Manual (Excel)
Control is not a word most people like to hear. These are the tools needed when the processes are not followed through measurement, audits, and inspections.
Employees: Workload / Productivity Measurement
Recipes: Verification / Portioning / Actual vs Potential Food Cost
Purchasing: Multiple Vendor Pricing / RFQ Audit / Quality Specification
Ordering: Who / What / When / Ordering Limits
Receiving: PO to Invoice Reconciliation / Inventory vs Issues
Prevent Loss: Par Levels / Key Item Verification / Portioning / Cooking programs / Locked Storage
Analysis: Actual to Potential Food Costs /Actual to Potential Usage / Profit Margin
As you can see when food cost is a problem it may not be a simple fix. Food cost is not always the only problem your operation is facing. Start with your employees and build a culture that makes them happy and proud to come to work. Then give them designs, processes, systems, and controls that are effective and efficient to help them do their job and serve your customers. Watch as your ‘food cost problem’ starts to disappear. Having this structure in place provides complete visibility into the food costs and the ability to have a strategic approach to food cost and profitability.
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