Restaurant Profitability Blog

Everything You Need to Know About Managing Your Inventory

The words “take inventory” are enough to make your staff cringe and run off in 30 different directions.

You’ve tried getting your staff to do it and it just doesn’t go well. They fudge numbers and are very inconsistent.

Instead, you try to do it yourself, but every time you pick up the pen and clipboard, there’s a dozen other fires to put out.

Yet somehow you get by, for now at least…

Why Inventory Matters

Inventory management for a restaurant can be a cross between gibberish and long division. In fact, it’s such a pain that the task can often fall to the bottom of the to-do list, where it sits unchecked for the week. Then weeks turn into months. Uh oh.

I don’t need to explain why taking inventory is important. You know it’s important.

Your inventory is one of the biggest assets of your restaurant. You should always know how much of it you have, and how much it’s all worth.

It’s also a way to help keep your costs down and avoid any food waste, spoilage, or theft. It allows you to know when you’re running low on product and when you have an excess.

Why Should My Current Inventory Process be Ditched?

I remember my old restaurant days. Sunday night was our designated inventory day. The kitchen team would break up the inventory list so we could get through it quicker. I’d take the walk-in, Jenny took dry goods, and Ben took the alcohol closet. We all rushed to count what was on the shelves and filled in our spreadsheets as quickly as possible.

Needless to say, the problem with our inventory process was immediately clear.

Nothing ever lined up correctly.

Big ticket items were always being counted lower than expected and out of nowhere, someone would stumble upon three 50lb bags of AP flour.

Our kitchen was a disorganized mess. Items were spread out EVERYWHERE, making it extremely difficult to count.

Lemons? They could be found in the bar area, walk-in fridge, even dry storage. Who knows?

See the case of avocados over there?  I would count it as half a case. Jenny would count it as half a case half the time, and two-thirds the rest of the time. Ben would just walk right by it, just trying to get out of the restaurant before midnight. Counting discrepancies were simply unavoidable.

At the end of the day, we were spending too much time taking inventory and the information we gathered was STILL always wrong.

By the time we got our Cost of Goods Sold and Inventory for the month of May done, it was the second week of June. We were always reacting on old information instead of course-correcting immediately.

There had to be a better way.

Enter Orderly

The solution is to implement a system that transcends the variability of your staff, doesn’t require hours of work on your end, and gives up-to-date reporting so you can make decisions today before you end up with a problem tomorrow.

Orderly simulates an inventory and logs in your weekly Cost of Goods Sold without having you count a single product. No more relying on Ben and Jenny to take inventory!

By taking a quick photo of your invoices and entering POS sales data, you will receive a weekly rundown of your Cost of Goods Sold, highlighting where and what potential problems may be costing you. It’s as easy as that.

Prefer to take physical inventory? Orderly has you covered!

You can easily set up your inventory by using Orderly’s categories OR you can build custom “shelf to sheet” inventory lists. Milk lives in the walk-in, flour in dry storage, you get the idea.

As you count, on-hand dollar amounts will automatically be calculated, and beginning/ending inventories will show you exactly what you went through over a given period.

Orderly will continue working for you, whether your team has hours to spend counting inventory this week, or they need to rely on our auto-COGS next week.

Rising prices of ingredients, over ordering and product waste can all lead to high food cost. That’s something most (if not all) of us can’t afford, especially during these times.

Knowing that you have high food cost is one thing. Identifying why your food cost is so high is like finding a needle in a haystack. Orderly will help you shrink that haystack so you can easily find the needle and culprit for your rising food costs!

Would you rather spend 5 hours a week counting inventory or 5 minutes a day in Orderly?

Schedule a live walkthrough of Orderly’s food cost management solution!

OrderlyEverything You Need to Know About Managing Your Inventory
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The Basics of Food Cost and Why You Should Care

Food cost is one of the biggest factors of your restaurant’s success. Knowing what it is affects everything from how you price out your menu to what you order on a weekly basis.

Understanding your food cost is especially important during these unprecedented times as many restaurant owners are counting pennies and doing everything in their power to maximize profits.

Most restaurant managers are probably exhausted and stretched thin on time. They’re facing supply chain shortages and staffing issues while doing everything in their power to stay profitable.

Lucky for you, there’s light at the end of the tunnel!

Orderly’s goal is to help you get a handle on food costs. We want you to become more profitable while saving time by following these restaurant basics and implementing some killer technology in the process.

Ready to streamline your operations and put time back on your calendar?

Let’s jump in!

What is Restaurant Food Cost?

When we talk about Food Costs, we are typically referring to Plate Costs (recipe costs) and Cost of Goods Sold (COGS)

Plate Cost is the amount a specific menu item actually costs you to make. This is calculated by measuring out every ingredient that goes into the dish and the price of the ingredient. In short, it’s the cost of all ingredients added together.

Cost of Goods Sold (COGS) is the total food cost over a period of time, maybe a week, or even a month. The formula to determine your COGS is (Beginning Inventory + Purchases) – Ending Inventory.

If you’d like to learn more about COGS, read our blog focused mainly on calculating your COGS here!

What is Restaurant Food Cost Percentage?

Food cost is typically expressed as a percentage, hence the term Food Cost Percentage. The rule of thumb is to aim around a 30%, though this could change depending on the type of operation you’re running.

To calculate your this percentage, you would take your total costs for a specific period of time (how much you spent) and divide it by the total sales for that same period and multiply by 100.

What’s the Difference Between Food Cost and Prime Cost?

Perhaps you’ve heard the terms Food Cost and Prime Cost but never understood the difference.

Food Costs are used to calculate Prime Costs.

Your Prime Cost equals your total direct cost of production (raw materials and labor). Your raw materials include things like food and alcohol. Labor costs include things like salary, taxes and benefits.

Because a restaurant’s Prime Cost is one of their largest expenses, by controlling and lowering your prime cost, you can directly increase your bottom line.

Why Should I Care About My Food Cost?

Knowing your food cost is essential to running a successful restaurant. It is another very large expense your restaurant will incur so learning how to control it will allow you to be more profitable.

It is also important to know for when you’re pricing out your menu. Pricing out your menu accurately will ensure you’re hitting the margins you’re aiming for.

Lastly, it affects your prime cost. You have control over your prime cost, which are things like labor or raw materials. What this means for you is that when you notice your food cost rising, you will be able to tighten the strings in other areas to help improve profitability.

So Now What?

Traditionally, the above calculations are done manually. That’s right, painstakingly entering numbers into a spreadsheet on a consistent basis. So much fun! And, if you aren’t consistent, these spreadsheets fall apart and become useless.

The problem with doing the calculations manually is that our industry is changing so fast and on top of that, it’s very chaotic, so it becomes double the work.

Time constraints don’t allow you to spend hours in front of a computer to update invoice prices and sales numbers. Not to mention, unexpected problems also occur in the restaurant industry, such as, your cook calling out or your grease trap deciding to go on vacation. Plus, you have hungry guests to feed! There’s no time to stop and calculate.

Orderly’s technology gives operators the insights they need to make better decisions without all the manual data entry. Why not take advantage of that?

If you’re ready for a hassle-free, stress-free work life, sign up here to get started with Orderly.

OrderlyThe Basics of Food Cost and Why You Should Care
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Cost of Goods Sold – Learn the Ropes of Calculating Your COGS

Do you know your Cost of Goods Sold?

You’ve tried everything when it comes to lowering your food costs but the daily mayhem in your restaurant keeps you so busy that your numbers are falling by the wayside. You’re starting to see more red numbers, and it’s not just because you’re running a pasta special. It sounds all too familiar.

You may know that the key to lowering food costs is knowing your restaurant Cost of Goods Sold. Or maybe you’re reading up on it for the first time.

Either way, if it’s not done right, your COGS won’t help you.

At Orderly, we’re COGS experts. We’ve taken all of our knowledge and compiled it all together— from things we’ve learned working in restaurants ourselves, to data from thousands of customers. Thus, creating a system that puts time and money back in your pocket!

What are COGS anyways?

Cost of Goods Sold are the total cost you can attribute to the production of goods sold over a period of time.

For a restaurant, it’s the total cost it took you to create all the food you sold over a period of time. COGS is also the metric that stands between your pleased regulars returning week after a week and a “closed” sign on your front door.

COGS looks at everything that came into your restaurant over a period of time and your total sales. It also accounts for the ingredients you have on the shelf before and after a given period and measures the overall health of your restaurant.

Why should I calculate my COGS?

If you start calculating and following your restaurants’ COGS, it’ll make a world of difference.

You’ll be able to determine when ingredient prices rise and even negotiate better prices. Your staff will stop over-ordering and you’ll know exactly how much you’re spending each week.

You’ll also know where sales were good and where they lagged, allowing you to adjust your purchases accordingly and control your inventory.

How to calculate COGS?

Calculating your COGS can be a tricky process.

Luckily, Orderly automates this arduous process for its customers. But if you still have an itch to find out how to calculate your COGS, we’ll break it down for you:

(Beginning Inventory + Purchased Inventory) – Ending Inventory = COGS

Your beginning inventory is the amount of product you start with at the beginning of a period (let’s use Monday for this example). This is whatever is left over from last week.

To get this number, your team has spent hours walking around the restaurant counting EVERYTHING—from strawberries in the cooler to sugar in dry storage.

Let’s say you have $3,000 worth of product leftover from the previous week—this is what your beginning inventory would be.

Next, you’ll need to figure out your purchases over that same time period. EVERY SINGLE purchase. Don’t forget to update prices on your inventory count sheet with the latest price you paid for every ingredient!

Finally, we’ve got your ending inventory which entails the amount of inventory leftover at the end of that period. Back in the cooler to count again! Fun, right?

Now let’s calculate:

Beginning Inventory + Purchases – Ending Inventory = COGS

Sound like a lot of work so far? That’s because it is!

Now let’s show you the Orderly way:

1: Snap a photo of each invoice into Orderly as an order comes in

2: Enter your sales on a daily/weekly basis

3: BOOM. Instant COGS!

Orderly was created to give your restaurant accurate COGS without any of the unnecessary hassle we walked through above.

No more counting inventory. No more math problems to dive into.

All you have to do is snap photos of your invoices and update your sales once a week in the Orderly App.

Too good to be true? Well, it’s not!

Our customers have found Orderly’s COGS to be more accurate and consistent than doing it themselves. When taking inventory by hand, your team may guestimate, miss things or just do a sloppy job. I mean, it’s not their fault, who really enjoys taking inventory anyway?

It’s the digital age. Embrace technology that empowers your staff, saves you time and helps you run a more profitable restaurant when you let Orderly take over.


OrderlyCost of Goods Sold – Learn the Ropes of Calculating Your COGS
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Recipe Costing Technology Made by Chefs, for Chefs

An easy way to ensure you are profitable is to align the cost of your recipes with your selling price.

At the end of the day running a restaurant is a numbers game. Plain and simple, but let’s be honest, not everyone is a numbers person.

I remember costing out recipes and menus in my old kitchen.

I would spend hours in the kitchen like a mad scientist in his lab, diving into math problems, the likes of which I haven’t seen since high school. I was converting ounces to quarts or asking myself “How many grams in a fluid cup?”

I was portioning, cutting, measuring and weighing the breakdown of every ingredient in my recipes, down to the grain of rice. “I would have the most comprehensive recipes ever!” I thought.

After HOURS of work, I was finally able to sit back in the glory of my achievement and look at my finalized menu.

That’s when I began to realize that the margins on some of my recipes weren’t where they once had been. With the rising prices of ingredients, some of my most popular menu items were LOSING me money. To top it all off, my distributors were sending substitutions for products I had never purchased before.

This meant that if one ingredient changed or there was a price increase, I would have to go back into my spreadsheets and constantly update product changes and prices. What a headache.

Now some restaurants are blessed to have full time staff members to manage the numbers.

But not me.

Aside from being a chef, I unwillingly also signed up to be the in-house plumber, fridge repairman, and personal therapist for the wait staff. On top of that I was also expected to be the numbers person.

The number of hats I was wearing aside from running the kitchen was growing, and all the moving parts involved in costing out my menu were completely out of my control. So unfortunately, like many chefs, recipe costing got put on the back burner.

The Problem

The problem with recipe costing is that there are so many variables constantly changing.

Ingredient prices are skyrocketing, vendors are substituting ingredients you typically buy due to product shortages, and on a busy Friday night you run out to the local store to pick up supplies.

The price you paid for ground beef pre-pandemic is nowhere close to what you are paying today, meaning your margins have shrunk immensely on your burger.

Unless you are inspecting every invoice that comes through your door with a magnifying glass and noting ingredient price trends, you have no idea what menu items are costing you today.

This is bad. Every day that you are unaware of your profit margins is a day that you could potentially be bleeding money!

The Solution

Hopefully by now you get the gist of this post. Recipe Costing is SO important but also extremely difficult to maintain.

Orderly was developed for chefs, by chefs, to be the easiest and most reliable food costing tool on the market. The less time you spend in our software the more time you have to do what you truly love!

Simply build your recipes in Orderly once.  One time.

That’s it.

With every invoice that comes into the system, Orderly will automatically update the ingredient price showing you the true cost of the recipe today and the current margins based off your selling price!

This allows you to make many updates and revisions as a problem arises.

Buying a new ingredient or your vendor sent a substitution? No problem!

Orderly groups together substitute ingredients with the products you typically buy.

This means that regardless of whether you bought Hormel Apple Wood Smoked Bacon last week or Oscar Myer Apple Wood Smoked Bacon this week, Orderly will group these like items together and use them interchangeably in your recipes depending on which item you bought most recently, giving you the most up today price for every menu item you build in Orderly!

Recipe costing is something that NEEDS to be done to ensure you are running a profitable business.

FINALLY, a recipe costing solution resilient to substitutions and supplier changes. 

Say goodbye to daily recipe maintenance!

Ready to put your recipe costing on autopilot and receive up-to-date food cost insights?

Reach out today and our team will be happy to discuss how Orderly can help!

OrderlyRecipe Costing Technology Made by Chefs, for Chefs
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The Technology Solution to Your Inventory Troubles

 Orderly experts recently sat down with Steve Moody, our Digital Product Marketing Manager, to discuss his experience with inventory during his career as a Chef.

Find out how he tackled the tedious task and the game changing solution he found that made the process quick and easy.

Taking inventory was like nails on a chalk board. While chewing on a broken bottle. In a burning building.

But worse.

Inventory management for a restaurant can be a cross between gibberish and long division. In fact, it’s such a pain that the task can often fall to the bottom of the to-do list, where it sits unchecked for the week. Then weeks turn into months.

I don’t need to explain why taking inventory is important. You know it’s important.

I remember my old restaurant days. Sunday night was our designated inventory day. The kitchen team would break up the inventory list so we could get through it quicker. I’d take the walk-in; Jenny took dry goods; Ben took the alcohol closet; we all rushed to count what was on the shelves and filled in our spreadsheets.

Needless to say, the problem with our inventory process was immediately clear.

Nothing ever lined up correctly.

Big ticket items were always being counted lower than expected and out of nowhere someone would stumble upon three 50lb bags of AP flour.

Our kitchen was a disorganized mess. Items were spread out EVERYWHERE, making counting them extremely difficult.

Lemons? They could be found in the bar area, walk-in fridge, even dry storage.

See that case of avocados over there?  I would count it as half a case. Jenny would count it as half a case half the time and two-thirds the rest of the times and Ben walked right by it just trying to get out of the restaurant before midnight. Counting discrepancies were unavoidable.

At the end of the day, we were spending so much time taking inventory and the information we received was still wrong.

By the time we got our Cost of Goods Sold and inventory for May it was the second week of June. We were always reacting on old information instead of course-correcting immediately.

There had to be a better way.

Enter Orderly.

The solution to this inventory problem is to implement a system that transcends the variability of your staff, doesn’t require hours of work on your end and gives you up to date reporting so that you can make decisions today before you have a problem tomorrow.

Orderly simulates an inventory and backs into your weekly Cost of Goods Sold without you having to count a single product! No more relying on Ben and Jenny to take inventory!

By simply snapping photos of invoices and entering POS sales data, you will receive weekly Cost of Goods Sold, highlighting where potential problems may be costing you!

Prefer to take a physical inventory? Orderly has you covered!

Easily set up your inventory by using Orderly’s categories OR build custom “shelf to sheet” inventory lists. Milk lives in the walk-in, flour in Dry Storage, you get the idea.

As you count, on hand dollar amounts will be automatically calculated and beginning and ending inventories will show you exactly what you went through over a given period.

Orderly will continue working for you, whether your team has hours to spend counting inventory this week or they need to rely on our auto-COGS next week.

Rising prices of ingredients, over ordering and product waste can all lead to a high food cost.

Knowing that you have a high food cost is one thing. Identifying why your food cost is high is like finding a needle in a haystack. Orderly is going to help you shrink that haystack, so you can easily find the needle and the culprit for your rising food costs.

Would you rather spend 5 hours a week counting inventory or 5 minutes a day in Orderly?

Schedule a live walkthrough of Orderly’s food cost management solution!

OrderlyThe Technology Solution to Your Inventory Troubles
Read more

Work Smarter – Not Harder. Recipe Costing Made Easy

We’re probably not the first to tell you that recipe costing is one of the critical practices undertaken by successful restaurant operators, right? However, we may be the first to tell you that it’s a time-sucking detail that many use incorrectly.

Before you aim for that little “x” on the top tab, let’s take a closer look at just what we mean.

The Process of Recipe Costing

First, we’d like to share that recipe costing is not a one-time occurrence—it’s an ongoing process. When food costs change with the rise and fall of market rates, your recipe costs change.

When suppliers change, your recipe costs change. When you decide to add a little more oregano and a little less thyme, your recipe costs change.

We’re sure you’re getting the picture.

But wait, there’s more.

First, you list out all of your ingredients for one of your dishes. Second, you list the purchased unit and the price per unit. Now, factor in your yield to come up with your actual unit cost.

From there, you can calculate your unit serving cost by converting pounds to cups, cups to tablespoons, pounds to teaspoons, etc.

Now times your portion size by your unit serving. Then add up all your ingredients.

Oh, wait, don’t forget your waste and overhead percentages. Phew, I’m tired.

Do you know why you’re doing all of this? Is it because someone decided that restauranteurs and operators have too much time on their hands?

The actual purpose behind plate costing is so that you can price your menu items in a manner that ensures you’ll make money in the restaurant game—keeping your food costs in the magical realm of 25-35%, depending on the type of restaurant.

And while we are all about data, we prefer data that is usable and reliable. How often are you going to calculate recipe costs and then change menu prices to reflect your findings?

While an essential and integral part of a restaurant’s success, knowing your food costs and cost of goods sold (COGS) on an ongoing basis can result in increased profits and much less painful number crunching.

Food Costs Vs. Cost of Goods Sold

COGS is the cost of the products used to make the products you sell. Let’s say you’re going to calculate your COGS and food costs every week (the minimum amount recommended). The formula reads:

Beginning value of inventory at the start of the week + purchases made during the week – the value of inventory at the end of the week.

Now, to determine food cost, divide your COGS by your total food sales and times it by 100 to view your food cost percentage.

That number will tell you if you’ve hit the food cost you’re aiming for. Are you in the 25-35% mark? As Yogi Berra said, “If you don’t know where you are going, you’ll end up someplace else.”

Increasing Profits

As much as you enjoy the restaurant industry, at the end of the day, you have to make a profit. While margins are thin, it can be done. If you perform the calculations and find higher food costs than anticipated, you’ve got a few options.

You can adjust your menu prices, find suppliers with the same quality products at lower costs, buy in bulk, or reduce portion sizes.

Once you’ve determined which change is best for your business, be sure to track your sales and food costs and see how the changes impacted them.

An Easier Way

If you’re still counting inventory via tally sheets and long hours in walk-in refrigerators and dry storage, you’re probably wondering how this calculation can save you time over recipe costing.

You’re also probably not in the mood to hear that food costing must be done regularly for operators to reap their monetary reward.

What if we told you that it doesn’t have to be so hard? What if you could take a look at a simple, organized dashboard that lets you know your food costs every week?

That’s where we come in. The Orderly Food Cost Dashboard contains the key metrics you need: food spend, sales, purchases, and COGS. And it’s updated every week.

Simply snap photos or import your invoices and update your weekly sales via your POS, and Orderly will do the rest for you.

Don’t live in the dark ages. Bring some Orderly to your life and business.

Andy RosenbloomWork Smarter – Not Harder. Recipe Costing Made Easy
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How to Calculate Your Restaurant Inventory Par Levels

Your restaurant’s inventory par levels and food costs go hand in hand.

It’s one of the hardest things to juggle… Having enough inventory to meet demand each week, but also keeping it low, as to avoid stockpiling or food waste.

We mentioned this in our last article, but keeping track of inventory (and your par levels) is essential to the success of your restaurant.

Lower inventory levels help:

Ben BaggettHow to Calculate Your Restaurant Inventory Par Levels
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What is Food Cost Variance and How Do You Control it?

How often do you check the prices of your ingredients?

Every delivery? Once a week? Once a month? You’re expecting your food cost to be around a very specific number. Your supplier didn’t mention any major changes in price, so why should you have to worry? You’re getting a good deal after all, right?

But prices are seasonal, and will often change. Small increments here and there. Sometimes they may go unnoticed. Sometimes you may catch them.

In an ideal world, your food cost would be exactly what you expect every single time. But unfortunately, that’s not how the supplier industry works.

So what is food cost variance and how can you keep it under control? Below we’ve outlined what food cost variance (as called cost variance) is and a few ways you can keep it under control.

Ben BaggettWhat is Food Cost Variance and How Do You Control it?
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