3 Hidden Food Costs Too Important to Ignore

Managing food costs can be a game of hide and seek.

Sometimes you know what you’re spending… and sometimes you have no idea.

But you just can’t ignore it.

After all, food spend represents 1/3 of your business’ success.

So how do you master the food costing game?

Sometimes it’s the little things that can make a big difference… like digging into the details.

In fact, we’ve found 3 overlooked factors that contribute to food costs.

And we’re breaking them down for you.

#1 The Hidden Cost of Transportation

Did you know the food you serve has to travel an average of 1,500 miles to get from farm to table?

That means “shipping & handling” is a big chunk of what you pay for your menu ingredients.

So when transportation costs increase… your food costs will, too.

In fact, over the past 2 years of sub-$2 national average gas prices, we’ve still seen food prices rise ahead of inflation.

And if fuel prices surge at all… well, you can bet your food costs are going to skyrocket even more. 

So what do you do?

Managing this reality can be difficult… but not impossible.

When you build your menu, think about offering dishes that use seasonal ingredients.

Seasonal ingredient prices will typically drop during the specific season they’re available… which means you save more money.

A great example is an asparagus.

While it’s a vegetable staple on today’s restaurant menu, it can get pricey when you buy it off-season.

By only serving asparagus from late-May through early-July (when it’s in-season), you can take advantage of lower prices.

Another way to combat sudden rises in food costs is buying in bulk.

Stock up on staple items like rice or flour.

These ingredients last a long time, and you can usually get a discount for buying them in bulk.

Watch for price dips on these items, too.

When the price goes down… stock up.

It’s true there are limits about what you can do to address price fluctuations caused by transportation costs.

But there are also ways to be proactive about purchasing decisions.

#2 The Hidden Cost of Training… And Re-Training

It’s the untold secret of inventory management…

A poorly trained line staff can wreak havoc with your COGS performance.

And this is the case both in the kitchen AND at the bar.

How?

Let’s do some simple math.

You pour a 1.25-ounce portion of spirits in a traditional Hi-ball (1 liquor plus mixer). And you sell about 400 of these – or 500 ounces – weekly.

Let’s say your bartending staff doesn’t calibrate their pours daily… they’re actually pouring 1.5 ounces.

That’s a 20% over pour.

Your actual use? About 100 ounces over ideal.

That’s almost 3 full liter bottles of liquors going to waste. Ouch.

Yes, while some over-pouring always occurs with preferred guests and friends… most incorrect portioning is caused by a lack of discipline — YOURS.

Take 45 seconds per bartender and ask him or her to reliably pour you various portions of liquor.

By doing this you’re being clear with your staff how serious you are about controlling inventory and you don’t have to threaten or cajole them… just manage.

The same is true of the kitchen, although the effort to correct deficiencies is a bit different.

Here you can add strategies such as a portion control program: Pre-bagging fries, wings or other drop items.

However, nothing is more potent than observing and directing staff about your expectations directly.

If you are at Expo, keep an eye on a station’s output.

It will be clear to you when food portions are off.

Additionally, create a way for waste to be reported. If that doesn’t match up with your actual food cost vs. ideal difference, then you have more work to do.

Improve training standards by giving it your full attention.

It will do wonders to improve your bottom line.

#3 The Hidden Cost of Poor Menu Design

I was visiting a local restaurant recently and ordered a glass of cognac to finish my evening.

It had been a good week and I chose a Hennessy XO for my nightcap.

When the check arrived, I was horrified to see what this operator charged me for that little snifter of cognac.

No… it wasn’t too much. It was way too little.

I was charged $8. Hennessy XO wholesales at over $100 for a 750ml bottle.

So that made the 1.5 ounce pour cost $6.05… or almost a 75% COGS.

They were literally throwing money away.

Sure, you might tolerate a high pour cost for expensive items.

But this is just a money suck.

A more appropriate price would have been $20 for a 33% pour cost.

Even if you don’t have control over the menu pricing at your location, you can still keep your eyes open.

If you catch something wrong with the pricing… tell someone.

And don’t let your staff choose “the next closest thing” on your POS if they can’t find a menu item… that’s what leads to an $8 glass of Hennessy XO.

Review your menu pricing and make sure your staff knows it forwards and backwards.

This is especially important at the bar. This area produces the highest margin for your business… protect it and the profits it drives.

You should also perform quarterly menu reviews with your management team.

This will allow you to catch pricing errors, outdated items… and offer you a chance to keep your menu fresh by adding new entries.

It’s worth the time & effort.

Stop Playing Hide and Seek with Food Costs

No one likes losing.

That’s especially true for food costs… when the stakes are so high, you can’t afford to be left in the dark.

In fact, food costs can – and often do – fluctuate on a daily basis.

And they’ve risen 25% over the past 5 years overall.

Understanding the hidden factors that affect your food costs… transportation, training, and menu setup… will help you make strategic, practical changes to improve.

And even the smallest changes can make a hefty impact on your overall spend.

GET PRICE TRENDS IN THE PALM OF YOUR HAND WITH THE ORDERLY APP

At Orderly, we hate the food costing game. That’s why we created the Orderly App… it’s designed to put food spend and price trends in the palm of your hand.

You’ll get paperless invoicing, painless inventory, and a food spend dashboard that shows you all the details.

You’ll even get push notifications when prices increase.

It will help you control food costs… and make better spending decisions.


Andrew Jaffee is the CEO and founder of The Rail Media. He’s an accomplished and respected restaurant industry professional with over 26 years of experience focusing on many aspects of small business management ranging from human resources to marketing – operations to accounting. At Orderly, we’re big fans of Mr. Jaffee… you can find Andrew & his company at therail.media.

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