Restaurant Profitability Blog

Give Yourself a $90,000 Raise by Knowing Your Restaurant’s Cost of Goods Sold

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Only one metric gives you an accurate measure of your restaurant’s profitability.

It’s not your sales, or the number of people who walk through the doors. It’s your restaurant’s Cost of Goods Sold, or your COGS.

It’s how you’ll know if your food costs are way too high, or if you need to make changes to your ordering, usage, or pricing.

It’s how you’ll know if this year is going to be great… or a little more tricky.

For one of our customers, it changed her life.

When she first calculated her COGS with Orderly, she found it was at 37%.

With accurate reporting week over week, she was able to lower her food cost, and shrunk her COGS down to 31%.

That 6% drop resulted in $90,000 worth of savings.

That’s not hundreds. Or thousands. That’s tens of thousands of dollars she found in her pocket.

WHAT IS COGS?

You probably already know this, so we won’t make this long.

If you don’t… then hoo boy. We’re about to blow your mind.

Your Cost of Goods Sold represents the total cost of all food product that left your restaurant in a week.

It does that by looking at everything that came through your doors in a given period of time – you know, that stack of invoices on your desk you’re ignoring – as well as your total sales.

Your COGS then lets you know how efficient your food spend was over that period of time (we suggest doing this weekly, just FYI). You’ll know if your food costs were too high, your sales were too low, and everything in between.

It’ll also help you determine if you’re overpaying for certain items… and how you can talk to your supplier to fix that.

HOW DO YOU CALCULATE COGS?

COGS is calculated with a simple formula.

Take your starting Inventory cost and add your purchases for a period of time. Then subtract your ending inventory. It looks like this:

(Starting Inventory Costs + Purchases) – Final Inventory Costs = Cost of Goods Sold

Seems easy enough, right?

Just don’t forget you’ll need an accurate inventory – both at the start and the end – to get a number you can use.

And we all know how that goes.

It results in Sunday nights spent in the stockroom instead of watching football.

It means you have to keep a jacket in your office for your weekly 3-hour freezer count.

It means your COGS is probably going to be off because we all know you’re just gonna fudge some numbers anyway.

On top of all that, you simply don’t have time for an accurate inventory once a week. Running a restaurant requires way too much work for that. Sure, you can train your employees to help you out. But they’re busy, too.

That means you might only get a picture of your restaurant’s profitability once a month – if that. Or, like most other restaurants, you just stop trying altogether.

IS THERE AN EASIER WAY TO DO THIS?

We bet the “lowering your food costs” and “upping your restaurant’s profitability” part sounds awesome…

But the “taking an accurate inventory every week” part is scarier than a group of 20 high schoolers walking into your restaurant.

Luckily, restaurant technology has evolved so you can get an accurate COGS – and start saving – with barely any work on your part.

With the Orderly App, there are only two things you need to do to get your weekly COGS.

Just 2. It’s simpler than making an omelet.

  • Snap photos of all your invoices
  • Share your sales

Using this data, our data nerds will help you determine your COGS.

Now, we have to admit… At first, you’re not going to get results overnight.

But, after a few weeks of data, we’ll use machine learning to have a solid picture of exactly what’s on your shelf.

What’s that mean for you?

You get an additional 5 hours of your time each week where you aren’t tediously counting. That counting you’ve been doing is about as useful as dull knives in your kitchen. Don’t waste time hacking at a cut of beef when you can slice through it with ease.

CONCLUSION: GET YOUR COGS. LOWER YOUR FOOD COSTS. GIVE YOURSELF A RAISE.

It’s crazy, isn’t it?

A formula so simple – with such a painless way to calculate it – can do so much for you.

At Orderly, we’ve worked with hundreds of restaurants to help them find their COGS and lower their food costs. And once they did… well let’s just say their bank accounts all looked a lot more green.

And we’re not talking in the hundreds… We’re talking thousands.

Everyone knows lowering food costs help you run a profitable restaurant… But not as many know just managing your COGS is the key to ensuring your restaurant stays running.

So why aren’t they taking the time to measure it?

We get that change isn’t always easy.

So sure – stay the course. Your restaurant might stay afloat. Or maybe you won’t.

But, if you truly want to make your restaurant profitable and add a few thousand dollars to your bank account…

Your COGS is the place to start.

Danny BarryGive Yourself a $90,000 Raise by Knowing Your Restaurant’s Cost of Goods Sold

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