Cost Reduction

10 Solid Techniques for Lowering your Food and Beverage Costs

Food and beverage costs are determined by the following formula: Opening Inventory Value + cost of Purchases – Closing Inventory Value = Usage Amount / Sales Revenue = Percentage of Cost of Goods Sold. While many restaurants perform this calculation on a monthly basis, to keep a close eye on your costs, weekly inventory and costing is recommended. Food Costs generally run about 28 to 32 percent of total food sales on average. Alcoholic beverages are varied with liquor generally running between 18 to 20 percent while wine is 35 to 40 percent. Draft bear comes in at around 15 to 18 percent and bottle beer at 24 to 28 percent. If you’re not falling within these benchmarks, it’s time to take a look at what could be eating away at your profits.

Keeping your food and beverage costs in check is really about three things: consistency, consistency and consistency. In a busy restaurant, this one factor is often hard to come by. It takes a great set-up with standardized processes and procedures that are in place and operating. It requires a POS system that is used to its fullest capabilities along with a food and beverage control system. Here are 10 ways this one adjective comes into play:

  1. Consistency through written recipes. Every drink and food item on the menu should have a written recipe that is contained in the POS system. Check on an ongoing basis to make sure that these recipes are being adhered to and that your inventory is matching.

  2. Consistency through portion control. This is an area that can make or break you. Obtain measuring devices such as scales and portion control serving spoons. If your bartenders do not have an eye for pouring, implement the use of jiggers or measuring cups. Inform management that any waste needs to be recorded.

  3. Consistent inventory control. According to the National Restaurant Association, 75 percent of all inventory shrinkage is a result of theft. Your bartender short-rings a drink or fails to ring up a drink at all and pockets the cash. Many POS systems offer inventory management solutions that make it much easier to perform weekly counts and calculations. This also contributes to successful ordering with limited waste.

  4. Consistent tracking from order, delivery, dispensing and stocking. Use comparative vendor pricing when making orders and don’t hesitate to question costs. Consider joining a purchasing group as there is often a reduced price structure. Check food items for freshness at the time of delivery.

  5. Consistently check cashier drawers and perform blind closeouts. This includes checking cashier drawers against your POS system at unannounced times. A blind closeout requires an employee to count their cash at the end of their shift without knowing what that amount should be.

  6. Consistent standard operating procedures regarding a designated area where employees take their breaks, eat their meals and what employee meal discounts you offer.

  7. Consistent pricing structure. In order to price your menu items, you need to know what each beverage and meal actually costs. This is where your recipe and portion control comes into effect. Take note of your highest-margin menu items and tweak your menu accordingly or offer daily specials with this in mind. Memorize this formula: Food Cost Percentage per Menu Item = Total Cost of Ingredients / Sale Price.

  8. Consistent policy on comp’s and voided food and beverages. Be aware of these through your POS system. If one member of your management team is responsible for the majority of these—keep a good eye on them, particularly at the end of the day.

  9. Consistently keep a key policy in effect. This allows only specified supervisors to keep keys to the freezer and alcohol storage areas. Of course, this only works if the areas are kept locked.

  10. Consistently create a company culture that rewards successful sales, recognizes exceptional guest interactions, and engages with its employees in ways that promote a sense of ownership and camaraderie. Theft is much less likely to occur when your employees respect you and are rooting for your success as well as their own.

Creating a business model that is consistent, accurate and takes the time to adhere to written policies and procedures, you’ll likely increase your chances of becoming one of the minority—the 40 percent of restaurants that succeed within the first year of their launch and the 20 percent that continue after five years. Serve quality food, provide excellent customer service and know your numbers and objectives.

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