Hospitality Financial Leadership - Controlling Food Cost – Top 10 List
By David Lund, The Hotel Financial Coach
Food cost is a never-ending battle in a war that does not end. You can never take your foot off the gas, if you do you will slow down. When you slow down in the food cost world it is costly. Back in the day I cut my teeth as a receiver, F&B cost control clerk and ultimately an F&B cost controller.
- Shop Around
- Check Your Receiving
- Lock it Up
- Menu Costings
- Embrace Contribution Margin
- Separation of Duties
- After Hours
- Invoice Approval
- Stock Rotation
Shop Around. It sounds simple and it is, but many hotels get complacent and don't keep their vendors on their toes. If you are buying the same products from the same vendors time and time again you are overpaying. Make it a habit each month to shop 10% of your products and remember the 80/20 rule. More on that here.
Check Your Receiving. If someone is not meeting the truck and making sure what is being delivered is what was ordered, then you are flying with your eyes closed. Companies know who does and who does not routinely check their deliveries. If you are on the wrong side of that equation, then your vendors will naturally take advantage of you. Weight, actual product and quality can all suffer and you are paying the price. Oh, and BTW - have a scale at the back door, make sure it is accurate and use it.
Lock It Up. Food is right up there with cash and booze in your hotel's ecosystem. It needs to be under constant supervision and when it is closing time you must lock it up. If you have a storage area that is away from the production area you must always lock it up. I cannot tell you how many times I have seen or been involved in situations where food has developed legs.
Menu Costings. Let's face it, people are busy and costing and re-costing a menu is time consuming. But having a menu that has not been costed at all or has not been costed lately is an expensive mistake. Always be looking for price changes and reflect these in your costings. At the very least have these in an Excel spreadsheet and have the principle ingredient prices updated monthly. Test this one. Go to your kitchen today and ask the chef for his/her costings!
Embrace Contribution Margin. It is one thing to have a good food cost percentage. But remember, we do not put percentages into the bank, we put dollars. Let me give you an example. We have two popular menu items: a salmon filet that costs $4 and sells for $20, a 20% food cost; and we have a NY steak that costs $7 and sells for $26, a 27% food cost. Which is better for my food cost? That's the wrong question. The question is which one has the highest contribution? Want to change your answer? Read more about contribution margin here.
Separation of Duties. In small hotels this is a challenge and it may mean extra dollars to have someone other than the person who ordered the food receiving and checking it. However, it is essential to ensure the person ordering the items is not in bed with your supplier. I have seen this movie before. And another layer we want separated is to make sure the person ordering (whatever the item is—not just food) is not the one who writes the checks to pay for it.
After Hours. The use of requisitions is critical and the after-regular-storeroom-hours food issue is a vulnerable area to protect. Establish a procedure that requires more than one person to access the storeroom after hours. As an example, security or the night manager must accompany the kitchen personnel. Unfettered access to your lockups is an invitation too good for some to pass up.
Invoice Approval. Food usually does not have an invoice included when it is delivered. It typically comes with only a packing slip. The invoice arrives later, usually by mail and must be matched with the original packing slip. The best-in-class process here is to have these invoices and the accompanying packing slips reviewed and signed off on daily by the head chef. We want to see proof of delivery and inspection with the packing slip and the chef's approval for payment.
Stock Rotation. Making sure that your food products are properly rotated takes more time, therefore some people do not do it. Make sure your operation is not one of those. Check to see the dates on items while stored. Oldest in the front - new stuff in the back. It might seem simple but make sure you test it.
Waste. Measuring and controlling waste is very important. So important that you can even purchase a service that will help you monitor it. There is an acceptable amount of waste given the fact that we are in the business of constructing menu items from raw ingredients. Make sure the waste gets monitored. Look in your trash on regular basis and ask why this and that is getting tossed out? Over production, over purchasing, too much…?
Being on top of your food cost is a never-ending job that requires you to be on your toes - and - that pays off!
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