Recipe Costing - Where Do I Begin?
Posted by Jim McGinty on Thu, Jan 28, 2010 @ 11:24 AM
Recipe costing is one of the most important areas a restaurant must address and it's a time consuming process to do it correctly. You need to do this so you can accurately set menu pricing, know when to increase prices and when to eliminate the items off your menu. Price it too high and you may lose customers if they feel the value is not there. If you price it too low, the difference between your actual price and what you should be charging comes right off your bottom line.
Restaurant owners should know what their actual gross profit margins are on each food item they are selling. In order to know this, you will need to standardize your recipes. This means there will be no more guesswork and no more surprise food cost fluctuations. Standardized recipes mean greater consistency, better food cost, and more satisfied customers.
Now you are probably asking, "where do I start?" Start with your entrees, as they are usually your higher cost items. Be very specific about how the center of the plate choices go from the cases of raw ingredients and onto the plate going out to your dining room. Some questions to ask yourself:
- Do you portion by cooked weight, pre-cooked weight, portion control item, ladle or piece?
- Is there a portion control system in place to ensure consistency for both the guest and the accounting staff?
You can't spend enough time in this area. This is where the major decisions are made in any recipe costing exercise.
The entrees usually have a cost of goods sold higher than your actual food cost percentage. If you have a 35% food cost percentage, you may see the entrees coming in at 40%. The reason the entrees run higher than the food cost percentage is the beverages typically have portion costs far below the overall percentage. Sales of beverages are made in higher volumes than the sale of entrees. These profitable items will help to lower the overall cost percentage.
Chefs and kitchen managers will get involved once they see you are factoring sides, bread and butter, garnishes, etc. into the total cost of these entrees. They should have been correctly trained to price entrees to cover all these costs. In addition, they may be able to point out entrees with a high food cost percentage that can produce high gross margins. As you gain the support of the kitchen staff in your exercise, have them proceed to cost any side, starch, bread, roll, garnish and condiment needed to serve each entree.
Maintain a focus on the production and service of center of the plate items. You will find a high percentage of purchase volume is devoted to the raw ingredients needed to produce these entree items.
Once you have completed your entrees, then move on to your other menu items keeping the momentum so you will have costing for all of your menu items. Once this is done don't forget to maintain this information as new items are added or as recipes change, this is an ongoing process. There are many tools available to help with this process, from Excel spreadsheets to inventory software solutions, you need to determine will one is right for you. No matter which one you select, they must be able to do the following:
- Maintain an accurate inventory of all food products, prices and period ending totals
- Find a simple and easy to use method of accurately costing their recipes
- Calculate the food cost percentage and gross margin of each item on their menu as well as the averages for each menu category, and
- Determine the "theoretical or ideal food cost" of their menu and menu categories based on how many of each item they sell.
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