Expert Advice on Hospitality Topics

The perpetual inventory is a check on the daily usage of your main entree items from the freezers and walk-ins. This is for tracking expensive items, such as meat, seafood, chicken, cans of caviar, etc. When completed, the perpetual inventory will ensure that no bulk products have been pilfered from the freezer or walk- ins. Computer software programs and some POS systems will track this information for you. The following is an example of a Perpetual Order Form:

• List all the food items that are listed on the Sign-out Sheet and Yield Form. In the "Size" column, list the unit size in which the item is packaged. The contents of most cases of food are packed in units such as 5-pound boxes or 2-pound bags. Meat is usually packed by the number of pieces in a case and the case's weight. The size listed on the perpetual inventory must correspond to the size the preparation cooks are signing out of the freezer and walk-ins.

• In the "Item" column, enter the number of each item listed. For example, if shrimp is packed in 5-pound boxes and you have two 50-pound cases, there are 20 boxes. Enter 20 in the "Item" column. Each number along the top corresponds to each day of the month. At the end of each day, count all the items on hand and enter this figure on the "=" line. Compare this figure to the "Amount Ordered or Defrosted" column on the Preparation Sheet; these amounts must be the same as the total number of each item on the "-" line. If there were any deliveries, place this total on the "+" line.

• Theft. Theft can occur when someone removes a box of shrimp from the case, for example. The person then reseals the case with the other boxes to hide the gap.

• Check the invoices every day for the items delivered that are in your perpetual inventory. Ensure that all items signed off as being delivered are actually in the storage areas. Should there be a discrepancy, check with the employee that signed the invoice. The number of items you start with (20) plus the number you received in deliveries (5), minus the amount signed out by the preparation cooks (1), must equal the number on hand (24). If there is a discrepancy, you may have a thief.

• What to do if you suspect theft. Should you suspect a theft in the restaurant, record the names of all employees who worked that particular day. If thefts continue to occur, a pattern may develop among the employees who were working on all the days in question. Compute the perpetual inventory or other controls you are having a problem with at different times of the day and before and after each shift. This will pinpoint the area and shift in which the theft is occurring. Sometimes, placing a notice to all employees that you are aware of a theft problem in the restaurant will resolve the problem. Make it clear that any employee caught stealing will be terminated.

Purchasing Kickbacks and Gifts

Unfortunately, the food service industry is notorious for kickbacks. It is even more unfortunate that these kickbacks or gifts are essentially paid for by you in the form of higher prices. Here are some ideas to help keep kickbacks out of your store:

• Purchasing and receiving must be done by different employees. The person ordering should not be the same person receiving and checking the items.

• Kickback policy. Develop a general policy and list it in your employee handbook that employees cannot receive anything for free from a vendor or potential vendor.

• Change positions. People become complacent over time; move positions around.

• Check on prices of expensive items like meat and seafood yourself.

Purchasing and Inventory Software

Purchasing and inventory software is readily available to restaurant operators. Many larger organizations are using inventory control software that saves a significant amount of time and money. Most managers are used to the monthly grind, standing in the walk-ins counting eggs, butter pats and frozen chickens. With inventory control software, managers can use a laser scanner, similar to the ones used in grocery stores, to scan bar codes. The software can also be linked to your distributors and you can place your orders electronically based on the inventory. 

• Consider placing your orders online. Almost all distributors now have systems in place to order online. The advantages are numerous: it reduces ordering errors, it's convenient, there may be discounts, and most systems build a customer database based on what you have previously ordered making re-orders easy. A list of vendor Web sites follows:

• Use written purchase orders (PO). A PO is a written authorization for a vendor to supply goods or services at a specified price over a specified time period. Acceptance of the PO constitutes a purchase contract and is legally binding on all parties. Utilizing POs will enable you to know what was ordered, the quantity, and the price. If you are using software to record the invoice and receipt of inventory, the program will restock and adjust pricing automatically. In addition, your perpetual inventory will be updated. Purchase orders from software programs can easily be faxed or e-mailed into the vendor, saving time and money.

• When purchasing food, avoid more expensive name brands wherever possible. Of course, you want to make sure you're buying quality ingredients for your food, but are your customers really likely to tell the difference between a "name brand" and an "industrial brand"?

• Local growers. Talk to local fresh-produce suppliers to see if you can't get fresher, cheaper, better-quality fresh produce direct from the grower. Why pay a supplier to get the fruit and vegetables that are shipped to their central warehouse, then shipped back to you, when you can just drive 10 minutes down the road and enjoy food right off the tree or vine? You can also use this as a promotional device. If you use local produce, let your customers know!

• Cooperative purchasing. Many restaurants have formed cooperative purchasing groups to increase their purchasing power. The cooperatives purchase items that are commonly used by all food service operators. By joining together to place large orders, restaurants can usually get substantial price reductions. Some organizations even purchase their own trucks and warehouses and hire personnel to pick up deliveries. This can be advantageous for restaurants that are in the proximity of a major supplier or shipping center. Many items, such as produce, dairy products, seafood and meat, may be purchased this way. Chain restaurants have a centralized purchasing department and, often, large self-distribution centers.

• Make sure you shop for purveyors. Don't rest once you've found one. Comparison shop on a continual basis.

• Look at vendors' product labels for box strength. This will tell you where the product came from. Most manufacturers won't ship more than 100 miles away from their plants. The further away that a supplier is located, the more shipping will cost.

• Consider planting your own herb and/or vegetable garden. Great food starts with using the freshest herbs and vegetables and the best way to do that is to grow them yourself! The techniques for growing your own are not difficult. With a little planning, you can build your own 24-hour supply of garden-fresh herbs. Even a small garden can infuse your kitchen with heavenly aromas and striking flavor. What a great way to lower your food cost and separate yourself from the competition! You can buy seeds online at:

The Basics

Controlling food cost is basically about two concepts: First, ensuring that all food and revenue is accounted for and utilized in the most efficient manner. Second, ensuring that every ounce of food purchased is sold at the maximum allowable price. The following sections will present a system of cost controls. Combining these controls with basic procedures and policies will enable you to establish an airtight food cost-control system.

Getting Organized

Organization is the easiest and cheapest manner of generating productivity and reducing food costs. The mere act of putting instructions on paper or giving your staff a checklist, instead of having to hold their hand through a process, can save your company thousands.

• Organizational and structure component charts. Use organizational charts to know and understand who does what in your restaurant on a daily, weekly and monthly basis. How can this structure improve? Are jobs allocated in the most productive manner possible? Written job descriptions are good tools to use for this. (You can find examples of job descrip­tions and a questionnaire for writing job descriptions at www.hrnext.com. Atlantic Publishing offers a complete set of restaurant job descriptions on computer disk at www.atlantic-pub.com.)

• Use checklists for yourself. Create a checklist of items you perform every day and organize your time. Of course, variations from this checklist will always occur, but you will cover the basics a lot faster with a guide in hand. This will save you and your staff time and confusion.

What Does Your Food-Cost Percentage Really Mean?

Johnny's steak house has a food cost of 38 percent; Sally's steak house has a food cost of 44 percent. Which is a more efficient operator? Which is more profitable? Your restaurant has a food cost in January of 38 percent; in February it is 32 percent. Did you operate more efficiently the second month? The answer to these questions is: we just don't know. There is not enough information to determine this from the figures; we need to know what the food-cost percentage should have been as well.