Expert Advice on Hospitality Topics

Effective Inventory Control System is an Integral Part of Purchasing

Posted by Nick Kaoukis on Wed, May, 18, 2011 @ 08:05 AM
Purchasing IdeasBy Douglas R. Brown
Atlantic Publishing

Part 3: Purchasing Ideas

There are many ways to curb cost. Here are a few ideas:

  • Inexpensive fish. Turn your customers on to seafood alternatives and lower your food cost. Consider using some alternatives such as Tilapia, farm-raised salmon, fresh-water perch, Alaskan halibut, mahi-mahi, shark or skate. Skate, for example, can be purchased wholesale right now online for $1.62 per pound. The secret, of course, is to make certain it is fresh.
  • Shelled eggs. Consider buying shelled eggs if your restaurant uses more than three cases of eggs per week. This will reduce the amount of cardboard and other packaging that must be disposed or recycled. Shelled eggs are often packaged in 5-gallon buckets that can later be reused for cleaning or maintenance.
  • Condiments. Use refillable condiment dispensers instead of individual condiment packets for dine-in customers.
  • Cost-Watch Web site. This site, www.cost-watch.com, helps restaurant management control labor, utility and food and beverage costs. It also offers regional reports to compare expenses and food costs in similar restaurants as well as price trend forecasts. It is a great resource for purchasing managers.
  • Join a barter club. Bartering allows you to buy what you need and pay for it with otherwise unsold products, such as food and beverages or even catering services. Almost anything and everything can be purchased with barter services. Nationally, over 250,000 businesses are involved in barter. Check out these Web pages:
        www.barterwww.com
        www.barterbrokers.com
        www.netlabs.net/biz/itex/index.htm
  • Similar ingredients. Include menu items that are essentially made with similar ingredients as others on the menu. For example, a shrimp cocktail and shrimp pasta are two very different meals, but the ingredients are similar. These ingredients are simple, inexpensive and don't take up a lot of storage space. Having five or six other pasta sauces to offer also loads up your menu with choices without excessively increasing your inventory. This will not only allow you to buy in bulk and keep costs down, but will also lighten the load on your kitchen staff.
  • Bread baskets. The potential for waste in bread baskets is large. Most of these come back from the table partially eaten at best. You may want to consider giving bread baskets only if requested or you may want to cut down on the amount served. You should also consider including packaged items since these can be reused. Some operators are now serving bread only by request or they are serving one roll or breadstick at a time from a breadbasket with tongs.
  • Substitute premade items. Substitute premade items for some items you have been making from scratch. You don't have to sacrifice quality to do this; many premade items are good. You can also start with a premade item and add ingredients. For instance, you can buy a premade salad dressing and add blue cheese or fresh herbs. Using these items will lower your food and labor costs, and you can still put out a quality item.

 

Topics: inventory managers, Hotel Inventory, Restaurant Inventory, food inventory, inventory schedule, inventory counting, purchasing, inventory control, Food control

Controlling Food Inventory to Generate Maximum Profits

Posted by Nick Kaoukis on Fri, Apr, 29, 2011 @ 10:04 AM
By Douglas R. Brown
Atlantic Publishing

Part 5: Purchasing and Ordering--Procedures and Practices

Purchasing and Orderingfood purchasing

What exactly is the difference? Purchasing is setting the policy on which suppliers, brands, grades and varieties of products will be ordered. These are your standardized purchase specifications; the specifics of how items are delivered, paid for and returned. These specifications are negotiated between management and distributors. Basically, purchasing is what you order and from whom. Ordering, then, is simply the act of contacting the suppliers and notifying them of the quantity you require. This is a simpler, lower-level task. Here are the basics:

  • Develop a purchasing program. Once menus have been created that meet your customers' satisfaction and your profit needs, develop a purchasing program that ensures your profit margins.
  • An efficient purchasing program incorporates: Standard purchase specifications based on standard­ized recipes, and standardized yields and portion control that allow for accurate costs based on portions actually served.
  • Keep in mind: Purchasing more than you need usually results in poor portioning, excess spoilage, waste and theft. Not buying enough can mean paying retail prices, or using a more expensive substitute.
  • Purchasing procedures. These procedures should include creating written purchasing specifications for every product and selecting good, reliable purveyors. Your purchasing procedures should do three things:
  1. Allow you to purchase the required items at prices that meet your food cost goals.
  2. Maintain control over your existing inventory.
  3. Establish a set of procedures to be sure that you receive quality product at the best price.
  • Purchasing responsibility. Either take on the purchasing yourself or assign a specific employee to do it. Make sure that this person keeps current with ever-changing food prices.
  • Price checks for different vendors. Sometimes you may find that one vendor is less expensive than another for a while, and then this may shift. Keep current with competing vendors' prices.

Purchasing Specifications

By creating purchasing specifications, you can control which items you purchase and you can maintain product consistency. This information is extremely important if you have more than one person that does ordering in your operation. You need to record the following basic information:

  • Purchasing specifications. They state the exact requirements for the amount and quality of items purchased. These specifications should include:
  1.  
    1. Product name
    2. Quantity to be purchased (designated with correct unit such as pounds, can size, etc.)
    3. Indication of grade, if applicable
    4. Unit by which prices are quoted
    5. What the product will be used to produce
  • Meats. Meats should be inspected by the USDA or
    other appropriate agency. The parts or packaging
    should carry a federal or state inspection stamp.
  • Eggs. Eggs should have a USDA grade; frozen and
    dried eggs should be pasteurized.
  • Shellfish. Shellfish should be purchased from
    suppliers that appear on public health service Food
    and Drug Administration lists of Certified Shellfish
    Shippers or on lists of state-approved sources. The
    control tags must be available if live shellfish are
    used.
  • Introduce a record sheet. Make it readily available for all your employees. They need to be sure that they're ordering the correct items in the correct amounts. You're also more likely to attain your desired food cost by keeping these records and maintaining purchasing controls. Keeping your food cost down will help you to maximize profits from your menu prices. The following form illustrates an example of a purchasing specification form:

Purchasing Specification Form

 

 

This article is an excerpt from the Food Service Professional Guide to Controlling Restaurant & Food Service Food Costs, authored by Douglas R. Brown, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

Topics: inventory, Restaurant Inventory, food inventory, Control, Hospitality, inventory schedule, inventory counting, controling costs, purchasing, inventory control

Controlling Food Inventory to Generate Maximum Profits

Posted by Nick Kaoukis on Wed, Apr, 27, 2011 @ 10:04 AM
By Douglas R. Brown
Atlantic Publishing

Part 4: Purchasing BasicsPurchasing Power

The goal of purchasing is to obtain wholesome, safe foods to meet your menu requirements. The operation must have food to serve customers when needed. The food needs to be the right quality consistent with the operation's standards and purchased at the lowest possible cost.

  • Vendors and food safety. Food safety at this step is primarily the responsibility of your vendors. It's your job to choose your vendors wisely.
  • Suppliers must meet federal and state health standards. They should use the HACCP system in their operations and train their employees in sanitation.
  • Delivery trucks. Delivery trucks should have adequate refrigeration and freezer units, and foods should be packaged in protective, leak-proof, durable packaging. Let vendors know upfront what you expect from them. Put food-safety standards in your purchase specification agreements. Ask to see their most recent board of health sanitation reports, and tell them you will be inspecting trucks on a quarterly basis.
  • Delivery schedules. Good vendors will cooperate with your inspections and should adjust their delivery schedules to avoid your busy periods so that incoming foods can be received and inspected properly.
  • Your inventory system is the critical component of purchasing. Before placing an order with a supplier, you need to know what you have on hand and how much will be used. Allow for a cushion of inventory so you won't run out between deliveries. Once purchasing has been standardized, the manager simply orders from your suppliers. Records show supplier, prices, unit of purchase, product specifications, etc. This information needs to be kept on paper and preferably computerized. Purchase food items according to usage. For example, if you plan to use tomatoes by blending and mixing them with other ingredients to make a sauce, purchase broken tomatoes as opposed to whole tomatoes. However, if you intend to use tomatoes to decorate a dinner plate or as a topping, opt for high-quality produce, such as baby plum vine-grown tomatoes.

 

This article is an excerpt from the Food Service Professional Guide to Controlling Restaurant & Food Service Food Costs, authored by Douglas R. Brown, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

Topics: inventory managers, Hotel Inventory, Restaurant Inventory, food inventory, Control, inventory schedule, inventory counting, controling costs, inventory control

Controlling Food Inventory to Generate Maximum Profits

Posted by Nick Kaoukis on Mon, Apr, 18, 2011 @ 09:04 AM
By Douglas R. Brown
Atlantic Publishing

Part 2: Reconciling at Every StepReconciling Inventory

The key to controlling food cost is reconciliation. Every X step or action in the cost-control process is checked and reconciled with another person. Once these systems are set up, management's responsibility is to monitor them with daily involvement. Should all the steps and procedures be adhered to, you will know exactly where every dollar and ounce of food went; there are no loopholes.

  • Teach them. Management must be involved in the training and supervision of all employees. For any cost-control system to work, employees must be trained and know what actions are expected of them. It is management's responsibility to supervise employees and see that they receive this training.
  • Communicate. Daily involvement and communica­ tion is needed in order to succeed. Employees must follow all procedures precisely. If they do not, they must be informed of their specific deviations from these procedures and correct them. This is a daily task that involves a hands-on management style.
  • Enforce. Any control initiated is only as good as the manager who follows up and enforces it. The total amount of time a manager needs to complete all of the work that will be described in this section is less than one hour a day. There is no excuse for not completing each procedure every day. A deviation in your controls or involvement can only lead to a loss over the control of the restaurant's costs.
  • Tracking. Although a simple manual system is detailed here, many of your cost-control procedures can be tracked through your computerized accounting system and/or POS system. Many of the basic purchasing and receiving functions are found in virtually all off-the-shelf accounting programs. 

75 Possible Food-Cost Problem Areas

1.  No balance of high- and low-cost items on the menu.

2.  No consideration of locally obtainable products.

3.  No competitive purchasing plan.

4.  Theft in any form.

5.  Purchasing more than needed (spoilage).

6.  No daily check of invoices, quality and prices.

7.  Improper rotation procedures.

8.  Too many items on the menu.

9.  Not enough low price - high food- cost percentage items on the menu.

10. No perpetual inventory in place.

I I. No controls on issuing items from storage areas.

12. Low yields on products.

13. Over-preparing (waste, spoilage).

14. Approving invoices without checking deliveries and following procedures.

15. Not using or following exact standardized recipes.

16. Not following exact portion sizes.

17. Improper handling (wrapping, rotating, storing).

18. No reconciliation of food sold vs. food consumed.

19. Employee pilferage including snacking on food items.

20. Orders not correctly received.

21. Frozen food not rotated.

22. Negative relationships with suppliers.

23. Freezer doors not closed properly.

24. Dry foods not stored properly allowing spoilage and bug infestation.

25. Not implementing a HACCP program.

26. Freezers and walk-ins located too close to back door, convenient for theft.

27. The manager not occasionally checking the dumpster and garbage cans at an unexpected time.

28. Use clear plastic containers in the kitchen to collect "waste." Each kitchen staffer should get his or her own container. Garbage cans are too easy to throw "waste" into.

29. Credit not received from vendor for returned merchandise.

30. Chemicals stored next to food causing possible poisoning.

31. Dry food areas are not well organized causing over-ordering.

32. Frozen-food area is not well organized causing over-ordering.

33. Perishable items left out of refrig­ erated area.

34. Food used in the bar and recorded in bar sales.

35. Failure to raise prices when food costs increase.

36. Food purchased at cost for personal use.

37. No reconciling of kitchen checks and guest checks.

38. Hors d'oeuvres that were given free to bar patrons.
39. No guest check rung up for house, complimentary or manager food.
40. Over-consumption - not portioning salad dressings.

41. Opened containers not properly sealed developing spoilage because of air flow.

42. Frozen products stored too close together.

43. Rusty and/or dirty shelving.

44. Supply room doors not locked.

45. Reprocessing of previously paid invoices for payment.

46. Poor paperwork and use of control forms.

47. Poorly trained employees.

48. Cooking equipment temperatures not regularly calibrated.

49. Scales not regularly calibrated or replaced.

50. Over-production.

51 .The staff deliberately creating mistakes so they can consume them.

52. Burned or overcooked food due to poor training.

53. Not weighing portions.

54. Cold food being returned by customers.

55. Incorrect garnishing procedures.

56. Incorrect addition or totaling on guest checks.

57. Not portioning margarine and butter.

58. Food being discounted or not reordered on a ticket.

59. Not removing all contents from cans and bottles.

60. Resetting or "Z"-ing cash register readings.

61. Spoilage due to incorrect thawing procedures.

62. Equipment used in food preparation not scraped of excess food prior to washing.

63. Not using standardized recipes.

64. Discarding unopened food containers which could be recycled.

65. Not charging for coffee, tea, sodas, etc.

66. NSF checks and invalid credit cards being accepted.

67. Brewing too much coffee, ice tea or tea.

68. Prepared food dropped on the floor.

69. Failure to take discounts offered for early payment from vendors.

70. No control system in place for guest tickets.

71. No control of after-dinner mints.

72. Servers receiving food from kitchen without recording sales.

73. Dull knives.

74. Fake company invoices being sent for payment.

75. Rotation and color-coded, day- dated labels not used.

 


 

This article is an excerpt from the Food Service Professional Guide to Controlling Restaurant & Food Service Food Costs, authored by Douglas R. Brown, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com

Topics: Restaurant Inventory, food inventory, purchasing, inventory control

Controlling Food Inventory to Generate Maximum Profits

Posted by Nick Kaoukis on Mon, Apr, 04, 2011 @ 20:04 PM
By Douglas R. Brown
Atlantic Publishing

Part 1: Tips on Establishing an Airtight Food Cost-Control System

The BasicsRestaurant Inventory Costs

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.

  • Importance of food-cost percentages. Don't become overly concerned over food cost percentages, they are truly meaningless unless you know what your food-cost percentage should be for the given time in question. Remember, you get paid in and deposit dollars into the bank, not percentages.
  • Weighted food-cost percentage. Once your food cost is calculated, you must determine your weighted food-cost percentage. A weighted food cost percentage will tell you what your food cost should have been over a given period of time if all procedures and controls in place operated at 100- percent efficiency. We will show you how to determine a weighted food cost in a later article.

Food Cost-Controls--Get it Right

In order to control food costs, you must first know what your costs are. Accurate record keeping is essential in implementing a cost-control system.

  • Controlling large operations. The larger the distance between an owner or manager and the actual restaurant, the greater the need for effective cost-control records. This is how franchisers of restaurant chains keep their eyes on thousands of units across the world.
  • Give managers information. Many managers of individual operations assume that since they're on the premises during operating hours, a detailed system of cost control is unnecessary. Tiny family operations often see controls the same way and view any device for theft prevention as a sign of distrust towards their staff. This is shortsighted because the main purpose of cost control is to provide information to management about daily operations.
  • Theft prevention. Prevention of theft is a secondary function. Cost controls are about knowing where you are going. Furthermore, most waste and inefficien­cies cannot be seen; they need to be understood through the numbers.
  • Definitions. You must be able to understand the numbers related to food cost and be able to interpret them. To do this effectively, you need to understand the difference between control and reduction:
  1. Control is achieved through the assembly and interpretation of data and ratios on your revenue and expenses.
  2. Reduction is the actual action taken to bring costs within your predetermined standards. Effective cost control starts at the top of an organization. Management must establish, support and enforce its standards and procedures.

Get Computerized

No matter what type or size of food service operation you run, our advice is to get your operation computerized. It's extremely difficult to compete successfully without utilizing technology, at least to some degree. Today the investment for a basic computer and accounting software is less than $2,000 and could be as little as $1,000. The investment will deliver immediate savings in accounting fees and your ability to get true insight into your business.

  • Utilize the same chart of accounts to compare your operation with others. Ratios enable you to compare the operating data of a specific hotel or restaurant to the average for a group of similar establishments. You may, for example, compare the food cost and food sales of a particular restaurant with the average sales and costs of restaurants of a similar size.
  • Operations report. The National Restaurant Association publishes a report entitled 'The Operations Report," an annual survey based on operator income statements that is conducted jointly by the association and the accounting firm of Deloitte & Touche. The report provides detailed data on where the restaurant dollar comes from and where it goes for four categories of restaurants: three types of full-service operations (with per-person check sizes under $10; between $10 and $25; and $25 and more) and limited-service operations (fast food). You can use this report to compare your operation to others.
  • Four-week accounting period. Companies typically close their books and prepare financial statements at the end of each month. The problem for retail businesses such as restaurants is that there are uneven numbers of days and uneven numbers of the type of days in a month. For example, you may have an extra Saturday in a month which would skew sales numbers upwards. Consider using a four-week accounting period so you can compare apples to apples.
  • POS (point-of-sale) systems are crucial for reducing loss. The most widely used technology in the food service industry is the touch-screen. The POS system is basically an offshoot of the electronic cash register. Touch-screen POS systems were introduced to the food service industry in the mid-1980s and have penetrated 90 percent of restaurants nationwide. (See Chapter 9 for more information on POS systems.) 

 

This article is an excerpt from the Food Service Professional Guide to Controlling Restaurant & Food Service Food Costs, authored by Douglas R. Brown, published by Atlantic Publishing Company. This excerpt has been reprinted with permission of the publisher. To purchase this book go to:

Atlantic Publishing Company 
Amazon.com


Topics: Restaurant Inventory, Food Costs, food inventory

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