Expert Advice on Hospitality Topics

Controlling Food Inventory to Generate Maximum Profits, Part 2: Reconciling at Every Step

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, Part 1: Tips on Establishing an Airtight Food

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