How do I reduce food and beverage costs?

Controlling food and beverage costs requires cooperation between front and back of house. Your chef may not be the problem.

Do you have a problem with food or beverage costs in your business? It’s a rhetorical question really, because most of the businesses we deal with have higher costs in these areas than we think are appropriate. It’s also interesting how few of the key staff who attend our training courses really understand the issues they have to manage in order to bring f&b costs under tight control.

It all starts with menu design

Design your menu to suit your market and make sure it communicates clearly

It all starts with menu and beverage list construction. How do you go about constructing them? Do you let your Chef or Sommelier go to town designing dishes or choosing beverages and then apply a margin onto your cost prices? For a start we would recommend that you tackle the problem from the opposite direction. Set your target pricing first in accordance with your marketing aims, then design your menus and beverage lists to deliver a margin within the target pricing.

The penalty for tackling it the other way is that if your purchasing or 

food production is not efficient and you start with high costs, by the time you put a standard margin on the top of your inflated costs you can easily price yourself out of your market and negatively affect customer perception. Many businesses seem to do this.

Accurate costings are an absolute necessity

I am assuming of course that you have accurate costings to work with in the first place. This is not such a problem with beverage, because most of it comes pre-portioned at a certain price. The big headaches come with producing accurate food costings. It still intrigues me how many hospitality operators don’t cost things properly and ‘wing it’ hoping that the figures will come out well at the end of the month (or, in some cases the end of the year!). I’ll grant you that you may be able to get away with this approach in a small kitchen where the owner is the chef, but trying this approach with a higher volume business can be an act of pure folly. If you specialise in one of the exotic food concepts like game or seafood you really need to be very careful.

Chef and Manager
They perform much better when they understand where the money goes

A common trap comes from not costing dish components properly. Take the example of a reduction sauce, for instance — by the time a chef has rendered down a whole herd of cows or battery of chickens to something that looks like vegemite using a gas burner resembling an F111 engine, the resultant substance can be a tad expensive. We’ve seen plenty of examples of costings allocating 50c for sauces when the real cost is as high as $4.00 per serve.

Costings need to be reviewed regularly

The other trap comes with the costing of recipes with ingredients that have wildly varying prices depending on the time of year you buy them. Take something as innocuous as the humble strawberry — a local punnet might cost you $1.50. Three months later a similar looking punnet, this one flown in from sunny California or somewhere equally as remote from Australia, might cost as much as $7.00. These little costing errors can all add up to a steady haemorrhage of your hard earned dollars if you are putting out lots of meals.

Goods receipt and storage need to be managed carefully

Goods Receipt
Make sure the goods you pay for are actually received in the right weight and temperature

Assuming that your costings are correct the next issue you need to consider is the potential losses you can sustain in the receipt, storage and production of your menu. Short delivery, incorrect pricing, theft, spoilage, wastage, non use of standard recipes, over-portioning, staff consumption and freebies are all going to inflate your food cost percentages, sometimes substantially.

These are the things in any larger business that justify a comprehensive control system, based on strict, accurate monthly stocktaking. We don’t think much of stock control systems based on purchases, they don’t give 

you the information necessary to track down the source of a lot of common problems. An article analysing all the nuances of internal stock control would be about 15,000 words long, so you’ll have to be content with generalities at this point.

Front-of-house can help control food costs

We’ve also come to recognise the very important role front-of-house plays in the control of food and beverage costs. All the good work done by a Chef or Sommelier can be undone by waiting staff who don’t know the margins on the things they sell. Consider the resulting food cost percentages from a waiter who regularly suggests the Jamon entree, the Waygu fillet or the Lobster Rolls compared with a waiter who suggests the pumpkin soup, the pasta or the risotto.

Most of the front of house staff we deal with admit to being blissfully unaware of the profit margins on the items they sell. There seems to 

Young waitress
She may have great people skills, but does she know what to recommend or what not to recommend?

be a general reluctance to share this information with waiting staff even if it is available in the kitchen. The simplest way to deal with this problem is to include some sort of discrete visual ‘code’ on your menus and wine lists that tell your staff which items to push and which not to push.

'Add-on' sales

suggestive selling
Have you got add-on items, and have your staff been trained to sell?

The sale of more ‘add-on’ items also has the capacity to substantially lower your food costs. A clever menu will have a range of high margin add-ons and ‘bits’ that the waiting staff can sell. Consider the food cost on a salad, a side dish of mashed potato, condiments or a sorbet dessert and this may become clearer.

What I had in mind when I started this article was to illustrate the point that the control of food and beverage costs is a cooperative effort between the front and back of house. I suspect that there are a lot of stressed chefs out there who are struggling to control their costs when they are only a part of the problem. 

To learn more about the topics discussed in this article please consider the following courses,

For documentation to support the management systems discussed in this article, please visit our resources website.

If you are not sure where to start, contact us now to speak with a consultant.

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