in this video you will learn everything about food cost the formula the tricks how to
improve it and the best techniques the biggest misconception about food cost is that it's the
cost of the product that you bought the cost of the food that you bought for that specific month
but that's not actually what it is at any time to better understand number
the real value of the number we must either compare that number to another number
time frame or to find out relation between those numbers and that's exactly what it is the food
cost is relation between what you sold your revenue versus what you purchased and we're
going to take a look at it when we review the food cost formula the standard food cost formula
is opening inventory plus your purchases minus your ending inventory which equals to cost of
goods sold and then cost of goods sold divided by your total sales for the month so revenue
whatever you made in that month or maybe a week or whatever time frame you're trying to find out
in this formula opening inventory is an ending inventory for the previous month or time frame
so for example if we're trying to figure out the food cost percent for month of march then
it means our opening inventory would be whatever was ending inventory for month of february
an ending inventory is all the products in the kitchen at the end of the time frame so
if we're trying to figure out food cost for the month of march our ending inventory is going to
be all the products left in the kitchen at the end of the march and of course our purchases
it's wherever you purchase for the month of march and of course never forget to count for those
kitchen transfers complimentary meals and employee meals and credits
now let's take a look at the food course formula one more time before we jump into actual examples
food cost formula defines opening inventory plus purchases minus ending inventory identifies cost
of goods sold for the time frame remember you have to account for the time frame maybe it's a date
maybe it's a week maybe it's a month of course most comment is the month opening inventory is
whatever is your ending inventory for the previous month purchases is whatever you bought in the
month an ending inventory is whatever was left in the kitchen all the products and everything
at the end of that specific time frame that's how you figure out your cost of goods sold then you
take the cost of goods sold and divided by your total sales revenue for that specific time period
and now when you do this let's take a look at the actual example
let's find out what is the food cost for the month of march
let's assume that our opening inventory was twenty thousand dollars whatever was left in
the kitchen at the end of february in the month we made thirty one thousand dollar in purchases
and our ending inventory is eight thousand dollars after everything 8 000 worth of
product is what was left in the kitchen that's all together equals to cost of goods sold for 43 000
next let's assume that our restaurant banquet hall or hotel restaurant whatever that you're
using for made total of 170 000 revenue in the month we're going to take our 43 000 cost of goods
sold for the month divided by 170 000 and find out that food cost for the month of march is 25
and to finalize everything we just learned here is it once again opening inventory plus purchases
for the month my ending inventory equals cost of goods sold of 43 000 we divided by total sales
and revenue whatever we made in the month we get 25 percent food cost for the month of march
because figuring out food cost involve multiple steps and a lot of calculations
there are common errors that happen during food cost counting process and we're going to review
each one of them in a detail but before that if you're enjoying this video please give me
thumbs up or comment below it really helps me with this small channel and youtube algorithm
and the first common error is that your input units are different than your inventory pricing
meaning you're comparing cans to pounds and boxes to the jars and when you're doing your
inventory spreadsheet it's probably at least one thing then you input in the other thing this is
very common because actually inventory counting process is very detailed and very time consuming
next one is you miss an invoice but inventory is accounted for
so you actually have a product in your closet in your storage room but you're missing invoice for
it you are going to have an imbalance because of it the third one is very similar you account it
for invoice but you're missing a product could be a bad product could be a return could be you
never received but built for it you also could be eligible for food credits and food transfers
accounting for those complimentary employee meals or any other comp meals
and the last one correct inventory and purchases compared to correct inventory and purchases
meaning in your march inventory you're not counting any invoice from month of february
and also you correctly coded your inventory and everything all the product you have in
the storage room so that you're comparing apples to apples and not apples to oranges
after we reviewed almost everything you know about food cost let's take a look at some of the proven
techniques how you can improve your food cost order smart order what you need just to eliminate
the spoilage as well as order the way that you don't have to pay for those delivery fees the less
delivery fees you pay the more you put in your pocket optimize your vendors get a pricing from
several vendors on a specific product and see what is the best don't rush with this decision remember
you are going to be ordering ton of products and pennies can add up here and as well as always
watch out for delivery fees book who is offering the best service who can deliver
the product for you as soon as possible if you need an in in case of an event and who offers
more variety so you can all order from the one place of course there will be specific vendors
remember delivery trucks doing multiple deliveries in a day who is in charge of your receiving who
is making sure that you receive the product that you ordered who is making sure that your invoiced
for the product that you received correctly who is signing off on the receiving always checking
if the product you received is in a good condition or it might be spoiled or damaged
make sure you have appropriate storing solutions and you have people assigned who are in charge
of it the delivered product doesn't sit on the deck for a long time and it doesn't get spoiled
make sure your high priced items are properly locked and there is a proper control in place
to eliminate the theft your 50 stake could be walking out of the door at any time if the
solutions are not in place cross utilize your product to eliminate waste as much as possible
portion appropriately make sure you have a process in place that it's same across all the shifts and
everybody follows make sure your recipe cards are available and everybody is well trained on them
it's not a first time when i would go to the restaurant and i would order the same dish or
same meal maybe a different day and it comes in a different portion or it comes plated differently
that's because in the morning i was working at john and the evening is working samantha and so
that's what really happened so you really need to make sure you have a portion control in place
especially when crooks are in the line are played in those plates because that's one of the most
common issues happening did your price for the product increase but you never changed the price
on the menu that's something that could totally happen and that's something that will absolutely
impact your food cost percentage for the month have you done the menu engineering do you know
what is your best selling product and what is your latest selling product do you know what are
those things that you need to promote and where to position them on the menu and you have looked that
sales for this product have been dragging for the last three months and it's not very popular
if you enjoyed this video please give me a thumbs up or comment below
it really helps growing this small channel and with youtube algorithm
but also let me know if you would like to see any other videos on this subject i'm
planning to do the menu engineering the cost control and more of a beverage control methods
so if that's something of interest comment down below thank you so much have a good one