Food & Beverage - Alternative Food Cost Benchmarks - By Joe Dunbar
Certainly, most restaurants use food cost as a % of sales as a key performance indicator. This week, an anonymous reader asked about tracking food cost in a different environment - a health care facility. He asked if it was advisable to use cost per patient per day in lieu of a percentage. I strongly recommend using the cost per patient day over a percentage benchmark.
In the remote site feeding segment, we tracked all costs per person per day. The advantages to management are greater in labor cost analysis using this method. Food cost generally is variable while labor has both a fixed and a variable component. With long term sales prospects dampened by the recession, tight control has helped many companies survive and prosper.
Is it possible to effectively use per cover cost analysis in a restaurant environment? Many chefs prefer to track menu item performance using gross margin per plate. Since the aim is to make more dollars vs. a higher percentage, they need to take care when analyzing other costs. Direct labor, direct operating expenses and overhead costs should follow suit. If the operation sells higher priced items with relatively high food cost %, the use of cost per cover for non-food expenses is necessary.
Operators should not mix the percentage method with the cost per cover approach.
Consistent use of the per cover method would require a reasonable profit per cover. Use a forecast of covers for the entire year to spread all fixed overhead and profit. In tight economic conditions, it pays to track fixed cost coverage and profit by cover. In addition to cost control, you need to review menu item pricing policy. The popular factor method may not provide you with the edge needed to survive a price war.
The entrees are the best menu items to use for cost coverage. Your entree cost should cover the recipe cost of the item, per cover amounts for direct labor and operating expenses, fixed overhead and profit. If a competitor price war forced you to adjust prices, you would have a clear number for pricing decisions. You could calculate precisely the impact of a penny, dime or dollar move in entree prices.
Joe Dunbar
Dunbar Associates
P.O. Box 579
Fairfax, VA 22038-0579
800-949-3295
http://www.joedunbar.com
jdunbar401@aol.com
- Food & Beverage - Managing Sunday Brunch - By Joe Dunbar
- Food & Beverage - Plowhorses or Deterrents? - By Joe Dunbar
- Food & Beverage - Basic Food Cost Analysis - By Joe Dunbar
- Food & Beverage - Mid-Week Gross Margin - By Joe Dunbar
- Food & Beverage - Who's Dining Out Mid-Week? - By Joe Dunbar
- Food Industry Faces Low Profit Margins and Thrifty Consumers Says Plunkett Research
- Plunkett Releases 2010 Food Industry Almanac
- Restaurant Trends - Growing And Emerging Concepts - Data Reflects Change and Activity from November 1, 2009 to March 1, 2010
- Brewers Association Announces 2009 Craft Brewer Sales Numbers
- Zagat Releases New Texas Dining Survey
