Steps in Monitoring Food-Service Costs 3.2 List and describe the 7 steps of the flow of food & their relation to controlling food costs Review standardized recipes, portions, and cost control Apply EP vs AP calculations to food costs Apply menu pricing techniques to food costs

Steps in Controlling Food Costs Food costs must be controlled during all seven stages of the food flow process: Refer to pg. 165-166 in the textbook Purchasing Receiving Storage Issuing Preparation Cooking (production) Service (sale) 3.2 Chapter 3 | Cost Control

Determining Food Cost Food cost is the actual dollar value of the food used by an operation during a certain period. Food cost includes cost of food: Sold Given away Wasted Spoiled Incorrectly prepared Overportioned Overproduced Pilfered 3.2 Chapter 3 | Cost Control

Determining Food Cost Inventory is the dollar value of a food product in storage and can be expressed in terms of units, values, or both: Opening inventory is the physical inventory at the beginning of a given period. The closing inventory is the inventory at the end of a given period. 3.2 Chapter 3 | Cost Control

Determining Food Cost – Closing inventory = Total food cost The formula for obtaining an actual food cost accurately is:  Opening inventory + Purchases = Total food available – Closing inventory = Total food cost May also need to subtract: Employee meals Complimentary items to customers Transferring food to another location (chains/franchises) 3.2 Chapter 3 | Cost Control

Determining Food Cost Percentage Total food cost percentage is the relationship between sales and the cost of food to achieve those sales. Analyze food cost percentage by comparing it to: company standards historical costs industry standards 3.2 Chapter 3 | Cost Control

Determining Food Cost Percentage To determine the percentage, divide the total food cost by the sales: Total food cost ÷ Sales = FCP 3.2 Chapter 3 | Cost Control

Determining Food Cost Percentage Food cost is a variable cost It should increase or decrease in direct proportion to an increase or decrease in sales if all of the standards and food controls are followed correctly. 3.2 Chapter 3 | Cost Control

Establishing Standard Portion Costs Most every operation has standardized recipes that are followed every time a menu item is prepared. For every standardized recipe, an operation should establish a standard portion cost: The exact amount that one serving, or portion, of a food item should cost when prepared according to the item’s standardized recipe. 3.2 Chapter 3 | Cost Control

Establishing Standard Portion Costs A recipe cost card is a tool used to calculate the standard portion cost for a menu item. As with the standardized recipe, a recipe cost card should exist for every multiple-ingredient item listed on the menu. 3.2 Chapter 3 | Cost Control

As-purchased versus Edible-portion Costs The as-purchased (AP) method is used to cost an ingredient at the purchase price before any trim or waste is taken into account. In the AP method, all ingredient quantities are listed on the standardized recipe in the form in which they are purchased. 3.2 Chapter 3 | Cost Control

As-purchased versus Edible-portion Costs The edible-portion (EP) method is used to cost an ingredient after trimming and removing waste, so that only the usable portion of the item is reflected. Using the EP method to cost an ingredient, the quantity is listed on the standardized recipe using only the edible portion of that particular ingredient. 3.2 Chapter 3 | Cost Control

Recipe Yields A recipe yield is the process of determining the number of portions that a recipe produces. To determine how many portions a recipe yields, calculate the total volume of the recipe either by weight or by volume, depending on how the portion size is calculated. Key to successful food preparation and controlling food costs. The measurements given in recipes must be followed exactly. Once a yield is known and properly followed, it’s easier to increase or decrease the size of the recipe based upon the operation’s changing needs. 3.2 Chapter 3 | Cost Control

Controlling Portion Sizes Controlling portions is very important for a restaurant to meet its standard food cost. Tools that are essential for accurate portion control include: Scoops Ladles Serving spoons Serving dishes Ramekins, bowls, cups, etc Portion scales Another mechanism for ensuring that portions are the right size is to proportion any item that can be preportioned before serving. 3.2 Chapter 3 | Cost Control

Monitoring Production Volume and Cost When restaurants produce: Too much = Food cost goes up Produce too little = Sales are lost Sales history is critical in helping management forecast how many portions of each menu item to produce on a given day. 3.2 Chapter 3 | Cost Control

Monitoring Production Volume and Cost A food production chart shows how much product should be produced by the kitchen during a given meal period. A well-structured chart can ensure: Product quality Avoid product shortages Minimize waste, spoilage, theft, energy costs, and administrative costs. 3.2 Chapter 3 | Cost Control

Food Production Charts Refer to pg. 176-177 in textbook 3.2 Chapter 3 | Cost Control

Menu Pricing The menu is the primary sales tool in most restaurant and foodservice operations. There are a number of methods for menu pricing: Contribution margin Straight markup pricing method average check method Food cost percentage 3.2 Chapter 3 | Cost Control

Menu Pricing A contribution margin is the portion of dollars that a particular menu item contributes to overall profits. To use the contribution margin method, an operation must know the portion costs for each item sold. Add contribution margin to the actual food costs. Refer to pg. 178 in textbook for example 3.2 Chapter 3 | Cost Control

Menu Pricing In the straight markup pricing method, multiply raw food costs by a predetermined fraction. Food Cost x Straight Markup = A A + Food Cost = Menu Price Refer to pg. 178 in textbook for example 3.2 Chapter 3 | Cost Control

Menu Pricing With the average check method, the total revenue is divided by the number of seats, average seat turnover, and days open in one year. Example: A restaurant has 65 seats, has an average seat turnover of 1.5, and is open 365 days. Total revenue for the restaurant is $498,225. What is the average check? 65 x 1.5 x 365 = 35,587.50 498,335/35.587.50 = $14.00 3.2 Chapter 3 | Cost Control

Menu Pricing Item Cost = Menu Price FCP Refer to pg. 179 for example The food cost percentage is equal to the food cost divided by food sales. FCP menu price determined by: Item Cost = Menu Price FCP Refer to pg. 179 for example 3.2 Chapter 3 | Cost Control

Section 3.2 Summary Food costs must be controlled during all seven stages of the food flow process, from the actual purchasing of food items to how they are served to customers. Food cost is the actual dollar value of the food used by an operation during a certain period. Food cost percentage is the relationship between sales and the cost of food to achieve those sales. Most operations have standardized recipes that are followed every time a menu item is prepared. 3.2 Chapter 3 | Cost Control

Section 3.2 Summary (Cont.) Two methods used to determine the cost of ingredients in a standardized recipe are the AP method, which means “as purchased,” and the EP method, which stands for “edible portion.” A recipe yield is the process of determining the number of portions that a recipe will produce. Controlling portions is very important for a restaurant to meet its standard-food cost. The menu is the primary sales tool in most restaurant and foodservice operations. 3.2 Chapter 3 | Cost Control

Assignment Cost Control Packet 3.4: Costing & Pricing Gazpacho 3.5: Case Study- The Cost Control Caper 3.7: Menu Markup 11/3/2014