Do You Know What Your True Food Costs Are?

Do you know how to calculate your true food costs?
Do you know if every item on your menu is profitable?
It’s not always black and white.
The avian flu affected over 48 million birds that lead to bulk prices spiking 63 percent in a matter of two to three weeks. And immigration policies also directly affect the supply and demand market. When the sharp rise in eggs from the avian flu hit, Panda Express and other chains quickly removed eggs from their lineup. Fried rice without eggs (and replaced with corn) isn’t really the same, but perhaps not worth a 63 percent uptick in price to the consumer. But without staying on top of food costs and reacting appropriately, Panda Express would have lost money on every serving of fried rice.

Small percentages lost on food margins can lead to large amounts of lost revenue.

Why does this matter to you? Because with margins for restaurants getting tighter with increased labor costs due to minimum wage increases and higher rents, now more that ever does every cent count towards the bottom line.

Simply put, small percentages lost on food margins can lead to large amounts of lost revenue. McDonald’s sells 68 million hamburgers a day, so losing a single penny on their margins leads to losing $680,000 per day. Granted, most restaurants aren’t McDonald’s nor aspire to be. However, if you are a popular local restaurant or sandwich shop and your food costing is off as little as a dime for your menu, it is easy to lose more than $20-50,000 annually.

And finding a dime in lost revenue is not all that hard. Think about it, a recipe with seven ingredients only needs to be off by less than two cents per ingredient. You know you are supposed to do it and know you know why food costing is so important to the health of your restaurant. Food costing should be maintained continuously, however, doing it just once a week can make sure that your restaurant is operating in good financial health.

Food costing is that annoying little task that you know you are supposed to do, but you just don’t want to. You take every opportunity to procrastinate or make every excuse to get out of doing it. You know you are supposed to do it. You know it’s good for you. Though you can rationalize putting off food costing to make yourself feel better, the reality is food costing is directly related to the financial health of your restaurant. And global factors, out of your control, such drought, climate change, worker shortages and more greatly impact how much your plate of food costs to produce.