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Restaurant Industry Trends
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Sunday June 11th, 2006 |
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Purchasing Dollar vs. Food Cost Percentage - By Joe Dunbar
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One way to increase awareness of food cost control problems and opportunities is to assign a greater weight to significant ingredients and recipes. It is very difficult to have a meaningful discussion about a tenth (using food cost as a percentage of sales). In fact, I find many huge problems overlooked in operations with a singular focus on food cost percentage.
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When analyzing the menu prices, they say: "percentages don't pay the bills, dollars do". The same is true in reverse. You don't pay suppliers a percentage of your sales. You pay them in dollars.
So we need a way to make our numbers and statistics have greater impact. A simple start is to shift the key factor from food cost percentage to purchasing dollar analysis. For an operation with a target cost of 33.3%, the result is a tripling of the values. Since the key factor is $1.00 vs. 33.3%, the supporting figures will triple as well.
It's probably best to give a short example before proceeding too far with this change. Imagine the overall food cost percentage is 33.3% and you have subgroups as follows: meat (12%), seafood (4%), dairy (3%), produce (7%), groceries (5.3%), and baked goods (2%). Now, we will shift to a breakdown of your purchase dollar by category: meat (36%), seafood (12%), dairy (9%), produce (21%), groceries (16%), and baked goods (6%).
We can plainly see the meat and seafood represent almost one half of purchases. Category analysis is a single factor. You can imagine how expanding the value assigned to other factors will improve visibility.
In the end, you'll hit a lower food cost percentage by assigning weights to issues in relationship to the entire purchasing dollar. I start every food cost control project with the objective of buying 10%* less food for the same sales level.
*Note: That's a 3.3% change in food cost percentage in an operation like the example above.
Joe Dunbar
Dunbar Associates
11350 Random Hills Road
Suite 800
Fairfax, VA 22030
800-949-3295
http://foodcostcontrol.blogspot.com
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Contact Information:
11350 Random Hills Road
Suite 800
Fairfax, VA 22030
800-949-3295
Click for Website |
| Operates the extremely popular and informative Food Cost Control Blog. |
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