Employers are now paying minimum living wage of £7.20 per hour for 25 year olds and over and operators are having to find ways of absorbing this increased cost – and other rising payroll costs, too. If held unchecked, they are forecast by the government to rise by 45 per cent by 2020. In his latest article, Peter Nannestad, of Hospitality Business Improvement Management (HBIM), co-author of How to Buy and Manage Your Own Hotel, outlines the approach that should be taken to controlling food costs.
The provision of food and beverage is the one constant that affects almost every one of the 250,000 businesses in the hospitality industry. There are few that do not – at some point – provide a food service, whether it is just breakfast in a B&B or a complete restaurant menu in a five star hotel.
Yet is enough attention paid to controlling the cost of providing this food? Certainly, food is expensive – the industry spends £11bn year on food purchases, of which some £3bn (or 27 per cent) is reputed to be wasted – the equivalent of 920,000 tonnes or 1.3bn meals. Because it is highly perishable it has to be purchased daily, demanding constant attention on the part of the chef. But not only is food wasted in its preparation and storage in the kitchen, customers waste food, too, leading to question marks about portion sizes. And food is highly pilferable – there are light fingers everywhere in the catering industry.
In this issue, we are looking at two of the most effective cost reduction vehicles – food stock takes and flash food costing.
Food stock takes
Without knowing how much food a business has in use and in store it’s impossible to control food costs. Over-ordering can lead to wastage and over-spend, while lack of planning can result in dishes being unavailable at critical times and the loss of potential sales. So having a precise knowledge of what’s in the fridges and store room is particularly important. This can only be achieved by a regular food stock take – ideally every week in a busy business but at least monthly.
Unfortunately, food stock taking is frequently misused or not used at all principally because of the time it can take. For the head chef and the food and beverage manager, however, it should be an essential tool which enables them to control expenditure in the kitchen which, with the bar, is the ‘leakiest’ of all catering departments. Chefs sometimes argue that food cost control is not really their job (though there are plenty of chefs who have gone bankrupt because they took that view) but whose job can it be? They need to be reminded that a key part of a head chef’s job is the economic and people management of the kitchen which includes all kitchen costs. That is what they are paid for.
An accurate stock take sounds simple but it can be complicated when it covers hundreds of items – hence many chefs’ reluctance to take responsibility for them as it can cover dozens of pages, taking in all fresh and perishable items as well as those in the freezers and all those in the dry goods store such as canned and bottled items. But the benefits of a regular stock take far outweigh the time and effort involved. It provides an accurate picture of the financial outgoings on food – on a daily basis for businesses with the greatest need – alongside a same -scale comparison with sales. It enables the business to track variations in purchases and sales and to act immediately to correct them. It also emphasises to the staff that the business is serious about cost control and deterring pilferage.
There are three rules that every business should recognise:
- Always employ an external stocktaker – someone independent from the kitchen or a professional stocktaker.
- Understand the formula that calculates what the value of the closing stock should be.In the following example, the business has monthly food sales of £40,000 net of VAT. With a 30 per cent food cost, the cost of food should be £12,000 over the 30 day period of each month – or £400 per day (£12,000 divided by 30).The maximum shelf life of some items – milk, cream, fish, fruit, bread, for example – is three days or less, while other items, such as meat and many vegetables, correctly stored, can last for up to seven days.If we take the maximum seven day period the value of what’s in the store should not exceed £2,800 (£400 multiplied by seven).If it’s much more, stock levels are too high, if less, they are getting dangerously low. The best day for a stock take is Monday. If the hotel has ordered food on a Friday for two 100-guest weddings and a banquet for 150 on the Saturday, then a stock take on Friday would inevitably show much higher stock levels.
- Make sure there are two people involved in stock taking – one counting and one recording.
Flash food costing
This is a simple vehicle to monitor the food cost percentage on a daily basis. It is called ‘Flash’ because its records daily purchases to daily sales, with an accumulative percentage column. This ensures that the food cost can be tracked on a daily basis and before the month end so that action can be taken before the final monthly stock take calculation is known. Of course, daily flash does not take into account monthly opening and closing stock level fluctuations.
From experience, it’s important that this daily recording is a chef/sous chef responsibility and should not be handled by the accounts department where it tends to become an administrative chore. As always, food cost control is the chef’s responsibility and a daily recording of purchases and sales will hammer this point home.
Tighter food cost control through stock takes and flash reports will not enable a business to cover all the cost of the increase in the payroll bill caused by the living wage, but if £3bn-worth of food is wasted every year in the hospitality industry, that’s nearly £12,000 for every business. Some waste is unavoidable but for a small business such a cost could be the difference between profit and loss.[/fusion_text][fullwidth background_color=” background_image=” background_parallax=”none” enable_mobile=”no” parallax_speed=”0.3″ background_repeat=”no-repeat” background_position=”left top” video_url=” video_aspect_ratio=”16:9″ video_webm=” video_mp4=” video_ogv=” video_preview_image=” overlay_color=” overlay_opacity=”0.5″ video_mute=”yes” video_loop=”yes” fade=”no” border_size=”0px” border_color=” border_style=” padding_top=”20″ padding_bottom=”20″ padding_left=” padding_right=” hundred_percent=”no” equal_height_columns=”no” hide_on_mobile=”no” menu_anchor=” class=” id=”][one_third last=”no” spacing=”yes” center_content=”no” hide_on_mobile=”no” background_color=” background_image=” background_repeat=”no-repeat” background_position=”left top” hover_type=”none” link=” border_position=”all” border_size=”0px” border_color=” border_style=” padding=” margin_top=” margin_bottom=” animation_type=” animation_direction=” animation_speed=”0.1″ animation_offset=” class=” id=”][imageframe lightbox=”no” gallery_id=” lightbox_image=” style_type=”none” hover_type=”none” bordercolor=” bordersize=”0px” borderradius=”0″ stylecolor=” align=”none” link=”http://ehotelier.staging.wpengine.com/product/how-to-buy-and-manage-your-own-hotel-digital/” linktarget=”_self” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ animation_offset=” hide_on_mobile=”no” class=” id=”] 
[/imageframe][fusion_code]W2FkZF90b19jYXJ0IGlkPSIxMzg4NzIiXQ==[/fusion_code][/one_third][two_third last=”yes” spacing=”yes” center_content=”no” hide_on_mobile=”no” background_color=” background_image=” background_repeat=”no-repeat” background_position=”left top” hover_type=”none” link=” border_position=”all” border_size=”0px” border_color=” border_style=” padding=” margin_top=” margin_bottom=” animation_type=” animation_direction=” animation_speed=”0.1″ animation_offset=” class=” id=”][fusion_text]About the author
Peter Nannestad, managing director of Hospitality Business Improvement Management (HBIM), is co-author with Miles Quest of How to Buy and Manage Your Own Hotel which fully covers the 12 economic levers that are outlined in these articles.[/fusion_text][/two_third][/fullwidth]
