My food costs are too high…

7 February 2024

Food costs continue to rate as one of the hospitality industry’s biggest concerns and we frequently get calls from members looking for advice on ways to reduce them.

These costs can play a major role in a business’ success or failure, and with margins in the industry notoriously slim, if you can control some of your food costs you’ll assist your business’ profitability.

Starting with the basics, when we get calls to the MentorMe helpline for assistance on managing food costs it is surprising how many don’t know what their food costs are, or they are not calculating them at all. It isn’t possible to manage your food costs if you are not calculating what they are. Food Cost is the actual cost of all the ingredients used to produce all of the meals in a given period. The Food Cost% is Food Cost expressed as a percentage of the revenue generated by the meals produced. The simple formula for calculating food cost is: net food purchases divided by net food sales (net means after the change in inventory).

Here are some tips that may assist you to control your food costs

1. Portion control

Food portions may vary for a number of reasons including differences in staff practices and raw ingredient size fluctuations. Minimise portion size variation by training staff on the importance of this in relation to your food costs. Document standard recipes and have all recipes with photos, available for staff reference. If necessary measure out portions prior to service. Another reason to focus on portion control is that you will ensure more consistency in the dish for your customers.

2. Monitor waste

Ensure your chefs understand the value of using every piece of a product, particularly the highly perishable products, and encourage them to be creative in using every piece of a particular product.
You also can’t control what you don’t measure…. so here are a number of ways to monitor waste:

  • Check the rubbish bins
  • Implementing a waste log
  • Waste collection and measurement

A balance between reasonable controls and controls that apply excessive overhead is required. It may be useful to implement controls as required (for example when food
costs are out of control) and/or spot checks. To decrease waste from spoilage you may consider ordering proteins and other short shelf life items daily. It is also important that you ensure that staff reject all sub standard supplies.

3. Build a relationship with suppliers

All successful businesses build a strong relationship with their suppliers. Communication is key here; be clear about your business’s needs. Make sure that you have a contact person that you can talk to about problems. Don’t view your suppliers simply as providers of a commodity, instead think of your suppliers as partners in the success of your business. Invite your key suppliers into your business and share with them what you are trying to achieve. Building a partnership with suppliers can also bring some new ideas to a company as they often have their finger on the pulse of new trends. It is also healthy to compare prices with competitors to ensure you are getting a good deal. Keep informed of specials and new products, as keeping up to date on market prices by regular rice comparisons can reduce food cost. And to keep your suppliers on side…pay your bills on time.

4. Order seasonal products

These days you can purchase products that were once seasonal specialties at any time of the year. However, the cost of produce and some other products varies greatly depending on seasons. When produce is “in-season” there is a greater supply, so that demand is easily met, and the price decreases. Needless to say the quality of produce that is in-season is also usually better as it has not been stored for long periods or traveled great distances.

5. Plan carefully

Effective planning will assist you to order wisely and reduce waste. Sales estimates based on previous periods, same time last year sales, future bookings and special events will assist you to ensure that the proper amount of food is being ordered for the level of business and demand.

Download the Food Costing Guideline

6. Cost out your recipes

Costing recipes provides a standard by which to compare actual costs. Without a benchmark there is no means to determine if food cost is too high or too low.

Download the Food Costing/Recipe Template

7. Inventory and stock rotation

Regular inventory of food items will help you to track your food costs and adjust if necessary. One example of an effective way to track your inventory is the “first in, first out” system. Everything should be clearly marked with the date of receipt. Those items with the nearest expiration dates should be considered “first in” and used before items with a later date. This will take the guess work out of stock rotation. Rotating stock not only improves the quality and consistency of your end product but also reduces waste through spoilage of products. Ensure all staff are aware of the importance of stock rotation and understand how your stock rotation system works.

8. Involve your front of house staff

If you need to move some lower food cost items to assist with reducing your overall food costs, or increase sales of higher cost items, communicate with your front of house staff on what items to push. Make a staff incentive around this to see who can sell the most. Better still, feature those items you want to move as ‘specials,’ or additions to the menu.  You can also use this method to move slow selling stock to reduce food waste.  The most important thing is to maintain a tight control over your food costs. By reducing costs the profit goes directly to your bottom line, however costs can just as easily spiral out of control without vigilance.