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The Restaurateur Insights

How to Understand and Manage your Food Costs in a Restaurant

June 20, 2013

How does controlling food costs lead to increased restaurant profitability?

Ensuring the success of your restaurant typically depends on the owner’s ability to understand and manage their food costs. Controlling food costs leads to increased restaurant profitability.

Here are a few ideas to consider:

Know your costs

Food costs are determined as the percentage of the total restaurant sales that are spent on food products (cost of food products/food sales). Keep in mind that the cost of food products should consider the change in your inventory for the period being calculated. Restaurants that operate with food costs of around 30% are typically profitable.

Monitor your costs

Knowing your food costs is a good first step but the real benefit comes from the ongoing tracking of these costs. The ongoing tracking keeps the restaurateur’s finger on the pulse of the restaurant and creates awareness that food costs are being analyzed closely. This awareness creates a staff culture that emphasizes the importance of cost controls.

Control your costs

Be careful to not expect an immediate food cost reduction from your chef and/or kitchen management. The call for an immediate result may lead to portion size reduction, price increases or ingredient reductions to solve the problem; however, these solutions will directly impact your patrons. Controlling food costs should be planned out, as the proper solution for your restaurant will take time. Focusing on several items, such as menu pricing, menu offering mix, plate cost, waste control, consistency of portion control and quality will help to control your costs.

The benefit of understanding and implementing food costing is the increased awareness within the restaurant on the importance of every action taken in the kitchen to the overall profitability of the restaurant. This awareness puts the restaurateur back in control of the restaurant and hopefully on the way to increased profitability!

Whether it is for owner-operated businesses or established franchises, Boston accounting firms can provide valuable financial services to the industry. KLR’s Hospitality Services Group can help companies manage a variety of vital tasks and responsibilities. By working with this team of dedicated experts, hotels and restaurants can take advantage of essential elements such as hospitality accounting, menu pricing and assistance with the state sales tax process.

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