Any seasoned restaurateur knows that cost management is crucial to the bottom line. With restaurants dedicating about a third of their spend to food, keeping a close eye can make a big difference to your margins. Here are four tips to turn the variability of food costs from a liability to an advantage:
1. Close the books quickly
If you sit on invoices for a week and then have to wait for someone to crunch the numbers, it can easily be 10 days or more before you realize that something’s wrong. Getting that information in a more timely fashion can mean the difference between addressing a problem as it arises and just wishing you’d been able to take action. Speeding up the time between receiving a shipment and understanding its impact on your bottom line lets you take immediate corrective action rather than having to wait for the financials to get finished.
2. Go beyond your GLs
Tracking spend at the general ledger level is convenient for keeping the books balanced, but doesn’t provide the level of detail you need for on-the-fly adjustments when an item skyrockets. Seeing those fluctuations is difficult when looking at GLs — after all, if you’re spending $2,000 a week on produce, a $50 increase in that category isn’t very noticeable, even though it puts you $200 in the hole by the end of the month. Plus, if you don’t have easy access to line item data, it’s tricky to trace last month’s surge in spend to a specific culprit (we’re looking at you, avocados) rather than chalking it up to “food” or “produce.”
3. Look for variance across stores
It’s no surprise that different vendors charge different prices for the same items. But it can be a shock to realize that a single vendor may charge different stores different prices for the same item. That means your Main Street location could be paying $20 a case for watermelon while your Second Street store is charged nearly twice as much. If you haven’t looked into how much each of your stores is being charged for items they have in common, now’s the time. If you’re lucky, you’ll find that everything’s equal. If not, you can use the results as leverage when re-negotiating your contract with that vendor…or a new one.
4. Regularly review your recipes
You probably costed out every dish to the last ounce back when it was new on the menu. And your POS system probably helps you keep a close eye on each menu item’s sales. But how long has it been since you looked at what those old plow horses are costing you? As prices change, so do your food costs, impacting your profit on every plate. Revisiting the numbers based on current data can help you optimize every plate that hits your pass-through.
We can help
If it all sounds daunting, don’t despair. Plate IQ is here to help. We transform restaurant operations by streamlining the accounts payable process from invoice to payments. The process starts with digitizing your paper invoices, virtually eliminating manual data entry and giving you access to spend analysis across items and locations. That data powers your Hot List, a report that alerts you to price changes on your purchases. Finally, our Recipes module updates your food costs for every dish based on your most recent invoices.
Don’t be blindsided by cost creep! Take control with a platform that handles the data work for you. Learn more about Plate IQ here.