Solving a Food Cost Mystery

By Andrew Shakman, Co-Founder & CEO  //  September 26, 2014

Get better food costs and save money on food purchases with these tips.

You know what your food cost should be. But how often does it hit the mark exactly? When it misses the target, why did it happen?

It’s a "food cost mystery," but one that is worth solving. The difference between your "actual food cost" and your "theoretical food cost" is known as a variance and it pays to look closely at the figure and understand why it’s happening so you can identify inefficiencies and inconsistencies.

4 Suspects

After years of working with clients to reduce food costs, we've found there are four primary drivers behind food cost variances.

  1. Waste. Did your staff over-produce an item and end up throwing half of it away? Did a shipment of rolls get placed on the wrong shelf and expire or spoil before they could be used? Food waste is hiding in many places and most operators don’t realize the extent at which it’s occurring unless they’re actively monitoring it.
  2. Portion Control. Is your team assembling recipe portions to meet the specs? Inconsistencies in portion sizes can throw off your actual food costs. Attention to portion control is critical, and it's also important to understand which items guests are choosing to leave on their plate.
  3. Yield. We expect a given yield from meat and produce, but we don't always hit the mark. Sometimes the product doesn't perform as expected, and in other cases we overcook an item (leading to less meat than we expected) or trim produce or meat inefficiently (discarding edible items). If you don't hit expected yields, your food costs won't match projections.
  4. Theft. Sadly, theft is an issue at many operations, with a portion of food costs disappearing by literally walking out the front or back door.

Collectively, these four suspects create variances between theoretical and actual food cost. But which of these bad guys are driving the variance? To solve the mystery, we need data. By measuring pre-consumer food waste, we can determine how much waste has occurred. It’s possible the waste will come close to fully explaining the variance, in which case you know you’re doing a good job with yield, portion control and theft. If, however, the waste number barely explains the variance, you know that one of the other three areas is the issue.

Collecting Evidence

As a next step in the investigation, look at post-consumer plate waste. By measuring plate waste, you will assess the sufficiency of your portion sizes. This clue may tell you something about whether you are serving the right portions. Train your team and provide right-sized serving utensils, then see if plate waste drops. If it does, it’s likely that portion control was part of the problem.

By measuring pre- and post-consumer food waste and understanding overproduction and portion control, you have the ability to solve for the scale of theft and yield problems which may exist. You have the bad guy corned and can begin to focus on yield testing, measuring trim waste and finished portions to see if you are getting adequate yields. If there’s nothing else, you can look more closely at theft prevention.

The Verdict

Data helps you solve this food cost mystery. Once you know the source of the problem, you can implement employee training programs, or take corrective action, if necessary. (And measurement can be easy with our automated food waste monitoring tools.)

Now, there are a few non-operational factors which can influence the accuracy of your theoretical food cost as well. First, are the recipes accurate? Next, do the recipes reflect current supply chain realities in terms of pricing and packaging? Is your POS system recording the sale of the item correctly to compute a properly weighted theoretical food cost? And finally, are you taking accurate inventories to properly calculate your food usage (starting inventory + purchases – ending inventory = food usage)?

Food waste is a critical control point for foodservice operations, exposing not only opportunities for waste reduction but also inefficiencies in operational practices.

Reduce food waste with our food waste audit guide.

Topics: Food Waste Prevention Newsletter