By Hayden Yeazel, Account Executive at Compeat
If you are growing increasingly frustrated with out of control food costs, you’re not alone. As a part of my job at Compeat, I speak to restaurant groups on a daily basis. From our conversations, food costing is hands down the biggest area of concern our industry faces.
Most people I speak to are managing their COGS and inventory levels through Excel spreadsheets which requires manually creating formulas and hours of data entry just to generate reports. So many restaurants rely on these massive spreadsheets that only the owner or general manager can maneuver through because with all of the various cells and tabs, it is nearly impossible to teach others how to use them. If one number in a formula is accidentally changed, up to forty reports could be affected. Managing COGS shouldn’t be this time consuming. We want your managers face to face with your most valuable asset… your customers. Not stuck in the back office…
If this sounds familiar to you, I want to share with you 3 reports provided by Compeat’s restaurant management software that will change the way you look at your business. These reports allow you and your team to make quicker, better decisions on your inventory and menu items without manual entries.
Item Count Variance (ICV) Report
The Inventory Count Variance report generates a list of theoretical quantities compared to actual inventory counts on hand for a specified period. The theoretical ending inventory count is calculated by taking the actual ending inventory count from the preceding period as the beginning inventory, then adding all the purchases made and subtracting all of the usages and waste.
It is expected that there will be some variance between the theoretical and the actual inventory, but finding excessive variances is key to pinpointing where you can save money. This report provides a numeric and percentage variance so you can determine which are normal variances and which indicate a problem of some sort.
While most of us would keep an eye on the most expensive items on your invoices like meat or alcohol, don’t forget that the little guys can add up quickly. For example, if you notice that you are ordering a disproportionate amount of romaine lettuce compared to the amount of salads that you sell you need to figure out where it is going. Is the staff storing it incorrectly or over prepping and then throwing it out without reporting it as waste? If you lose 270 heads of lettuce in a 6-month period that equates to $500, which means you are losing $1,000 per year.
Now think about that handful of candied almonds each server grabs day after day from the salad station to snack on during each shift… Hmmmm. That right there could add up to another $1,000 per year. Just looking at two inexpensive items could save you up to $2,000 per year.
Menu Engineering Report
This report allows you to compare the performance of menu items against each other by profitability and popularity of the item. Comparing similar items on your menu on a Menu Engineering Report would allow you to determine the performance of different menu items. For example, you can compare all six sandwiches offered on your lunch menu to determine which items are doing well and which items you may need to re-plate, reprice, or remove.
Let’s say that the “Half Quinoa Avocado Appetizer” is your hottest item on your menu. A lot of operators would look at the POS reports and assume the item sold most often is the most profitable, but just because you can’t keep that item on the shelf does not mean its contribution to your bottom line is the best it can be. Perhaps your second or third best sellers are really making you more money even though you sell less of them. Perhaps adding .97 cents to the menu price of the “Half Quinoa Avocado Appetizer” really will make it a STAR for profitability by adding an additional $1,500 annually to your bottom line!
Menu Item Contribution Report
This report allows you to generate a list of the theoretical cost (the cost of all ingredients) of menu items and contribution each makes to your restaurant’s profit. Also, if you use target cost percentages, you can determine where opportunities exist to increase profits.
So, let’s say you generate a report on all the available sandwich menu items. When you see the turkey avocado sandwich is running a 32% food cost, but you set the target food cost to 25%. Maybe it’s time to look at each inventory item that makes up this recipe and change vendors for turkey or avocados because another vendor can get you these items at a lower price without sacrificing quality. Knowing that you have 8 other turkey-based menu items means that you could be more profitable on 9 dishes by making one change and lowering the cost of turkey; perhaps adding another $1,000 in profits. Imagine what you could do with your entire inventory by knowing how each ingredient in your dishes contributes to the profitability of your restaurant.
Bottom line, these three reports will change the way that you look at your business because it is not always obvious where you are losing money. These three reports alone demonstrate how an operator can drive up to $7,000 to the bottom line by concentrating on the little things. Perhaps it is time to look beyond meat and liquor and start thinking about pecans and lettuce!