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In a chain restaurant, will a unit that has skewed product sales towards higher food cost menu items have a higher food cost?

Yes, more sales of higher food cost items will yield a higher overall food cost. That doesn’t mean that it’s a bad thing though. A low food cost isn’t what makes you profitable. A high gross profit is, meaning that making $4 gross profit on a $7 sales is better than making $3 gross profit on a $4 sale, even though the food cost for the first instance is higher (43%) than the second instance (25%). No matter the food cost, making $4 is better than making $3. The only exception would be if that $7 item resulted in significantly higher expenses or labor that ate up that extra $1 in gross profit, which isn’t likely.

You CAN’T use food cost percentage as a factor in pricing out your menu, or deciding what items you’d like to sell. Food cost percentages are a management tool, not a pricing or strategic tool. You want a product sales mix that yields you the most gross profit, despite the food cost.

What food cost percentages ARE important for, are to help give you a first line of defense in stopping theft and waste, but to go along with your actual food costs, you have to have ideal food costs to compare them too. If you don’t figure what your food costs SHOULD have been, you have no idea if a high food cost is bad because of theft or waste, or good because your sales mix has changed to higher cost, higher gross profit menu items. High food costs alone don’t mean there is a a problem. They could mean just the opposite. Start a system for figuring ideal food costs, so you can compare your actuals to them to know if there is really a problem, or if your product sales mix has changed.

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About friendthatcooks

Food service consultant and owner/operator of an in-home weekly meal prep service in Kansas City, Chicago, St. Louis, Omaha, Des Moines, Denver, Milwaukee and Wichita

Posted on February 23, 2008, in Questions and tagged , , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. Well Said!

    One additional comment would be in this era of trading up and down both on your current offer and your competitors offer. Eliminate the bonus incentive by owners for their Chef on low food cost%. Replace their motivation with an open book policy around the profitability of the business and plan on going to the bank!

  2. Great point Stuart!

    I always advocate a bonus structure for all employees based solely on profitability. Afterall, it’s the one common goal FOH and BOH managers can share.

    Another blog of mine, answering a question from a restaurant owner, talks about this. You might be interested in it:
    https://bodellconsulting.wordpress.com/2008/01/10/i-need-a-good-incentive-program-that-is-fair-to-everyone/

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