How You’re Blowing Your Food Cost and Don’t Even Know It

chips in fry basket | Culinary Business Strategy Blog
Photo credit: Jeffrey Wisdom

By Deagon B Williams

I’ve already written on food cost percentage, but it was such a hot topic, I’m coming back to it. Basically, it’s important to understand that every time you don’t use inventory you purchased, you are throwing away its value times 3 or 4 or 5. In its most simple form a restaurant or food service business is like a machine. Like a machine, it takes in capital, adds value, and transforms it into product.

A case of apples, 5 lbs of flour and some sugar that you bought for $20 become 10 apple pies that you can sell for $100. So, you take $20 of capital, add value, and transform it into $100 of product. Any part of that original $20 of inventory that gets wasted reduces the $100 of product.

Here’s the trick though- One quarter of your inventory purchase is $5- not too much to waste right?  But one quarter of your product sales are $25.  Inventory isn’t transformed into product dollar for dollar. The value of this lilt id bit is almost a secret in the industry. This alone will take care most of your food cost percentage problems.

Like this post? Get more where that came from- join us on Facebook, or sign up for our RSS feed. Plus, we love comments, so leave us your thoughts! Thanks for reading.