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.
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