Joe Dunbar answers reader question on the waste calculation while determining the food cost percentage
I hope my mail finds you well.
I would like to know how to take into consideration the waste calculation while determining the food cost %.
Food Cost% =(opening inventory+purchases-ending inventory-staff meals-entertainment)/sales
So where is the place where we can add the calculation of wastage in the above formula?
Thanks for the question, Elie. This is a popular issue with many food cost controllers.
In your operation, the purchased food should be consumed by guests when they order a menu item.
If the actual ingredient used to create a menu item requires fabrication, it is possible to experience a much lower yield than you expect. You may also purchase too much of a perishable item and suffer a loss due to spoilage. Finally, you may produce too much of a batch recipe used in a menu item which is not part of the base menu.
All of the food purchased, whether consumed by guests, lost in fabrication and poor yields, or lost due to over production or spoilage, is included in the “purchases” component of the formula.
The goal of the food cost control team is to explain to management the causes of food cost success and failure in the period of the report (week, month, quarter or year).
If you use standard recipes and standard yields, your variance reports will highlight the difference between actual usage and ideal usage. Focus on the high volume items when you analyze variances.
In order to have the right information available, you should keep records for the ways each key item is used. Purchases, butcher yield sheets, portion control records, and spoilage sheets are the building blocks for your variance analysis report.
In 2015, the high cost per pound or kilo for protein and fresh fruits and vegetables is a main driver of high food costs. Only menu price increases can help with the higher purchase costs.
By developing a solid usage analysis for all key items, you will gain an advantage. Over time, you will see trends in waste and spoilage. If the management team communicates effectively, waste and spoilage will decline over time.