Waste Calculation in Food Cost - By Joe Dunbar
Joe Dunbar answers reader question on the waste calculation while determining the food cost percentage
Most dinner houses with a full bar have a difficult time deciding how to allocate food, beverages, labor and other expenses. Since the tight control of cost of sales and labor are critical to success, the allocations in these prime costs are a central focus.
In 1991, my wife Jackie and I spent two weeks in the Finger Lakes area of New York State. We decided to stay at a hotel in Ithaca. Near Cornell University, we found a terrific bookstore with a big red dot on the door. Once inside, I went hunting for books on food purchasing and restaurant cost control.
Our industry has absorbed the impact of the supply chain adding health insurance coverage. Most distributors now have complied with the ACA provisions. The food distributors have passed these increases on to restaurant owners and caterers. The record drought in 2013 and the related poor corn crop had a major impact on protein prices during the first 3 quarters of 2014.
A frequent reader question topic involves the addition of direct labor in all standard recipes. Before giving a firm recommendation, I'm going to explore the pros and cons of this approach.
This month, Adam from New York wrote an email asking whether it is better to use contribution margin or food cost percentage. As many readers know, I prefer using contribution margin. My early experience in remote site support services showed me the value of tracking all costs by the number of patrons served.
The market prices for beef, pork and chicken remained high this summer. In the most competitive markets, restaurant operators have had a tough time building higher costs into their menu prices. Consumers continue to carefully manage how they spend their discretionary income. These consumers see the higher food prices when they shop in the grocery stores.