Latest / Chef's PSA Podcast / Food Costs Explained Part 2: The Formula Ep. 56
Transcript
- 0:00Hello Chefs, This is Chef's PSA Podcast.
- 0:02I'm your host Andre Natara. On today's episode, this is Part
- 0:052 of Understanding Food Cost. Stay tuned.
- 0:19So we're going to get right into it.
- 0:21Last week was part one of the three-part series on
- 0:24understanding food cost. The first thing that we needed
- 0:26to do last week was to understand money.
- 0:28So last episode we got into the history of money.
- 0:32What is money? What makes something money and
- 0:35what is the store value? That will help you better
- 0:38understand how to look at the different commodities in your
- 0:41kitchen and understand where the value is.
- 0:43Understand that you're looking at perishable dollar.
- 0:45We also went through a mental exercise on how to view your
- 0:48cooler as a bank vault, how to view the delivery truck as the
- 0:52Brinks truck and how to view everything that you do with the
- 0:55food as an exchange of money. So today what we're going to get
- 0:59into is we're going to start talking about the different
- 1:01formulas that you need as a chef to manage food cost.
- 1:05I do get a lot of questions about managing food cost.
- 1:08That's why I wanted to do this three-part series.
- 1:11And a lot of people think food cost is a very simple formula,
- 1:14which it is. Cost divided by sales equals
- 1:16your food cost percent. So I said this in the last
- 1:18episode. I'll say this again.
- 1:20This is the one formula that you're going to need for the
- 1:23majority of your career, but not just for food cost, also for
- 1:26labor cost, also for controllable expenses.
- 1:29Basically anything you're paying money for, you're going to use
- 1:32this formula to determine what percentage it is of the total
- 1:36revenue. So cost divided by sales equals
- 1:39food cost percent, labor cost percent, paper cost percent,
- 1:43whatever the case may be. Let's get into some terms that
- 1:46are used in business for those of you that may or may not be
- 1:49familiar with some of these terms.
- 1:50So the first one is understanding the difference
- 1:54between gross and net. Now we talk about gross sales.
- 1:58We could talk about gross income, basically the difference
- 2:02between gross and net. So think about it like this.
- 2:06Gross is everything. Net is what you're left with
- 2:09after everything that you owe is removed.
- 2:11So let's talk about taxes and things like that.
- 2:13So if you're looking at your paycheck, your gross income is
- 2:16what you get paid and then your net income is what you're left
- 2:20with after all your taxes and deductions have been removed.
- 2:23The same thing applies in business.
- 2:24So gross sales is the money that you've earned and then net sales
- 2:29is what you're left with after everything has been removed,
- 2:32such as returns, allowances and things like that.
- 2:36And this is a little bit tricky, at least it's it's been tricky
- 2:39for me to remember sometimes what the difference between
- 2:41gross and net is. So I'm going to give you a
- 2:45little rhyme that helped me remember maybe to help you
- 2:48remember. Maybe it won't, I don't know.
- 2:50But remember it like this. That's how I remember gross is
- 2:53the most and net is what you get.
- 2:56So that little rhyme will help you remember.
- 2:58Gross is the most. So it's the big, it's the big
- 3:00number and net is what you get, it's the little number.
- 3:03So remember like that gross is the most, net is what you get.
- 3:06So those are different examples I can give you to help you
- 3:08remember the difference between gross and net.
- 3:11So it's just important that we lay a foundation of some of the
- 3:15terms that we're going to use throughout.
- 3:16Now why do we put so much emphasis on understanding food
- 3:20cost? Well, the reason that is, and I
- 3:24mean it's it's for obvious reasons, the lifeblood of any
- 3:28restaurant is the money, right. It's how much money you take to
- 3:31the bank at the end of the day. That's what keeps the restaurant
- 3:34open. That's what keeps the restaurant
- 3:36in business is money. The cash flow coming in and the
- 3:41money going into the bank is really what's going to keep your
- 3:43restaurant open and make it sustainable.
- 3:45Now, a lot of people think, well, I'm cooking for the
- 3:47passion does that. And the other If you're just
- 3:49cooking for the passion, that's not a good recipe for success.
- 3:52To keep the doors open on your restaurant.
- 3:54You have to have a certain level of business acumen in order to
- 3:57have a successful restaurant. If you're only cooking for
- 3:59passion, that could be a recipe for disaster.
- 4:03It's important to know how to calculate food cost, and it's
- 4:05important to know how to make good financial decisions when
- 4:08you're looking at your operation.
- 4:09Like I said, money is the lifeblood of the restaurant.
- 4:11What happens if there's no blood flowing?
- 4:13Well, basically you're dead or your restaurant's dead.
- 4:16So keep that in mind. Money is the flow, it's the
- 4:19lifeblood which keeps things going and operational.
- 4:22So you want to make sure that you're taking money to the bank.
- 4:25Something that I learned early on in my career as a chef is
- 4:29that you don't bank percentages, you bank dollars.
- 4:32Now we're all measured on food cost percent.
- 4:34And the reason that is, is because that's a good measure of
- 4:38how your overall performances. Lower food cost doesn't
- 4:42necessarily mean more money in the bank and higher food cost
- 4:45doesn't necessarily mean that you're not profitable.
- 4:48But we have to assume that at some point when you were opening
- 4:51up your restaurant with your investors, with your owners,
- 4:53with the banks, there was some form of strategy of what your
- 4:56estimated food cost number would be.
- 4:59Now, I want to dispel a myth that everyone seems to think
- 5:02food cost is around 30 to 35% or 25 to 35 to 40%.
- 5:07It's it's a myth. Every single restaurant is going
- 5:11to operate on a different food cost.
- 5:13So sometimes I've seen chefs, you know, kind of make fun of
- 5:17other chefs, like you're running a 38% food cost.
- 5:20I'm running a 30% food cost. And I've seen other shucks
- 5:23that'll say I've you're running a 19%.
- 5:26A lot of it has to do with the operation that you're running.
- 5:28The larger the operation and what the mix of sales is, is
- 5:31going to determine what your food cost percentage is.
- 5:34So I'll give you an example, what I mean, if you're running
- 5:37an independent restaurant, your food cost may be anywhere from
- 5:4025% depending on the type of food that you're serving, up to
- 5:43about 35%. Does that mean a 40% food cost
- 5:46is bad? No, not necessarily.
- 5:47Does that mean a 20% food cost is bad?
- 5:50No, not necessarily. I'll give you 2 extreme examples
- 5:53on both ends of the spectrum. If you are running a high end
- 5:57steakhouse, your food cost percent might be on the higher
- 6:00side. So you might be running a 40%
- 6:02food cost or 38% food cost. I've seen some places run as
- 6:06high as like a 45% food cost. It doesn't mean it's necessarily
- 6:10bad. That's the business model.
- 6:12They're planning to run a 45% food cost, and that is due to
- 6:16the expensive meat that they're buying, but they are also
- 6:19charging a premium markup on that meat.
- 6:22On the flip side, a 20% food cost doesn't necessarily mean
- 6:26that you're ripping off the customer.
- 6:28It could mean that maybe you are a salad restaurant, which is
- 6:32less expensive than serving steaks, so you might have to put
- 6:36more volume in to make more dollars, but your food cost
- 6:40percentage looks really good. So two ends of the spectrum, not
- 6:44all food costs are 30%, not all food costs are 25%, not all food
- 6:48costs are 35%. A lot of that is determined on
- 6:51the type of restaurant that you run.
- 6:53If you run a big major Convention Center catering
- 6:56house, you might be as low as 15% food cost.
- 7:00A lot of that has to do with you're selling bottled water,
- 7:04you're selling gallons of coffee and iced tea that are extremely
- 7:07expensive and coffee breaks and things like that which drive
- 7:10food costs down. So places that like hotels,
- 7:12convention centers, conference houses that do a lot of
- 7:17meetings, coffee breaks and things like that, they tend to
- 7:19have a lower food cost percent, but they are also measured on a
- 7:23lower food cost percent. So keep that in mind.
- 7:25One size does not fit all for every type of restaurant.
- 7:28It's important to know that. So let's start out with the
- 7:31first thing. What is food cost?
- 7:33Food cost is the total cost of goods sold.
- 7:36So cost of goods in this case, is your food the total amount of
- 7:40money that you spent on food. So after you've done a elaborate
- 7:46calculation, that is the total cost of goods sold, also known
- 7:50as the consumption. Food cost percent is the percent
- 7:54of that consumption against the total revenue or the total
- 7:58sales. So food cost percent.
- 8:00Cost consumption divided by revenue or sales equals food
- 8:05cost percentage. That's the food cost percent
- 8:07which you are getting by first knowing your total food cost.
- 8:11So food cost, food cost percent, two different things.
- 8:14So it's important that you understand the distinction
- 8:17between those two terms. And again I'm going really basic
- 8:20because I have a a large audience that ranges everything
- 8:23from new cooks to experience executive chefs to experience
- 8:26executive chefs. Were saying, yeah, we know that
- 8:28already. Let's get to the point, bear
- 8:31with me, we're we're teaching everybody.
- 8:32So we we talked about total consumption.
- 8:34So here's how you figure out what your total consumption is
- 8:37for your food cost. You are going to begin every
- 8:41month with an opening inventory, assuming that you're carrying
- 8:44inventory on your balance sheet. So let's just say you have
- 8:48$100,000 worth of opening inventory.
- 8:51That could be everything that's counted according to your
- 8:54accounting practices and everywhere is different.
- 8:56Some places only count what's in storage, some people count
- 8:59everything. Best practice is I would only
- 9:03count what is not used and everything that was on the line
- 9:07for service, I wouldn't count. So that was just what I would
- 9:09do. But everywhere is different.
- 9:11But back at it, the opening inventory is what you're
- 9:14starting the month out with. Think of this as the amount of
- 9:17money in the bank that you started the new month with.
- 9:20Now that you've started with this opening inventory, anything
- 9:22that you purchase is added to that opening inventory.
- 9:25So as we said, you opened with $100,000.
- 9:27Let's say you added another $100,000 worth of purchases.
- 9:31That is the new number that you're working with, $200,000.
- 9:34I'm just using nice round numbers so everyone could follow
- 9:36me opening inventory plus purchases.
- 9:40Now the next thing that you have to do is you have to subtract
- 9:43anything that is transferred within your restaurant.
- 9:46So this could be if you're transferring.
- 9:49If you have a a big operation like a hotel with multiple
- 9:51restaurants, this might be transfers in in inter
- 9:55department, it could be transfers to other departments,
- 9:58it could be transfers to the bar like for examples the bartenders
- 10:01come and get lemons that might come off the food cost and go to
- 10:04the beverage cost balance sheet. Again these are just different
- 10:08practices in different places, not everywhere is the same but
- 10:11for the sake of contact you're opening inventory 100,000, your
- 10:15purchases another 100,000 and let's just say your transfers
- 10:20out were 10,000 then you're going to add, then you're going
- 10:25to add any transfers in. So this is people giving you
- 10:28things. So a lot of places.
- 10:29Again, it's different, but let's just say you're moving food from
- 10:32one restaurant to another restaurant or in some places
- 10:35people do count the liquor as food when it's added to the
- 10:39culinary inventory like wine or something like that.
- 10:43For example, depending on depending on where you work,
- 10:45everyone's accounting practice is slightly different.
- 10:47But let's just say anything that you're adding from other
- 10:49departments are transfers in this would be addition to your
- 10:53inventory. So again, I want you all to to
- 10:57I'm going to go slow so you all stay with me.
- 10:59You have $100,000 opening inventory plus $100,000 on
- 11:04purchase, minus $10,000 in transfers out, plus $10,000 in
- 11:12transfers in. So that kind of washes, but I'm
- 11:15using this as a very simple example.
- 11:17Then at the end of the month, what you're going to do is
- 11:19you're going to count your inventory.
- 11:20We talked about everyone's inventory system may be
- 11:22different, but the inventory system that you've deemed is the
- 11:25acceptable one, you're going to do an inventory count.
- 11:29That inventory number again just so we have something to play
- 11:32with, we're going to say that inventory is now $80,000.
- 11:36So now let's look at this example.
- 11:37You're opening inventory was $100,000.
- 11:40You added $100,000 in purchases. So now you're sitting in the
- 11:44bank with $200,000 worth of product, right, What you opened
- 11:49with and what you added. Then you subtracted that $10,000
- 11:53in transfers. Now that leaves you at 190,000.
- 11:57You added in the additional $10,000 in transfers in that
- 12:03again balances out. So now you're back to 200,000.
- 12:07Your closing inventory was 80,000.
- 12:11So if you have $200,000 is the number right now and you take
- 12:15away $80,000 what you're left with is $120,000.
- 12:20That $120,000 is your total consumption.
- 12:25That is basically everything that you consumed dollar wise in
- 12:29the month. Now now if you're not following
- 12:32me here, I'll explain it another way.
- 12:33If you have $100 in the bank at the beginning of the month and
- 12:38then you got paid and you got another $100 in the bank and at
- 12:42the end of the month you only have $80.00 in the bank, that
- 12:46means you used $120.00 of the money that went into your bank
- 12:50for the month. So hopefully that's a that's a
- 12:52more simple way to explain it, but basically that's how you
- 12:55calculate the consumption. Now once you know the total
- 12:59consumption, now you can figure out what your overall food cost
- 13:03percent is for the month or the period depending on what kind of
- 13:08financial system that you are working off.
- 13:10Some people work off a 13 period a year, other people work off of
- 13:15a month end system. So every accounting system is
- 13:18slightly different. You're going to have to tailor
- 13:20this to what makes sense for you and your operation, but in a
- 13:23nutshell, now that you've figured out what the total
- 13:24consumption is, you can divide that by the total revenue for
- 13:27the month to figure out what your food cost percentage for
- 13:30the month was. The next thing that you want to
- 13:32understand is what your individual food cost is per
- 13:34plate. So assuming that you have
- 13:36recipes for everyone, and This is why I encourage everyone to
- 13:38make sure that you have standardized recipes and
- 13:40everything is weighed out. If your recipes are accurate,
- 13:44you're not going to have 100% accuracy in your food cost.
- 13:46But if your recipes are accurate and they're costed out, you are
- 13:48going to be closer to understanding what your food
- 13:51cost is versus if you're winging it all the time and just saying
- 13:54a little bit of this, a little bit of that, there's no
- 13:56consistency. It's going to be very hard to
- 13:58figure out and how to manage your food costs.
- 14:00It's much easier if everything is weighed, costed and measured.
- 14:03So to figure out the the food costs of an individual dish,
- 14:07it's, again, it's not rocket science, but we're going to do
- 14:10is you're going to figure out the size of the portion of that
- 14:12particular item and then you're going to have to calculate it
- 14:15based off the original price of the item.
- 14:18So let's just say you're looking at an 8 out state.
- 14:22What you're going to have to figure out is what the cost per
- 14:24oz is. So in this case, if you have a
- 14:27state at 16 ounces, because there's 16 ounces in a pound, it
- 14:32costs you $16.00, so it's $16.00 a pound.
- 14:37We're just using this as an example because it's easy to
- 14:39calculate the math. That means every pound is $1.00.
- 14:45So to figure out the cost, you would say $16.00 / 16, because
- 14:50there's 16 ounces in a pound will give you your cost per oz.
- 14:56So in this case, $1.00 per oz. You're serving an 8 ounce steak.
- 15:00It's going to be $8. You're following me.
- 15:02You may be working in grams, So you're going to say if it's a
- 15:07dollar an ounce, it's a dollar for every 28 grams because
- 15:11there's 28 grams in an ounce. You're going to do that for
- 15:13every single ingredient on the recipe so that you could
- 15:16calculate what the total cost per dish is.
- 15:19Some people like to calculate it in batch recipes.
- 15:21So for example they might say this batch yields 10 portions
- 15:25and then they'll divide it by 10.
- 15:26So depending on how you're doing it, ultimately what you need to
- 15:29find out is what your per plate cost is.
- 15:32That's going to require some math.
- 15:34Get good at Excel. I would advise you just figure
- 15:37out how to build excel sheets. Most chefs work off of Excel
- 15:41because it's the easiest thing to use when you're you could
- 15:44program cells to add up the correct math formulas that you
- 15:47need. So anyway, get the individual
- 15:50plate costs. So let's just say when it's all
- 15:53said and done, the plate costs $2.00 when you include the steak
- 15:57and the vegetables and everything else.
- 15:58Now, a lot of places will factor in a little bit of a waste
- 16:01factor, because the fact of the matter is, you're going to trim
- 16:03stuff off, you're going to trim off ends of this, you're going
- 16:05to throw some away at the end of the night.
- 16:06You're going to lose a dish here and there.
- 16:08Everywhere is different. Some people will add a 5% waste
- 16:12factor, some people will add a 10% waste factor in their
- 16:15recipes, and other people will just add a flat dollar amount to
- 16:19the waste factor so they could calculate their individual plate
- 16:22cost. I've done all three and other
- 16:26things as well, but I would say those are the most common
- 16:29practices when you're calculating an individual
- 16:32recipe. Cost is to add either a
- 16:34percentage for waste or to add a fixed dollar amount.
- 16:39So now that you have the individual plate cost, the next
- 16:41that you typically want to do is you want to find out, well, how
- 16:43much should I sell it for? So let's just say something cost
- 16:46you $3, right? So it costed you $2.
- 16:48You added in a dollar for waste, so you round it up to $3.00 and
- 16:52you need to figure out what to sell it at.
- 16:53So what you're going to need to do, it's the first thing you're
- 16:55going to do is you have your plate cost $3 and you're aiming
- 16:58for a 30% food cost. When you do the calculation,
- 17:00you're going to want to do that as a decimal.
- 17:02So 30% as a decimal expressed is .3, so $3 / .3 will give you
- 17:10$10.00. So that is roughly what you
- 17:12should sell your plate act if you want to hit a 30% food cost.
- 17:18Now every now and again you're aiming for a 30%, but it may be
- 17:22way high or it may be way low. So 30% of something might only
- 17:27be, you know, 3 or $4.00 and you're not going to sell that
- 17:32particular dish at that price. So you might want to take it up
- 17:34to $8 and run a very low food cost percent on it.
- 17:38On the flip side, you might have a higher plate cost and running
- 17:43it at 30% might kind of price you out and people might not
- 17:47want to buy it. So you're going to run a higher
- 17:49food cost on it. This is what's going to bring
- 17:51you into what's called a mix of sales, right.
- 17:53So you're going to have some items that are higher, some
- 17:56items that are lower, but with the overall hope that in the end
- 18:00it's all going to balance out to the 30% what you are aiming to
- 18:04achieve. Now in order to figure that out,
- 18:06you're going to need to do something called a theoretical
- 18:09food cost. So theoretical food cost is like
- 18:12the ideal target that your restaurant wants to achieve
- 18:15based on the cost of ingredients, all the dishes on
- 18:18your menu, your factory and waste theft, spoilage that that
- 18:21fudge factor percent that we were talking about.
- 18:24But nevertheless, it's a useful benchmark to figure out what
- 18:27your actual food cost is. So the way to figure out
- 18:30theoretical food costs is you kind of have to play a little
- 18:32bit of a guessing game, or sometimes you're doing it
- 18:34retroactively before your actual food cost numbers come out.
- 18:37So the way you need to figure out your theoretical is you need
- 18:39to know the individual cost of every dish, and you either need
- 18:45to have the actual sales numbers of each dish or the proposed
- 18:49theoretical amount of dishes that you're going to sell.
- 18:52The way I would do this in a simple Excel spreadsheet is I
- 18:54would total all of them up to save.
- 18:57This is the total cost. This is the total sales of all
- 19:00the dishes sold. Total cost divided by total
- 19:03sales will give you a theoretical food cost.
- 19:06Now it's not exact and it is theoretical.
- 19:08So one of the things that you know, a lot of restaurants will
- 19:12do these theoretical food cost exercises.
- 19:14And it's kind of a trap for chefs too, because you could
- 19:17look at a theoretical food cost and say, hey, my theoretical
- 19:20food cost says I should be at 30%, but I'm hitting 35.
- 19:25And so you go to your owners or you go to your manager and you
- 19:28say, I don't know what's wrong because according to my
- 19:32calculations, it's supposed to be 30%, but I'm hitting 35.
- 19:36Well, I'm here to tell you if you're it's supposed to be 30%
- 19:39and you're hitting 35, then either your calculations are
- 19:42wrong or you're not managing your business.
- 19:45People could be stealing. Your recipes might be costed
- 19:48inaccurately, You might not be managing your kitchen as tight
- 19:51as you think in terms of managing waste.
- 19:53Your vendors could be ripping you off.
- 19:55You might not be paying attention to price increases or
- 19:58inflation as we talked about in the previous podcast.
- 20:01So theoretical food cost is great, but you don't take
- 20:03theoretical food cost to the bank, and most likely you're not
- 20:06held accountable to theoretical food cost.
- 20:08You are held accountable to actual food cost.
- 20:11So use theoretical food cost as a good guide to guess where you
- 20:14should be or to manage your business in the preopening phase
- 20:18or the pre menu rollout phase. But.
- 20:21Once things are done, what you should be looking at is your
- 20:23actual food cost percent. Now, and I know I said this
- 20:26earlier, you don't take percentage to the bank, you take
- 20:28dollars to the bank. So I'm going to give you a small
- 20:31example of what I mean. But we're going to take two menu
- 20:34items, right? One is a salad and one is a
- 20:37steak. And you'll ask someone, what
- 20:39would you rather have a good food cost or dollars in the
- 20:43bank? You'd ask someone, would you
- 20:44rather have a 10% food cost? Or would you rather have a 40%
- 20:47food cost? And a lot of shots are going to
- 20:48be like 10% food cost. That means I'm doing great.
- 20:51Not necessarily. Let me explain to you what I
- 20:53mean. Let's just say that you have a
- 20:56salad, and that salad costs you $0.50 to make.
- 20:59So your total cost on the salad is $0.50 and you're selling it
- 21:03at a 10% food cost, which would make it $5.00.
- 21:06So you know $0.50 / .110 percent is going to give you your
- 21:11suggested selling price of $5.00, so $5 for the salad.
- 21:16For every salad that you make at a 10% food cost, you're making a
- 21:20profit of $4.50. Okay.
- 21:24So you have a 10% food cost, but you're only taking $4.50 to the
- 21:28bank. Now let's take another example.
- 21:30Let's say you're looking at a steak, and that steak costs you
- 21:36$20 and you were selling it for $50, which is a 40% food cost,
- 21:41right? $20.00 / .4 equals $50.00,
- 21:45right? So again giving you reiterating
- 21:50point on the map, so you have a $50 entree and it costs you $20
- 21:55every time you sell one of those $50 entrees, those steaks that
- 21:59cost you 20 dollars, 40% food cost, your profit margin on that
- 22:03is $30.00. So for every steak that you
- 22:06sell, you take $30.00 to the bank.
- 22:09So you have to sell several salads to make the same amount
- 22:13of money as selling one state. Think about the amount of Labor
- 22:17that goes into that. Think about the amount of work
- 22:19that goes into your service team to have to sell that many salads
- 22:22versus someone that just sell one state.
- 22:24Now think about it like this. You could extrapolate that up.
- 22:27We talked about money. And the other one, would you
- 22:30rather sell a candy bar or would you rather sell gold?
- 22:34Right. So maybe your gold, you're
- 22:36getting 50% markup and your candy bar, you're getting 90%
- 22:39markup, but how many candy bars do you got to sell versus the
- 22:43gold, right? And if you were making $1000 for
- 22:45every gold transaction and you were only making $0.90 on every
- 22:48candy bar transaction, you're going to see the amount of work
- 22:50that has to go into each one, right?
- 22:54So if you, if you follow me, you'll understand that at the
- 22:56end of the day you don't bank percentages, you bank dollars.
- 23:00With that being said, my caveat is I ain't your boss and I don't
- 23:05know what you're measured on. Sometimes you are measured on
- 23:07your food cost percent. And I'll tell you, in my
- 23:09experience as a chef, a lot of times the reason owners or
- 23:14general managers are so focused on the percentage is because
- 23:19they are incentivized by the percent.
- 23:21They're not incentivized by the dollars.
- 23:24And usually that's because maybe there's an asset manager in
- 23:26between or there's a middleman that's managing it.
- 23:29And and a lot of times people aren't looking at the bigger
- 23:31picture, which is dollars in the bank.
- 23:33So again, I'm not telling you because I don't want you to go
- 23:36back to your boss. They look at how much money I
- 23:38brought in the bank. No, at the end of the day, you
- 23:39got to do what you're measuring on.
- 23:40I'm just, I'm just telling you as a strategy, if you're the
- 23:43business owner, you want to have more dollars in the bank, right?
- 23:45So if you have that freedom, that's the way I would look at
- 23:47it. If you don't have the freedom,
- 23:49well it's unfortunate because you're going to be managing
- 23:51percentage versus dollars. And as we talked about earlier,
- 23:55money is the lifeblood that keeps that restaurant open.
- 23:58You want to increase the amount of money that's flowing through
- 24:01going straight into the bank, right.
- 24:03That's how you keep a profitable business running.
- 24:06Now I know this is a three-part series on food cost.
- 24:09I want to wrap this one up because we, you know, we're kind
- 24:11of getting to the really boring stuff at least.
- 24:14So when people ask me why haven't they done a food cost
- 24:16podcast, this might be why. Because, you know, we're just
- 24:19going to talk about formulas and it's somewhat rather boring.
- 24:23Hopefully not still a 5 star podcast, but here's a story that
- 24:27I would like to share with you. When I was a young chef and I
- 24:29took over my first executive chef job, my chef was still in
- 24:32the building. And in order for me to prove my
- 24:34worth, one of the things that I wanted to do was I wanted to
- 24:37demonstrate that I could lower food cost because I thought that
- 24:40I'm, I'm bringing value if I'm lowering food costs.
- 24:42So I did everything I could to buy, you know, less expensive
- 24:46products, shape the portion, all these things which will cover in
- 24:49the next podcast. And my my former chef came up to
- 24:53me. I said, you know, what the hell
- 24:54are you doing? And I said, what do you mean?
- 24:56I'm lowering food costs. It's good for business, he says.
- 24:59I'm going to tell you two things.
- 25:01He says, no great chef. That's a household name out
- 25:03there is a household name because they ran good food
- 25:06costs. Not a one.
- 25:08They're not writing books about chefs that ran great food cost,
- 25:11he says. It's still about the food.
- 25:13Make sure you're making delicious Food First.
- 25:18Then he said #2. When you give them something,
- 25:22they will always ask for more. So you lowered food cost 3%.
- 25:26Where else are you going to lower it?
- 25:27And I said, well, I don't have anywhere else to lower it, and
- 25:29I've already done it, he says. Exactly when you've lowered it
- 25:32this much, they're going to say what a great job, can you lower
- 25:34it more? And when you can't, what's going
- 25:37to end up happening is you're going to have bad months and
- 25:39you're going to accidentally raise it and then they're going
- 25:41to think you're not as good as you used to be, he says.
- 25:45They will always push you to find more, so be careful
- 25:49lowering your food cost too low to the point where you cannot
- 25:53recover. Not only that, but if you work
- 25:54in an environment where there's another chef coming in after
- 25:57you, no chef wants to come in after the person that lowered
- 26:00food cost to a detriment. And the reason that is, is
- 26:03because they're going to walk into the place and they're going
- 26:05to say, oh, I know how to fix this place, make better food,
- 26:07you're serving shit quality. And then they're going to say,
- 26:10oh, I can't because the reason food cost is so good and the
- 26:14reason the owners are so happy with the amount of money that's
- 26:16coming in is because we serve a a poor quality product.
- 26:20So you're not setting up the person to come in after you.
- 26:24Anyway, that's a little bit of a rant.
- 26:26I always say you want to make sure that your legacy as a chef
- 26:29is built off the food that you're making, not necessarily
- 26:32the cost, right? Be careful, it's a slippery
- 26:35slope. When you start cutting food
- 26:36costs too far, then it's very difficult to get out of that
- 26:39situation. Anyway, that is episode 2 on
- 26:44understanding food cost. On the next episode, no more
- 26:48formulas. Well, cost divided by sales.
- 26:50I'll probably remind everyone of that.
- 26:51But on the next episode, what we're going to talk about is
- 26:53strategies that I look for #1 to lower food costs when you need
- 26:57to. And if you have a food cost
- 26:59problem, where do you look? Anyway, Thank you all very much.
- 27:03If you want to support the show, make sure you leave five stars.
- 27:05If you're watching on YouTube, hit the like button, subscribe,
- 27:08make sure you go to chefspsa.com and show some love.
- 27:11Get some of the books, they're Good for you.
- 27:13Right? You'll get Smarter, Bad to Good
- 27:15Chef, How Not to Be The Biggest City in the Kitchen, Line, Cook
- 27:17Survival Manual, Culinary Leadership Fundamentals and
- 27:20Kitchen Art of War. I do explain food cost a little
- 27:24bit more in depth in the Culinary Leadership Fundamentals
- 27:27book. So if you like this podcast, you
- 27:29want to learn more about food cost, you'll get that book.
- 27:32Thank you all very much. See you next week.
- 27:34Hit the porno music.