Latest / Chef's PSA Podcast / Food Cost Explained Pt. 3 Ep. 57

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Food Cost Explained Pt. 3 Ep. 57 · Chef's PSA Podcast

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Hello Chefs, this is Chefs PSA Podcast.
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I'm your host Andre Natara. On today's episode we're going
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to get into the final park part three of food cost, so stay
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tuned. Before we get into it, let me
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give you a quick update for those of you that have been
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asking. The Chef's PSA book series that
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I've written is now translated into Spanish.
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So for those of you that need those books for yourself or
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maybe for your kitchen staff, it's available.
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Go support Chef's PSA. Go get those books.
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They should be like in every chef's office or in on every
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line. Cooks Clipboard.
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That's really where they belong. Now, I've done some free ebooks
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as well, so I did a two-part series here on Chef's PS a How
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to Open Up a Restaurant. I turned that into a guide.
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It's available also on Chef's psa.com.
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I have 100 basic recipes that I've written that's also
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available, and a culinary dictionary for new people that
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don't understand some of the words or slang that we use in
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professional kitchens that's also available.
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If you want me to turn this three-part series of
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understanding food cost into a guide, let me know.
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Shouldn't take me that long. I'm in the process of wrapping
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up the Spanish translation. I'm moving into Italian
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translation and then I could work on the food cost guide.
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Or maybe I'll take a quick break and get that done in a couple of
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days. So anyway, that's something that
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you guys want, Let me know. Now.
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This is part three of the series when it comes to food cost.
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If you'll recall, episode one was really understanding what
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money is and how to see money as food and how they're
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interrelated. So I said you have no business
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managing the money in your restaurant if you don't even
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know what money is. So go back and listen to that
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episode if you haven't. The second part was really
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understanding the different formulas when it comes to
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managing food cost. As I said, if there's one thing
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that you take away from this entire series, cost divided by
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sales equals food cost percent. And that's the formula that
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you're going to use pretty much for your entire career as a
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chef. And it doesn't just apply to
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food costs. It applies to labor costs and so
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many other things. But that's the formula.
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Cost divided by sales equals food cost percent on today's
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episode we're going to talk about, so you've identified a
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food cost problem. How do you fix it?
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And then what are some of my strategies when it comes to
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addressing food cost issues? So here's something, whenever
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I've taken over a new job as an executive chef, the first thing
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that I've done, well, I have a whole strategy and I could
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probably do a whole podcast on that.
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But normally what I do is I go into a place and I write down
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100 areas where I could lower food cost percent.
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So that way it's fresh in my mind and I write down 100 things
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that I could do. What are the opportunities?
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What's the low hanging fruit that I could address food cost?
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And I don't do anything. I just write the ideas down and
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I save them for later. And the reason I do that is
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because whenever you start a job, usually they want you to
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impact several things. They want you to impact quality
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and they want you to impact the finances, right?
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That's usually the job of an executive chef.
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You're managing the finances, you're managing the people,
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you're managing the quality, You're measuring on all these
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things, right? Your financials, quality people,
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the three legged stool as it's called in business.
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And so anyway, I go in and I write down these 100 things,
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these 100 opportunities to reduce cost.
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And when upper management comes to me and says, hey, we need a
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lower food cost a little bit, I could go back and look at that
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list that I had written early when I had just begun the job.
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And I pull out a couple of things that I want to change.
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And then I could make an immediate impact on food cost
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and then boom, everyone's happy again.
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And then a couple months go by and they're going to say, hey,
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we need a lower food cost again and then go back to that list.
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And I whittle away at those items.
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But I never give them everything upfront and I would caution you
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if you do follow this, don't give them everything up front
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because then you have nothing else.
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When they say that was great, give me more.
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And inevitably as a chef, they always do.
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You give them, you give them a point, they want two points in
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food cost. So that's the strategy that I
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have when it comes to lowering food cost is identify as many
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opportunities that you can to lower food costs, but don't
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implement all of them, only implements them as you need to.
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The other thing, and again, this is my personal strategy when I
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would go into places previously is I was never the person to hit
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food cost on the nose or lower. If anything, I would hit it on
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the nose or a little bit higher. And I'm not talking much higher.
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I'm talking like a half a percent or a percent, just
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enough to afford no one notices in this, you know, sneaky
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tactics that I'm giving you. And the reason was, is because I
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never wanted to set myself up for failure the following year.
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So for those of you that have never been an executive chef,
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usually the way it works is ownership's going to come to
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your upper management's going to say okay, you gave us, you know,
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25%, can you give us 24%? You gave us 24%, can you give us
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23%? And then it's just a race to the
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bottom. After that, it becomes a
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slippery slope and you're always chasing a way to find food cost
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to get it lower. And that's not necessarily the
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most productive for a lot of chefs.
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So I would always strategically go the other way.
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I would raise food cost 1/2 a point and then I'd raise another
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half a point. So after the course of time,
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what they didn't notice is that I was gradually increasing the
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food cost. Now by gradually increasing food
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costs. And I'm not talking 10%, I'm
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talking about percentage .1, half a percent, maybe 1%.
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And the reason I was doing that is that would allow me to buy
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better quality ingredients because this allows me to go
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back and say what I had said earlier in this series is I
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never wanted to be known as the chef for great food cost because
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no chef's legacy is really built off having the best food cost in
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the world like you, who has the best food cost in the world?
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You don't talk about that chef. You talk about the greats, the
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Thomas Keller's, the Renee Rozeppi, the Farran Adria's, and
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so on and so forth. No one ever talks about the
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chefs who have great food cost. Maybe the owners talk about it
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and you get a little bonus or something like that.
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But there's no glory in having great food cost.
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There's glory in creating good food.
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So that's just my little caveat. And that was my strategy when I
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was creating food gusts. Now I will say this again, word
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of caution, don't go get yourself fired by raising food
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cost. If they threaten that you're
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going to lose your job because you've raised it a point, then
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do the right thing. Like I'm not.
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Don't call me up and say I can give you bad advice because I'm
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not going to, I'm not going to pay your bills for you.
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So use some discretion. I'm just letting you know what
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I've done in the past. And the reason I was able to do
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that is because I always backed it up with the other two.
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So I always had really good food and my employees were always
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really happy. So if you have the other two,
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you can get away with a little bit more on the food cost side.
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Now when it comes to tracking food cost, we talked about the
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formulas and making sure you have good accounting principles.
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But one thing that I do is there's multiple ways to track
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food cost. Some places track it for the
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entire month, other places track it for the week and I would
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track it day-to-day. The reason I would recommend
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that you track it day-to-day is because it's easier to find a
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blip in the radar to find where that problem is.
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So if you're tracking it for the entire month and food cost is up
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5%, you don't know exactly what day it went sideways.
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But if you're tracking it every single day, you could say okay,
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food cost was 25 percent, 25%, this day was 40%, Why?
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Then you could go back and you could look at that specific day
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and see what the issue was. And typically the issue is
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usually a sales problem. Maybe revenues weren't what they
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were supposed to be and you over purchased that day.
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Maybe you got hit with a bunch of late invoices from previous
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months. That also happens.
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Maybe your vendors snuck something in when you weren't
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looking right, but you don't know where to look if you're not
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tracking day-to-day. So tracking day-to-day allows
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you to have a better grasp on where your food cost is,
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especially where it's trending for the end of the month and
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where to correct the problem. Then we could talk about looking
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at your inventory. So when you're looking at your
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inventory, you should be able to run simple descending reports on
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Excel or depending on what program you're using, where you
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could see where the majority of the dollars are being stored in
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inventory. And are these items still on the
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menu? Are they not moving?
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Do you need to donate them to maybe get them off your balance
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sheet? These are things that you got to
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look at. So having a good track of your
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inventory and looking at where your big dollar spend is going
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to definitely benefit you in the long run.
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You don't want to be carrying dead stock.
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You want to make sure that you're putting it to use and
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you're rotating your stock and you're getting it out of your
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turning specials or staff meal or something like that.
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Now let's say you have a food cost problem and you need to cut
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costs. So the first thing that I would
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look at is I would look at, you know, your top 100 spend items
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in the kitchen. So you're going to have your top
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items and your bottom items and your 100 spend.
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What I would look at is look at the top ten items and fix those.
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Don't look at the bottom 10 items because you're really
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going to have no impact on there.
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Let me give you an example of what I mean.
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I was doing a consulting for with the chef in another
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restaurant and they had food cost issues and I said where do
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you want to look? And we looked at the report and
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they said maybe we need to change brands of salt now I
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don't know if they were like a Mortons or diamond crystal.
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I'll let you guys argue, I don't know what's best.
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I'm a diamond crystal person for what it's worth.
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Anyway, we digress. This person said let's look at
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our salt cost and let's change the brand of salt that we're
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using. And I remember thinking well
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that's not necessarily going to put a dent in food cost.
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I said how much, how do you spend on salt a year?
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And I remember it wasn't a large number.
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It was like $500 a year in salt. And I said okay.
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And by switching to this other brand, how much are you going to
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save? And he's did the math real
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quick, He's going to save like 40 bucks.
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So I said you're going to save 40 bucks on salt, but all you
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have to do is shave an ounce off of this protein over here and
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you're going to save $40 off of £2.00 of meat.
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Like, it's a nobrainer. Think about how much meat you're
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buying, like that's where you want to look at is fish, where
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the fish are, your top spend items, your top ten, your top
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five, your top two, that's where you're going to make the biggest
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impact on food cost. Now if we're looking at specific
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strategies on the plate, I would say there's things called the
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protein flip. And what that is now that a lot
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of restaurants are moving to a more vegetable forward dining
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experience or veg centric entrees.
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And I'm not talking vegan or vegetarian.
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I'm just talking about like it's a plate of vegetables garnished
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with meat. So for example, you have a plate
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of grilled broccoli garnished with pork belly as opposed to a
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pork belly dish with a little bit of broccoli.
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So you flipped it a little bit and vegetables in this case
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typically are going to be less expensive.
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So it's a good way to reframe your menu and put items on there
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that are more profitable. Another way to look at is
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shrimp. The portion size, a simple oz
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here and an ounce there on your expensive proteins could be big
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savings. If you're looking at meat, for
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example. And let's say you're paying $30
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a pound for meat and you've shaved it one ounce.
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For every 16 portions you sell, you're saving $30.00, right?
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If you shaved it 2 ounces, you're saving $60.00 for every
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16 portions of protein that you sell.
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So that's going to make a bigger impact than looking at the brand
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of salt that you're using. Then other places that you want
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to look is you want to look at your menu abstracts and maybe if
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you call it menu engineering, stuff like that, where you could
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look at which items are moving, which items are not moving,
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which items are profitable, which items are not.
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And you want to look at those items.
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And the idea is to have as many profitable items and get rid of
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the items that are not. I talked about this the other
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day. I put up a video on it on Chef's
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PSA Instagram account where I talked about the 8020 rule or
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the 7030 rule. When designing menus, 70% or 80%
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of your menu should be items that people are familiar with
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that are going to move, that are going to sell.
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The other items could be, you know the 20 to 30% could be the
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experimental items. And the reason I recommended
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that is because you don't want to go the opposite way and go
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70% experimental and 30% of the items are the fastball down the
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middle because you're probably realistically going to sell the
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30% and that 70% is going to use up space in your cooler.
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It's going to be inventory that's going off and that's most
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likely items that are not going to move.
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So put your focus on the 70% and the 80%.
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So when you're looking at that 70 and 80%, make sure that they
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are profitable, make sure that your recipes are costed
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accurately. And I'm not saying you got to go
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cost your recipes every week, but if you have a software
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system, and a lot of places do where the recipes speak to the
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inventory system, that's a good way to make sure that your costs
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are in line. Sometimes it's a simple matter
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of human error. You costed your recipe
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incorrectly, or you put one too many zeros or not enough zeros,
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and so you thought a particular item was more profitable than
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what it was. So again, looking at your
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recipes and making sure those are accurate, making sure you're
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doing proper menu engineering to make sure you have the right mix
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of menu items on your menu. And then you also want to make
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sure you're looking at your point of sale system.
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So in a lot of cases this is your micros.
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I've I've been a chef of places where we've had items on the
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menu for months and no one caught that.
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There was a discrepancy on the menu and in the point of sale
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system. So every time we'd sell a
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certain dish we were losing $2.00 according to the menu
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price. Now that's common, that mistake
13:38
happened. So it's very important to that.
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You're auditing your menus and your point of sale systems every
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time you make a menu change, so you could see if there are any
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discrepancies on the price on the menu point of sale system to
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make sure that you are not losing any money.
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Other things that you could do is maybe your menu is too big,
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maybe you need to shrink it a little bit, maybe you need to
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look at the amount of garnish that you have.
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So I know all these flowers and microgreens are pretty, but a
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lot of times they're also extremely expensive.
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So then you have to ask yourself, does that particular
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garnish bring value to the dish? Maybe you got to look at it and
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say, you know what, maybe we don't use that flower or maybe
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we have a certain amount of flowers.
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I remember I was looking at something that's like every
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flower we put on the plate was like $0.75 and I was like, shit,
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these flowers are expensive. Anyway, it's neither here nor
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there. So basically, make sure that
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everything that's on the plate has a purpose, is functional and
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is bringing value to the plate. You don't want to put in things
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on the plate that are increasing it significantly in cost, but
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bringing 0 value, that's something that you got to.
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Now the last thing I will say when it comes to food cost, the
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most important thing that you could do is just take action.
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Start to understand it. Start looking at your costing
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everywhere. Start looking at food as
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dollars. Train your team to view food as
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dollars. Train them to not see what's in
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the garbage bin as garbage or waste or trim, but view it as
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dollars. What could it have turned into?
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Start viewing your menu as the way that your restaurant makes
15:08
profit. That's what brings dollars in
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it. As I said before, the lifeblood
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of a restaurant is money. Cash has to be flowing through
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the restaurant to keep the doors open, to keep the employees
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paid, to keep your bills paid with your vendors, and to make
15:21
sure that your restaurant is open.
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So you must be a good steward of the business and make sure
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you're making good business decisions with your food cost
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anyway. I could talk about food cost all
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day long and still not cover everything that needs to be
15:37
discussed. What I hope you enjoyed this
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three-part series on food cost and like I said, if you want me
15:44
to make a guide on this, let me know.
15:46
I could probably turn around a guide pretty quick for those of
15:48
you that need something more tangible to remind you about how
15:53
to look at food costs and just some best practices that I have.
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Also, I cover food cost extensively in Culinary
15:59
Leadership Fundamentals book. There's also a video course that
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I have where I also cover food cost in depth as well.
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You can find all that on Chefs psa.com.
16:08
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