Food cost is a double four letter word for me.

It’s triggering.

The minute service industry management was thrown at me it was the first thing that was thrown at me to reckon with. I had no equations to go by. No one to take me under their wing and show me how to evaluate it, conjur it or solve it.

It’s an intricate part of the industry especially if your a food heavy establishment. Most of my restaurants were 75% food 25% alcohol. Habitap was around 60/40 I honestly would’ve liked them all 60/40 alcohol is more profitable.

In the twilight of my long career at the steakhouses I feel like the last two years of my job was driving to each steak establishment and having long discussions about underachieving food costs.

Steakhouse’s ideal number was 35-37%. Most sat at 40%. Some hovered on 42%. You won’t stay open too long with 42%.. and they didn’t

What exactly is food cost? I’ll make it simple for you or at least try.

Food cost is the amount of money you put on a plate to be served to a customer. If you came into a steakhouse of mine and order just a simple 8oz filet with a baked potato and salad then that menu price would reflect the sum of all three products to line up at 35%’cost.

Filet – lets say it’s $18 lb. So 8oz would amount to the proprietor as $9 per serving. Now before we do this across the board you have to ask are these pre cut filets? Chain off? Or loins at $18 a lb? If you’re buying your own loins then you have to calculate waste but we won’t do that at the moment because then we get into some varying word problems and have to apply some arithmetic. It’s 6am and I’m on my first cup of coffee.

So, filet has already put your plate price at $9. If you were calculating your food cost to be 35% you would be looking somewhere around $25.60 to cook a filet and put it on a plate and serve it to a customer.

That’s the easy part. Now you have to calculate the plating accessories. You’ll most likely be purchasing your potatoes in 50lb cases. You’ll have to forgive me it’s been a minute but I think we were buying 60ct potatoes. My memory has lost quite a bit of storage.

You buy bulk potatoes in 50lb cases. So if you’re buying 60 count potatoes it means you’re getting 58-60 potatoes per case at 13oz avarage each. Cost of potatoes fluctuates like fucking petroleum. Always pray for good weather in certain regions it has a huge impact on your bottom dollar. We’ll mark this case at $30 for simple math. That puts a potato at $.50 a unit.

Sounds simple right? Well do we want to go by the law of averages and price out each potato loaded or just butter and sour cream which is the most popular choice? This is where your line training will set that pricing standard. When I used to work at the steakhouse the potato guys always prided themselves on the height of their loaded potatoes. Yes they looked great on a plate with that mountainous build up of butter, sour cream, bacon pieces, cheddar shredded and a mound of green onions. That little accoutrement could range from $.25 to .$50 per potato. Doesn’t sound like a lot but over time 1000 loaded potatoes could fluctuate your food cost by $250. That’s just one side item on your menu.

So let’s cost out potatoes at $.75 per build up just to be safe. That puts your plated filet $28. We haven’t touched base on the salad plating. I will skip over the individual cost of each salad component because I feel like my equations are probably already losing most of you.

But yeah you have to cost out each ingredient. And lettuce can go from $19 a case to $40 in a week if a nice flood or drought hits the farms. At the time I was costing out salads I believe the average side salad was $.80 per serving. That included the $.18 portion of ranch dressing. That was our popular salad dressing so I used that for the law of averages. You give your pantry guy tablespoons for accuracy, a portion vessel for lettuce and one I repeat ONE scoop for dressings and it better not be bigger than 2 oz or we will pull your ass off the line to reeducate. This is cost control at its finest. You put a lot of your food cost in the hands of $12 employees who usually maintain the efficiency you put into their training unless it gets busy of course then it gets a little hairy.

You think you’ve got a good hand on it? Now go look into the trash cans on the kitchen line. There always full of food. Mostly food that’s suppose to go out to the tables. How do you account for that? Well we have to start a waste sheet to blend in with your comps to explain to your investors why your food cost is trending upwards. You could fill up 30 more potatoes with the cheese, bacon and green onions you’d sweep off the floor during a Friday night line sweep. Salads that were dressing on the side and misread went into the garbage without thought of comping. As a line cook you don’t want expo to notice how many times you fucked shit up so most mistakes slide quietly into the trash. Grill cook is the same. Of 150 steaks going out the window at least 5 probably dropped on the floor, got thrown out for being undersized during butchering or they went flambé from all the fat and grease on the grill. Some will be comped others will sit in the at the bottom of the trash never to be found. Grill cooks are egomaniacs. They never mess up..

So now we have a steak (filet) $9

Baked potato assumed loaded $.75

Side salad assumes it’s 1.5 cup greens at level market price with tablespoon chopped bacon, diced tomatoes, two red onion rings slices (on slicer setting 3 for consistency) and two ounces of ranch. $.80

Price on plate $10.55. Menu price will be $30. That will put your food cost at 35.166666666666666666%. That’s what we want right? Close enough if every single plate goes out exactly the same way as all the others.

Which will never happen. Let’s bump it up to $31 at least. Now we are at 34% with a tiny bit of wiggle room for over portioning and drops. Not much though. You have about $.30 worth of wiggle room. I’d suggest $32 just to be safe. All of this is under the pretense that your company’s food cost is set a 35%. My own personal restaurants I liked for it to be hovering under 30%. Burger bar was 32%.

It’s difficult to price everything across the board at 30%. Some items won’t sell at that cost.

Some, the only thing you’re doing is taking a steak out of its airtight wrap and slapping it on the grill. Others you have to take into account the process of preparation. That brined, smoked, carved protein might’ve gone through an 30 hour process of preparation. It may have consumed a $18 an hour prep cook’s time most of the day. You have to make sure financially it makes sense. Prep time has its fingers in cost too.

Another thing to consider is what percentage of P mix is the big sellers on your menu? WTF does that mean Chad? Well let me tell you.

One of my problem children during my regional steakhouse days was our Columbia location. Its food cost was usually 2% higher on average than the other three. I spent a lot of time there rewriting inventories, meat count sheets, pouring over comps for theft. I’d sit with them while notating inventory and data entry, I’d watch every plate for consistency, employees eating, I set new portion standards and the cost wouldn’t budge. After spending a few weeks back in Greenville I began to recognize that although our menus were identical the consumers tastes were different. Greenville sold a lot of sandwiches and salads for lunch (a great food cost item), sirloins were the star (34% food cost). Columbia didn’t do much for lunch. People went thirst for steaks. They loved the ribeyes, prime rib and the Arizona dip sandwich which was priced out at 40%. The ribeyes were 38% and prime rib was around 42%. This greatly affected their overall god cost. The p mix for Columbia showed they sold up to 40% more of these items than the upstate locations. The lower cost items such as chicken, salads and sandwiches inserted on the menu to balance the higher cost items were way below par than the company average. It caused the fluctuations.

Also their sales were underperforming. High volume fixes food costs too.

How so? Well another equation you have to reckon with is inventory. The larger your menu the larger your inventory. Maintaining a strict inventory is good for costs. You have to set the standard with a little planning involved. Everyone’s inventory is different I can’t come out and tell you $8k is the ideal opening inventory every month. It doesn’t work that way. The months end on different days of the week. Our big trucks always came in on Mondays and Thursdays. Its not fun doing inventory on a Thursday night when you had a $6k truck arrive that morning. On the other side Sunday night inventory was most likely small due to the weekend taking everything off your shelves. Your costs are also effected by your existing inventory. It’s an over/under thing. You don’t necessarily get good credit by having a healthy inventory. It gets backed out of you monthly costs. I might touch base with this later but honestly I’ve probably lost most of you by now.

Ideally it would be great to end each month of your inventory on a Sunday when your shelves are mostly empty and you can start all over again. I prided myself on how streamlined my inventory was every week. Monday healthy inventory, Sunday empty shelves. There’s a fine line between reducing your inventory to a healthy low point as opposed to running to the grocery store 16 times on Sunday because you ran out of product.

Slow restaurants have higher food cost due to the fact that it takes a healthy investment to create that first inventory purchase and to maintain it. Your very first truck will most likely be your biggest one. It may take $10k to fill your stock up for the first time and then you’ll watch it flow down to $2k and back up to $8k but never back to tht original level. Why? Because hopefully you’re selling it and not holding it. The more shit that sits comfortably on your shelves collecting dust the higher your food cost will remain.

This isn’t some secret formula. Its economics.

You wanna talk about theft? It’s rampant in the service industry. Usually it’s just employees making a meal behind your back. I was very transparent with my line cooks. If you’re hungry eat. Don’t make a four course meal if you want a burger then get a server to ring it up. It had to stay under a certain menu cost. Most abided by it but I’d still get some jive ass turkey that would walk back into dish with 8 pieces of bacon, 4 biscuits, stainless bowl of grits and a piece of fried chicken.

Others kept me on my toes on daily inventory and meat counts. Especially if you bought meat in pre cut form. Its already wrapped and ready to steal. Most of your theft is on its way to the dumpster and then takes a detour to someone’s trunk. Always check your slim Jim’s at the end of services. Its usually wrapped up in a trash bag on top of other trash. Always at the end of service unless they are resourceful and have a cooler in their trunk. You don’t want a tenderloin basking in your backseat for 5 hours in July. Once you get a vibe from that employee they are easy to catch.

Always have cameras on hand. I enjoyed watching two line cooks on a Friday night pile prime rib into a take out box while the manager was outside smoking.

Whole tenderloins under empty boxes, a chub of hamburger meat, pack of burger buns and a gallon of mayo. These are just the ones I caught. You might catch 10%.

I had a dishwasher get t boned on his moped after work and cryovac sealed pork chops were found all over the side of the road next to his moped. He was fine btw. Just walks with a limp now. I see him every morning on his little stoop next to the Hampton station. No hard feelings. Moped might’ve moved faster had it now been weighed down with stolen goods though.

Keeping your comps below 2% of your food sales should be the norm. 1% is ideal but no more than 2. A solid management team that communicates well with patrons will help. Stay away from the office managers who dislike confrontations and walk out with a stack of gift cards. If bribery is the only way to bring customers back then save yourself some trouble and lock the doors. Use your comps to show appreciation towards your regulars. It goes a long way.

So why are we bumping up our purchases 350 to 400%? Well we have bills to pay. That food inflation is imperative to pay things. A lot of things.

The napkins in your lap. Linen is a huge bill that adds up annually.

Bar towels, mop heads

Silverware, China, small wares. If you buy a plate from any reputable China distributor you’re looking at $10-$15 a plate. That’s on the cheap side. I’ve bought $25 bowls just to make my shrimp and grits look prettier. They all chip like a pringles in a dropped can. It’s fun watching 20 plates topple over when a dishwasher cracked out slips on the floor. Silverware? Sidework is pulling old silverware out of discarded linen for hours a week so you don’t have to buy more. Those little magnetic trash cans are trash. They may catch 1 out of 10. Also customers love those fancy steak knives and will take them home with them.

Chemicals for sanitation and washing dishes, hands, floors and ass.

Utilities. Want to see my gas bill on busy days? Power bill for 5000 sq ft restaurant in 90° summer heat with 300 people coming in and out all day is fun to pay.

I could write a hundred more lines but this was meant to be a brief blog.

If I could give you an easy equation to start off with for managing a forecast for a full service restaurant it would be this –

Keep your food costs under 30%

Keep your labor under 30%

Beer and wine under 25%

Liquor 18-20%

My easy diagram for dummies start up model is 30/30/30. This applies for full service. Food costs and labor for bars varies differently.

Aforementioned food cost after comps 30%

Labor ideally after taxes 30%

All other expenditures 30%. These range from monthly rent, utilities, small wares, paper products, repair and maintenance and everything else on your p&l lines.

If this pipe dream retains its level lines of financial burdens you’ll net 10%.

So if you have a $1,000,000 in annual sales you’ll net $100k. Sounds great right???

Well.

You lost a GM last quarter and had to train a new one so you double up on management coverage for 3 weeks while your new gm gets acclimated. Your kitchen turnover caused you to spend an extra $300 a week to train a pantry cook who thinks a fried egg goes into a fryer.

Your hood fuzzed out during Friday night dinner rush so you had to close at 6 and turn away 80 reservations

Line cooler shit the bed overnight or it got unplugged while cleaning last night and you toss out $300 in filets

The L on your marquee sign went out and it costs $600 for a professional sign company to pull their rig up and change the bulbs

Water heater doesn’t want to heat anymore

Your lease is on year 5 and now it’s gone up 3%

Your dining tables are sticky from years of food and residue and now they have to be sanded and restained

Again. I could write a hundred more lines of not “what ifs” but “when it does”

Just wait until minimum wage finally doubles. Look I get it. I understand it. The average consumer will not like it that’s all I’m going to say at the moment.

I’m about to compute my food costs for the deli soon. Charcuterie I don’t worry about because I add assembly costs to my food costs so it works out for the most part but that will change soon.

I threw this out there somewhat for fun because I do this for a living and also for some to understand why restaurants charge what they do.

It may also be good for some of my km and chef friends who don’t calculate your food costs accurately. Some have never grasped it or at least most of mine couldn’t seem to for the most part. I recall interviewing a chef for SC and asked him what his food cost were at his previous employer and he looked at me with a blank stare and said “I think around 15%” and our interview ended immediately.

Math is easy for me it’s the million other things that are not.

Don’t read this and think I’ve got it all figured out. This was only a brief summary I wrote out after a pot of coffee. There are a thousand different variables to come into play. This was meant to be a very elementary example for discussion.

This counts as a deli update right?..