COST PERCENTAGE

OK, I know I’m new at this. Six weeks now and still learning the ropes. But we just took inventory for the first time so now I have some definite numbers to work with. I was surprised to find that my COS is about 31%. Shouldn’t my box expenses be counted into the COS figure? If I include my boxes, etc into the COS my % is WAY OFF. If that’s the case then I got a real problem. If not, then what percentage should all the “supplies” (boxes, cups, etc.) be of my sales. Help! and Thank you.

yes

I would NOT include box or paper/take-out expenses in my cost of food % but some do…

I track my packaging costs as another line item…

I also track beverage sales/costs apart from food costs…

Semper Fi
U.S.M.C.
Auditor

what is your percentage of takeout and delivery compared to dine in? most places are 20-25% dine in in this business (except ph) so i feel it should be included in the food cost for a pizza

Hopefully Billy will expound on “yes”. I am thick and don’t understand what he is replying to :frowning:

I ran my numbers this month, and I am doing about 25.6% Food Cost (FC) this month. When I include packaging goods like foil, boxes, foam containers, little souffle cups/lids . . . I hit 27.9% COGS. That’s how I distinguish the two numbers in my counting.

I hope this is helpful to you.

We include everyting we consume in COGS, so food, paper, cleaning supplies, condiments etc. For the last couple of years we have been at about 29.5% all in. High volume months it drops to about 26% and in the slowest months it can be 35%. (Our highest volume month is 4X our lowest)

Since we are a delivery business and therefor boxes are part of every order, I would not separate them out any more than I would leave out sauce when firguring cost of goods.

yes, i consider all paper products c.o.g.s.
like patriots i also track them separate,but all in all,they are food costs in my book,including beverages,each has its own line,and to me must be considered as part of overall food cost,mine run at 30-33%
i factor all these into my pricing structure for my menu…

I have to agree with bodegahwy and billy. I figure the cost of a box in unless yout track both food and paper products and cleaning supplies seperately and then add the percentages together to get a “true” cost. In any event if you are doing strictly pizza you shouldn’t be much more than 25% in the case of those of us doing dinners, subs and fried foods the cost can run upwards of 37%, especially with mozzarella being as high as it is right now.

Well thank you all so much…I feel better now. Maybe I’m not so way off. If I include all the paper goods, cups, etc. I’m at 36% which considering that we probably put too much on the first pizzas in the beginning weeks and made some comps, is a reasonable number. We don’t do any delivery but a large share of our business is take-out. We need to buy better also.

Question,
I have tried to persuade myself to use gross sales when comparing percents. I have always used net sales.

I believe that net sales should be used. However, this certain person is trying to convince me to use gross sales, which would even out the numbers when you are comparing different stores.

For example, if one store has a special on $5 pizzas. The other store does not. Store 1 will have higher discounts and lower sales (probably)
Store 2 will have a higher contribution margin and most likely higher profit.
My belief is that you take net sales to the bank, not gross.
So can anyone please put forth a valid reason to use gross sales vs net sales when comparing no.s or vice versa.
Bubba

you can’t take %'s to the bank, only $$$'s

that being said, your business model will dictate %'s…

LC does $12K - $15K wk w/$5 pies…Food cost may be 40% or so, but labor might only be 12% - so their GP (after labor) might be $7,200

Another operation may only do $8K wk & run a 22% FC & equal labor so their GP might be $5,280…

which is a better operation?

you ALWAYS start w/sales after taxes to do your computations…

Semper Fi!
U.S.M.C. Auditor

More Questions,
If you have multiple stores, would you be able to get comparative and equal data from the stores, if one had a special that another one did not?
My vision is that I am sitting down at a table. I have 2 P & L’s in front. I am comparing 2 stores, in 2 different parts of town and I want to run 2 different specials to see which gets a better response. Let’s say one store has a deep discounted special. The other store does the million dollar letter. Could it be that I need to use net and base for 2 different reasons?
It would seem that I cannot compare the 2 based on net but quite possibly could use gross sales.
I do understand that the bottom line is the bottom line and is the most important concern, however, I also know that my desire is to create a returning customer.
More thoughts please.
Bubba

Agreed. %'s are strictly general indicators of performance against goals and efficiency of your business and its structure. The %'s will tell you where you are running lean and where you are running higher than desired costs to the business. They can tell you where to look to gain more profit margin and when you are wasting money on labor and such. General indicators of achievement of goals.

That said, even if you are taking $$$ to the bank, if you aren’t paying attention to your %'s you won’t know if you could be taking still more $$$ to the bank . . . yes?

you’re confusing yourself & the issue - you want to single out the “specials” you do for each store or each marketing campaign…and then compare the success - right?

Gross sales are just that…you need to look at the amount of net revenue based on the cost of the marketing costs and the product costs, but even then you won’t know 100% because of “spill-over” sales etc.

start w/a goal & design your marketing plan around that goal, then when that segment of the plan has run its course, evaluate the results based on their cost/return ratios and profit

Patriot Pizza,

Are you claiming LC numbers based on Owner Operator or a corporate store?

I have a feeling you are claiming these figures off an owner operator, thus the owner working 70 hrs a week and paying for a job.

I dont say that negatively, if one can make 100k working a ton of hours building equity, I dont think that is so bad.

The LC sales #'s I quote come from an article from PMQ…costs are guesstimated, but based somewhat in reality…remember, LC is a carry-out op only…limited labor required…

There are no franchise stores (I believe) in Florida…

LC is a privately held company, but he’s made enuf $$$ 2 buy the Detroit Tigers & the Red Wings…

Although I don’t run a LC style operation, I’ve run several hi-volume operations - volume covers a lot of sins & skews %'s dramatically…