Current Food Cost %

In analyzing my August, I realized that my Food Costs have doubled since last August, but my sales have only increased by 50%. My food costs last August were running around 26%, including packaging. My food costs are now running around 35%.

31% Food, 4 % Packaging.

I know cheese is through the roof, and I’ve had a lot of other increases since January, but this is more of a jump than I had expected. I just raised my prices, but I was just curious as to what anyone else’s food costs were before I tore into my supplier?

Ive been running the same numbers. We are at the mercy of the market because we have fixed costs (our menu) Everyone keeps telling me to ride the wave out, easy for them to say!!!

close to the same, checked a bunch of invoices the other day and in 4 months almost every product went up. anywhere from 20 cents to about 5 dollars per case, not including cheese, just all other products. I have a restuarant depot about 45 min. away and since a lot of stuff is cheaper there I just bit the bullet and make 1 trip per week to stock up on some things and only order some stuff i can’t get there from suppliers. I tried talking to my sales guy and he sort of just was like , oh well, well you know what , oh well , if his commissions go down, not my problem! I haven’t raised my prices since april, then only a few, but i will have to again if this keeps up!

It has been a tough year…
Increased cost in the Beef Sector due to Mad Cow Disease.
Increased cost in the Poultry Sector due to Avian Flue Pandemic.
Increased cost in the paper & cardboard market due to reduction in mills, and supply.
An increase in Minimum Wage… $5.15 to $5.85 (15% increase)
Increased Cost of Fuel…Last August it was about $2. now its $3. (50% increase)
And Lastly an increased cost in Cheese… from $1.35 to $2.10 (55% increase)

This time last year my total COG was 28%, for most of the Spring & Summer I ran a 35%, I recently used local, national, and International news related to the increase in Cheese, and The Major Pizza Establishments raising their prices, and a justification to raise mine also. After the increase, I am running a 31%

Food Cost is important, but what is really important is your Contribution Margin %, if you can keep that up around 45% to 50% your golden!!!

hate to sound stupid, but what is the contribution %? I’m familiar with the rest. But now that I’m asking questions, when you look at payroll %, is that net or gross or loaded (as in all taxes added in too)?

Your contribution margin is the dollar amount left after paying food cost for an item. A ten dollar item with a 50% food cost has a contribution margin of $5.00. A six dollar item with a 33% food cost has a $4.00 contribution margin. The 10 dollar item with the higher food cost leaves more left over to pay the bills with. For this reason, don’t get too wrapped up in percentages alone.

tommieknowspizza I hope will tell how he/accountants figure it

contribution %, as I understand, is when you sell a $20 pizza and cog is 50%, the contributiion is $10
when you sell a $10 pizza and your cog is 30%, the contriution to your pizzeria is $7
…the $10 contribution, eventhough more cog, contributes a larger % to your profit than the lower cog oizza that sold for $10…
I am slack at accounting, but I understand I want to sell more of those $20 pizza with 50% cog !

I do not know how most people figure the payrol %
…maybe tommieknowspizza or an account can chime in and tell us the popular way the contribution % and the payroll are figured

hope that helps,
Otis

When I look at “payroll” I include everything, all the taxes, the payroll processing fee, the bank charges, you name it.

Our food cost is up from about 29% (I count all supplies and paper in here too) to close to 33%.

I will wait about another 30-60 days to watch the chees price as we head into our busy season. If the prices stay up there, our prices will jump by ata least $1 per pizza.

$2 would be a better reflection of the increase in costs. Just the price increase on 12 oz of cheese on a 16$ pizza would justify an increase of $1.50. Flour is up 30% as well.

The contribution margin is the amount of money by which the selling price of a good exceeds the variable cost of producing it. That’s the amount of the sale that’s available to pay for fixed costs, and hopefully profit. The variable costs are the costs that, if you didn’t sell that pie, you wouldn’t have. So, for a pizza, the variable costs are the cost of food, the cost of packaging, the cost of delivering it. So, a $10 pizza that costs $5 in food and box, has a contribution of $5. The percentage is the margin divided by the price sold times 100; in this case $5/$10, or 50%.

Fixed costs are costs you’ve got pay, regardless of your sales. Rent, utilities, insurance, and so on are typical. Some of these really are varaible costs, like your water bill , but are very hard to allocate.

Whether you include labor as a variable cost or not depends on your preferences. Most small restaruants don’t. It’s a reasonably fixed cost – you’ve got to have people working whenever you’re open. It is worth figuring out and tracking your daily labor costs, which is just the fully loaded payroll (wages + taxes, insurance, etc) divided by your daily sales. If you can do it hourly, you can easily see when you’re over or understaffed.

a $10 pizza that costs $5 in food and box, has a contribution of $5. The percentage is the margin divided by the price sold times 100; in this case $5/$10, or 50%.

thank you, that makes sense,
Otis

As I know it…

Gross Net Sales minus Total Variable Costs (i.e. Food, Variable Labor, Payroll Taxes, Advertising, Supplies Expense, Delivery Expense, & Donations) equals Contribution Margin.

Contribution Margin Minus Fixed Operating Costs (i.e. Rent, Telephone, Electricity, Gas, Garbage, Water & Sewer, Store Insurance, Maintenance, Accounting, Legal, Fixed Labor & Payroll Taxes, and lastly Royalties)equals EBITDA (cash flow from ops) or (gross profit)

As was suggested above.

A store doing $10,000 a week in sales with a 50% food cost will probably profit better than a store doing $5,000 a week with a 25% food cost.

Its not always the %'s that matter, its the volume behind it that matter the most.

In my situation,

I am running about 31% food cost on 5,000/wk with a Total Variable of 56%, My fixed cost are very low about 10% or 500/wk. Which nets me about 34% or about $7500 a month. Which is good.

But I would trade it in, any day for a store running 50% food cost at $10,000 my total variable cost might be 70%, cause I would have to hire additional labor to handle the increased volume but remember my fixed cost are only $500/wk or 5%, which would profit me about 25% or about $10700 a month.

So again in closing, don’t focus to much on the %'s, focus on the volume, and all your problems should heal themselves.

[quote="Fixed Operating Costs (i.e. Rent, Telephone, Electricity, Gas, Garbage, Water & Sewer, Store Insurance, Maintenance, Accounting, Legal, Fixed Labor & Payroll Taxes, and lastly Royalties)

My fixed cost are very low about 10% or 500/wk.[/quote]

How is it possible to have all the above expences @ 2000/mo?
My fixed Costs are arround 1500/week (not including fixed labor because I just do all labor as variable cost and I have no royalties) and I have hard time making 6000/week in sales.

I’ll play devil’s advocate here.

After months in my store and using the same prices and topping coverage of the previous owner I weighed all ingredients for each of the 21 signature pizzas we have on our menu to work out the true cost to sales. Took a couple of hours.

The main cook I inherited, and got rid of real quick after I was confident enough to go without him, used to pile toppings on. I did the calculations on his toppings spread.

We then gradually scaled back the toppings which brought the costs of goods % down. Funny thing is people suddenly started telling us how good the pizzas were now. What we did actually helped the cooking process as all ingredients now cooked more evenly and the bases lost that wet line effect.

Over the next twelve months as prices rose we very marginally cut back the amount of toppings to where we are now. Another funny thing - our sales went up even more and compliments came more and more, as did our customer count.

A prices went up we were able to absorb them to a degree until now where we have now put our menu to press with prices increased across the board. Last finacial year our food costs were 30-32%.

We are streamlining our priceing and putting some lines up only 6% and others up to 15% with others in between. Averaged out our increase is about 8.5%. On our new menu our cost to sales is around 27%.

We have been in the shop for 20 months and used the same pricing as the previous owner and his menu prices were about 8 - 12 months old, so in fact we are 2.5 - 3 years without a price increase. Don’t jump on me I know this is really bad business but there wers some issues we had to overcome before we could do a price increase without affecting trade.

Luckily we have increased our sales by around 25% over the last 12 months so the extra dollars have helped the bottom line. Add to this a more streamlined staff levels and having all staff crossed trained has helped immensely.

With our current sales levels without any advertising (we stopped as we are overloaded on busy times) we are confident customers will accept our increases. We expect to lose some as well as get comments on the new prices but the media has been trumpeting massive food price increases for some time now so most customers will be accepting.

I will be delighted when our costs get down to the 27% as it will go a long way to paying for our much needed additional oven, prep bench and the installation of our POS, plus put a couple of bucks in my pocket. We will also re-start our advertising as we will have oven capacity to take on more orders.

I have no hestitation in recommending reducing toppings to improve margins as long as there is room to move. You only do it very gradually until you get to your desired goal.

Maccas, Burger King, KFC etc all continuall downsize their products to improve profitability, as well as putting prices up, as do the grocery manufacturers, and guess what? People still buy their goods, so why is the pizza industry so hyped up about giving more toppings than competitors? I will stand by my decisions that we made to cutback the amount of toppings as a profitabilty earner and will recommend them.

If you have a good product that people are willing to wait 45 minutes on busy nights then you know you are doing something right and they will accept your product, even with a little less toppings.

In the end of the day I’m in business to make money and not go out the door backwards giving customers the most toppings in town.

There is the opportunity while the media is talking about the rising costs of food to raise prices and marginally reduce toppings. Hopefully then we can all get the full rewards for our efforts.

Dave

Alessandro,

I live in a very remote place with a population of about 6000 in the valley where I live. Thus the cost of living, and doing business is substantially lower than anywhere else.

My Rent is $200 a month for a 2000 sq. ft. space
My Telephones are $120 for 4 lines.
My Utilities are $400 a month all electricity, no Natural gas.
My Garbage, Water, & Sewer $0, included in rent.
Store Insurance $65 a month, for $4,000,000 Liability.
Maintenance $250. set aside for any big problem that arises, like a mixer taking a dump.
Accounting. $100.
Legal $250. set aside just in case.
I am the only fixed labor, and I don’t charge the store royalties yet. But I do charge them for my Company Car, Auto Insurance, and my Condo. Which amounts to about $700 a month.

Which totals just over $2000 a month, or about $500 a week.

but in the end you have to divide what you payed for food that came in the door by your sales so how will contribution factor in ?

Ooooi Veeeeey!!!

A SIMPLIFIED MONTHLY PROFIT AND LOSS SHEETS LOOKS LIKE THIS.

GROSS REVENUE 20,000.00 100.00%

VARIABLE COST
FOOD COST 6,000.00 30.00%
VARIABLE LABOR COST 3,000.00 15.00%
ADVERTISING 1,000.00 5.00%
SUPPLIES EXPENSE 200.00 1.00%
DELIVERY EXPENSE 200.00 1.00%
TOTAL VARIABLE COST 10,400.00 52.00%

CONTRIBUTION MARGIN 9,600.00 48.00%

FIXED COST
Telephone 200.00 1.00%
Electricity 400.00 2.00%
Gas 000.00 0.00%
Garbage 000.00 0.00%
Water & Sewer 000.00 0.00%
Store Insurance 62.50 0.31%
Maintenance 200.00 1.00%
Accounting 200.00 1.00%
Legal 200.00 1.00%
Fixed Labor & Payroll Taxes 1600.00 8.00%
Royalties 10% 2000.00 10.00%
TOTAL FIXED COST 4862.50 24.31%

GROSS NET OR EBITDA 4737.50 23.69%

IF YOU REDUCE YOUR PRICE, AND IT INCREASES YOUR REVENUE, IT WILL REDUCE THE % COST TO REVENUE OF EVERYTHING ELSE, AND SHOULD NET YOU MORE.

KAPEESH!!!