What way do you figure food cost for the week?
Starting inventory $ plus weekly purchases minus ending inventory $ divided by sales?
Weekly food purchases divided by weekly sales?
Other?
Who has the easiest, most accurate way to calculate food cost percentage for the week?
Calculating food cost without taking account of inventory is useless.
Food cost = (Starting Inventory + purchases - ending inventory) / sales.
Purchases = (Checks and cash paid - unpaid invoices at the start of the period + unpaid invoices on hand at the end of the period)
We combine all products that we use up in our cost including paper and supplies. We also make the process a little easier to manage by not counting stuff like basil, oregano, cleaning suoplies, foil, napkins etc. We just assume that stuff is all used up when we buy it. Yes it makes the number a little off, but it cuts the list of things to count in half and it all washed through any way.
I created my own excel inventory file where I input my beginning inventory (the ending of last week), input all my purchases, input all my ending inventory, and then just enter my sales for the week. And voila. It does ALL the calculations for me. I also have it break down into my dairy usage percentage, meat usage percentage, toppings percentage, ingredients percentage, appetizers percentage etc… Its pretty nifty if I dont say so myself.
Lets not over complicate things…for the purpose of food cost over a week ‘Purchases’ is simply the value of every item that has come into the inventory in that period regardless of how or when it is paid.
In the past we did an inventory each night…That way we could identify which staff were working when our food cost (including boxes & supplies) was off our target…The most telling item was our box count which allowed us to know if pizzas were being sold without being rung in…
“Lets not over complicate things…for the purpose of food cost over a week ‘Purchases’ is simply the value of every item that has come into the inventory in that period regardless of how or when it is paid.”
The point is exactly that… just the stuff that came into inventory. I have worked with SCORE clients that thought “purchases” was what they paid for that week. so yes, there are two ways to do it:
Since I want to know the amount of payables at all times, I find it easier to do it with the invoices and the checks. Especially when done monthly; I don’t have to find all the invoices and add them up and check the delivery dates, I just run the total in the check book and balance out the unpaid invoices with the ones from the period before.
It is not more complicated, just not what you are used to.
Begining Inventory
= Total Available Goods 4 Sale
= Cost of Goods Sold
/ Net Sales (same period)
= % Food Cost
PERIOD!
Sep out your paper products, as they are not FOOD, but a cost of doing business (controlable costs)
You can track Purchase %'s as a guide to food costs, if you don’t do inventory every week…Purchases s/not exceed 50-60% of Sales @ weeks end, else you’re buying too much & creating waste…
QuickBooks is an excellent method of tracking your Sales, Expenses & if you you use the inventory feature, you can track all costs on what ever frequency you desire…
I track mine weekly, so I know if I have a problem b4 months end…
Tracking your box inventory to doughballs made/pizza sold keeps the staff on their toes…
U. S. Marine Corps, Auditor
Semper Fi!
That’s like an accounting Rube Goldberg machine! :lol:
A good figure most restaurateurs should keep in mind is “Prime Cost”. Prime Cost is the sum total of your controllable expenses… the total cost of goods (food, beverage and related paper products such as disposable cups, napkins, etc.) plus the gross labor cost for all employees (including managers and working owners), which not only includes payroll, but payroll taxes, worker’s comp, medical insurance and other employee benefits.
This percentage should be less than 60%. The percentage left goes to uncontrollable costs (at least from a financial management point of view) such as rent, utilities, etc. Prime Cost should be visited at least weekly. And I am surprised it is not included in the higher end POS systems. But it should be part of your regular QuickBooks reports and upon which you base manager compensation.
PMQ has a nice description here:
http://www.pmq.com/mag/20070102/davidscott.php
“Sep out your paper products, as they are not FOOD, but a cost of doing business (controlable costs)”
When you are in the delivery business, there is no difference at all between boxes and cheese (except that the box quantity does not vary by pizza maker LOL)
It comes down to how much time you want to spend working on this stuff and whether it provides a useful number. PP is right as far as a definintion of “food cost” goes. For me it is more useful to combine food, paper, supplies all in one number. Call it consumables cost if it makes you happier.
Knowing how much cleaning supplies or paper plates and napkins I use as a separate % from food is not useful to me. I roll it all together. Occationally, I will carve out cheese and track it as an individual cost.
Dewar is right about “Prime Cost”. We track that monthly. With monthly sales that swing from 25K to 110K based on season, our monthly performance on this metric is all over the map, but on a full year basis we are a little under 60% (not counting owner comp since we don’t work in the store)
The reason I do it food cost with the check book is that it saves me a lot of time. We do a detailed food cost monthly not weekly. (If the number starts to wander we go to weekly) I can flip through the check stubs and add up those costs a lot faster than going through the old invoices. By netting out the effect of unpaid invoices I do not have to check the delivery dates. I certainly do not run through the US Food and Sysco invoices splitting out supplies! I can finalize the monthly food cost with the inventory the manager does in about 5 minutes the way I do it. If I ran through all the invoices and tallied up the things to subtract, checked the delivery dates etc etc it would take an hour and would give me a number that was NO MORE USEFUL than the one I get doing it my way.
There is no end whatsoever to the amount of time you can spend on looking at numbers. I find them fascinating… BUT, not all of them are useful or useful enough for the time spent generating them.
People on this forum have asked how I run this business in 5 hours a week. This is one of them. At a half hour in the mornings, I spend about as much time on this forum than I do in my two stores.
Steve,
Do you not use accounting software? I’m guessing you don’t, since you talk about going through the invoices checking delivery dates. If you don’t, I can see why you do things the way you do.
Finding the total purchases for any time period takes me about 3 mouse clicks and 4 seconds. I think that’s the confusion on why you use the “complicated” method of deriving purchases.
If you don’t use accounting software, you’re hard-core. Or possibly a massochist 
I do have to say that I agree with PP about paper goods though. The idea of splitting them out is so I can see if (and where) something goes out of whack price wise. But again, it’s easy with software; I’m not sure I would take the time if I was doing it with paper and pencil. If I see my COGS jumps a percent, I want to be able to see where it happened at. This saves me time by not having to go through every single invoice and monitor prices every single week.
I have accounts for COGS:Supplies, COGS:Beverages, COGS:Beer and COGS:Food. COGS:Food is further split into several accounts for dairy, protein, produce, etc.
So when each invoice arrives, you take the time to split all the categories out so you can track them? I often have food, paper, supplies all on one invoice. I sure would not want to spend that time.
You are right, I do not use acconting software. It would take me longer to enter the data for every invoice splitting out the categories than I spend in total in my store. In the end, you problem is never going to be in supplies or paper (and if it is paper, there is only one thing it can be) so splitting that stuff out never made any sense to me. My total consumables cost is over 200K. All supplies combined are maybe a couple of % points at most and they don’t vary enough to throw the numbers around.
Payroll is handled by the POS system for hours and by calling ADP with the totals. It takes my manager about a half hour every two weeks at this time of year and somewhat more than that in the winter.
I don’t. Both of my broadline distributors will arrange the invoices how I want (Sysco is one of them.) I tell them which items I want in what category… the invoices come with each category subtotaled for me.
Using QuickBooks, I spend less than 10 minutes/day, entering purchases, adjusting inventory & inputing sales…but I am an accountant by default
I only do a “good” inventory @ month’s end & spot check it every several days…
Yes, QB takes a bit of prior planing 2 set up, but it gives me all the info I require when needed…