Where to begin...lowering food costs

So we’re six months in and revenues have beat projections. BUT, my cost of goods sold (includes paper and chemicals) is 36.5% over the entire 6 months. There is no particular trend. I’ve gone through and re-analyzed our costs on the core products (85% of our revenue comes from Pizza). Here’s a few tidbits.

We offer a buffet at lunch and full service at night.

We make a weekly trip to RD and buy everything there we can except produce. I feel like, for the most part, we’re paying as little for ingredients as possible. We keep a running spreadsheet to compare costs between RD, US Food, and my produce vendor.

So where do I begin to drive the costs down? I’ve started figuring out the weight cost of toppings and then measuring the amount we put on intermittently (spot checks). It’s pretty cumbersome. But, for instance, we are consistently using 2.5 oz of pepperoni on our pizza. It’s pretty expensive at 2.89 and is our #1 topping. That’s about $.45 per pizza and we get $1.50 for that topping. We’re doing much better on sausage - hitting about 25%. I’m just kind of overwhelmed by the dauntingness of the task. Any ideas on how to get a fresh approach? I’m almost to the point of just raising prices on our core items across the board (toppings in particular could easily go to $1.75 and still be competitive in our market - and we’d bring the price of specialty pizzas up with it. )

Any experienced thoughts would be appreciated.

Congrats on 6 months! Right now is very tough and if you have beat your projections your in the right path! The food cost is always tough to get started keeping track but it does get easier when you commit to it! I have been open for almost 5 years (11-5-05) and it was a real pain to sit down and do all the extra homework of the food cost! The first thing is to get all weights and prices down to the ounce. the next step is to measure ALL items on every pizza not just spot check!!! This has saved me thousands of dollars the last couple years. you would be suprised as I was when you do this and see the dollars add up. I took one week and we would literlaly redo every pizza to see how close to projection we were running and I about had a heart attack. When you get in a rush you put more on when your slow you will come close. After that week I went straight out and bought plastic cups at the dollar store for EVERY item in the make line. THEY MUST BE USED OR EMPLOYEE IS DISMISSED!
A great place to get some more info is http://www.bigdaveostrander.com/articles/portion.htm
He has been all around the country and at most of the shows instructing on just this type of thing! His site is just another of the great websites to reference. Raising the prices if you have not done it in the last 6 months would probably work as long as you arent pricing yourself out of your market. Or if your are above the market just make sure the customers are getting a great value for the money. I personally use 4oz on a 12 -6 oz on 14 -and 8 oz on 16" pizzas but i use hormel rosa grande that cup and cover the pizza entirely.
To give some more info on where your shop is and what size of pizza you are selling would be the best to get some more specific answers to your questions.

Well, if your controls are correct and monitored then your prices are too low or you are discounting too much. Its really not rocket science. Add your discounts back into your sales and see what your costs are. Limit at least some of your discounting to slower nights only.

In addition to adjusting your pricing you can influence your food cost by promoting items with higher margins. How you structure your menu will influence what people order.

Thanks. I have Dave’s site bookmarked and read his article on portioning cheeses with cups many months ago. I have never followed that method but we do use a portion cup. However, admittedly, during the busy nights we definitely abandon the cup and free throw cheese (and everything else for that matter). I have almost every thing in the shop broken down to ounces except produce and bacon (bc I have not figured the cooked yield.

We sell two types of pizzas - thin and chicago. Sausage, meatball, and hamburger go on RAW.

Thin is 11" and 15". We use grande ec blend. 5 oz and 10 oz of cheese respectively. 2.5 oz of pepperoni and 2.5 oz of sausage (since these are by far our two most popular toppings, I’ve focused on them more than others). We use 1/2 the toppings on the medium.

Chicago is 10" and 14". We use 8 oz and 16 oz of cheese respectively and the same amount of toppings as the thin.

I was thinking of portioning the pepperoni and sausage or, at least, getting a reasonable sized rameken so we don’t way overdo any pizzas.

I’m in a pretty affluent suburb of Kansas City that is very family friendly. I’m the only pizzeria for 3.2 miles and one of only 3 restaurants in the same distance (subway and a local bistro being the other two).

I’m offering a unique product (Chicago pies) to our area but we are not a fluffy pizzeria. We want to be a family friendly joint so want to keep my prices reasonable. But my two main competitors are getting $1.95 for toppings on their 15" and 16" larges. So I think i could raise those without a problem.

I’m really considering transitioning the cooks to strict portioning. Do you find it slows down your production? How much?

What are your non-food costs of goods (chemicals, papers, etc?) as a percentage of revenue? I need to pull out all my receipts and break that down well. I’ll have to do it for several months to get a good sample because there’s a lot of chemicals (for instance) that we only buy 1-2 times per month…

I also have discounted quite a bit in the past six months. Our most successful promotion has been a ridiculous takeout promotion ($8.99 and $10.99 for large one-topping take-outs (thin and chic respectively). This has been wildly successful in bringing in new customers and keeping us on peoples mind but may have outlived its usefulness. I’ll definitely be increasing the price on that deal slowly with the goal to phase it out in the next 6-12 months.

Thanks again for your help and input.

Pizza Pirate,

I think you are right - we are discounting too much. I sort of poo-pooed the discounting until I just ran the numbers in my POS. I need to get a handle on those discounts! I think we’ll look more carefully and try to squeeze all sides:

  1. Better portion control (I still am not convinced this is a problem, but I’m going to find out)
  2. Fewer discounts.
  3. Modest price increases to put us in line with the competition…

Portioning is just the hardest one because it’s laborious and requires us to change the culture of the kitchen. It’s got to be done though…

If you are keeping track of everything that leaves the kitchen, you should be able to run a theoretical food cost or at least know how much you should be using (by weight) versus actual usage…The comparison will tell you if you have shrinkage and/or over portioning…Excel should become your “best friend”…

The only thing we portion, in regards to pies, is the cheese. Its your most expensive item and its really easy to do. We have a digital scale with a bowl on top right next to the cheese tub. We just portion and dump, portion and dump . . . There’s a chart on the wall detailing cheese weights for quick reference as well.

I don’t see it as being very practical to measure toppings. Its important to monitor the make line, however, because things will go array otherwise. What also works well is having pictures on the underside of the pizza tables or walls showing how each topping should be done.

Sounds like you’re all over it otherwise. Just need to clean up the discounting and pricing a bit.

Cheese.
Cheese.
Cheese.

Did I mention cheese?

You almost can’t scew up pepperoni in a way that would throw your overall costs and it is easy to “eyeball” pepperoni! Get used to what the right number of slices looks like. You could be wrong by 10 slices and still would not cost more than 10 cents! but if you were throwing that much pepperoni you would see it. But cheese? It is easy to get to where you are throwing 2-3 oz extra on every pie and at current prices that is 35 cents or more… per pizza. Do a couple of hundred pies a night and you are talking $500 a week and 2-3 food cost points in no time.

If you are doing free pies for promotion (works VERY well) you have to put your discounts or freebees back into sales before you calculate food cost so you see what your cost would be if you were charging for everything. That is how you equalize food cost during times of the year that you are promoting heavily with times when you don’t need to do that so much.

I think most of us are running a higher food cost than we were last year. Cost of most goods are up while the big 3 are forcing us to discount a little more to stay competitive. Right now would be a very bad time for most of us to raise our menu prices. However, flour is up, cheese is way up, boxes are at all time highs, meats are up, soft drinks aren’t getting cheaper. However, if we raise our prices some of our customers will leave for a cheaper option. I think we have more increases coming at us in the next 3 months also!

Seems like your cheese cost is adding quite a bit of the percentage. We use 12 oz of cheese on a 20" thin-crust pie. That’s 26 square inches per ounce of cheese.
Your thin crust is at 17.6 square inches per ounce.
Perhaps try some cheeses other then Grande as it sells at a premium.

I was thinking what Royster said. You need to determine what your “ideal” food cost should be. figure out what it costs to make it the way you want it made. Once you have your ideal, then you can decide whether or not you should do something about your foodcost. Ideally, you should have your point of sale software setup to keep running tabs on your ideal foodcosts as you go. Even more ideally, you should be able to take that info and use it to find where you need to adjust portioning or better control waste.

Secondly, you mentioned you do buffet… throws flag Buffet can either make you or break you. When you figure out what your ideal food cost should be, you need to figure in all those buffet pizzas as well. Where I worked, i set up a special menu button within our system just for buffet food. As I would make stuff to put on the buffet, I would pause occassionally to update an open ticket that listed how much of each thing I made. There were times that the computer had me listed at 65+ % ideal foodcost at the end of buffet :shock:

I just got done raising some prices on our POS and then came and read this thread. I’m not feeling comfortable about raising my pizza prices yet, but I have to at least partially offset the increase product prices. We did raise prices on soft drinks and beer, however. The increases there will cover about 30% of the increased cheese prices we have seen since May.

Everybody has mentioned cheese portioning, and I completely agree that’s where you should attack first. Like pointed out above, 2 extra ounces of cheese on each pizza is thousands of dollars per year and easily five figures in a decent volume operation, and a whole lot more at Grande prices.

Weigh out 2 ounces of cheese and spread it over a 14" pizza pan - you’ll be shocked at how small of an amount it appears to be, but that little bit could easily be a $10,000 difference over a year.

Beyond portioning, make sure you are tracking the usage. There’s no better way to monitor if your guys are using the portion cups than to check your actual usage. We do a cheese inventory every day and then compare it to what we should have used. Our goal is to not have more than a 2% variance. Post it up on the wall every day and let your cooks know that you mean business about the cups.

Just a thought…

Only 6 months in business and you exceeded all projections and food is 36% - That is awesome!

Training a new staff, giving food away, stocking up inventory, promoting your business with discounts etc…account for these.

Be cautious about a knee jerk reaction to change everything. This could destroy your business. Customers want a consistant product.

Every area is different with the amount of cheese that a customer would consider appropriate. I spent some time this summer in philly and down the east coast and believe me when i say that the amount of cheese they put on a pizza would never cut it here. Like I said, every area is different.

Enjoy your success right now and keep fighting the fight…It will only get tougher

pt

For pricing, have you tried Roma or possibly Gordon’s? I don’t know if Gordon’s works in your area or not, but Roma certainly covered STL (assume they still would).

I am not impressed with Restaurant Depot’s prices, especially since they don’t deliver.

I agree with portioning cheese as the most important thing you can do.

Just to give you an idea:
We started portioning cheese for our stromboli’s in 2007. We sell between 800 and 850 each week. When we started this we saved 40 lbs. of cheese each week! That’s $4,200 that we save in food costs each year.

36% is just waaaaay to high so:

  1. Implement a workable portioning proportion. We count pepperoni slices onto the pie, we weigh others and we have good quality ;ideal portion’ pictures of the rest. As said cheese is a killer so watch that one big time. If your POS will allow it set up each pie with ideal toppings (sure its an investment in time but it will repay its self very quickly) go to nightly inventory for food items. You can then see very quickly what is being used heavy handedly and train/watch that item straight away.
  2. You have to work out the cost of each pie and then make sure you are charging the correct price to get your desired food cost. You imply that you are charging less than the competition? Why would you do this??? Raise your prices! If you aren’t making money on the price you charge then charge more. If the market can’t stand it sell up. What is the point in making $0 or little on a pie just to compete or stay in the market? You’re in business not public service!

Can we assume you are making dough and not buying it? That is another big expense area if you paying an extra 50 cents per pie in dough cost.

Buying block instead of shredded will save you about 10 cents a pound. The comments above about pricing for various brands of cheese are right on the costs too. Some brands just charge too much, and despite great stories, do not deliver the differences they claim to.

Are you buying whole veggies or pre-sliced? A 50 lb bag of onions costs about the same as 10 pounds sliced. Cut them yourself! Same is true for mushrooms, green peppers etc and shelf life of whole veggies is a LOT longer reduing waste.

If you are putting them on pizza and cooking it, you can buy #2 mushrooms, peppers, tomatoes etc. Saves a few $$s per case.

Price out different tomato product costs. Some are as much as $8 case higher than others. Again, you may find that you are paying more than you want to.

Agree on comments above regarding restaurant depot. We do not have one near us, but when I visited one, I was not at all impressed with the pricing.

Contact suppliers of pepperoni, sausage etc and get pricing through one of the food wholesalers. You can save a couple of bucks a case. Same goes for rebates on sauce products. Shop the box prices too (a place where RD was completely out of line when I looked)

Do not assume that clients appreciate over portioned pies…I got a pie the other night that had too much dough and too much sauce…It was not anywhere near as good as their normal pies because it did not cook as well…

And I think a few cents here and a few cents there is often overlooked…5 or 10 or 15 cents per pie can be a several thousand $$$s at the end of the year…5 cents on dough, 5 cents on sauce, 5 cents on sausage, etc…

I think 36% is about average for the first year, especially if you have no prior experience in the industry.

pcuezze, If I were you, I’d take a seriously HARD look at the buffet. Why offer a discount dine-in experience? Do those customers come back in the evening for dinner? I think you’re running counter promotional information, on one hand offering a cheap buffet, yet on the other, offering a unique evening dine-in experience. I do not think they co-exist very well. The customer bases are too different. I dump the buffet. If lunch biz goes to zero, so be it, focus on your middle to high market.

Here are some of the actions (recommendations) I implemented over the last 3 years:

  1. Started a lunch buffet and DUMPED IT.
  2. Started with a 30QT mixer with 25 lb bags, upgraded to a 60QT with 50 lb bags. **BIG SAVINGS!
  3. Started with guest checks, upgraded to a POS. Installed and support FREEPOS myself (5 terminals) for less than $2500. ***HUGE SAVINGS!!!
  4. Started with SAMs Club diced cheese, upgraded to BLOCK cheese from ROMA (shredding cheese ourselves). ****HUGE SAVINGS!!!
  5. Started with par-cooked wings from Sams & ROMA, upgraded to fresh wings cooked by us. **BIG SAVINGS!!!
  6. Started with coupons, upgraded by DELETING ALL COUPONS AND DISCOUNTS. ***HUGE SAVINGS!!!
  7. Started with DELCO, upgraded by adding dine-in with 80 seat capacity. Dine-In now accounts for 60% of sales. *DELCO has continued to increase every year.
  8. Started with Pizzas, Calzones, Wings, upgraded by adding sandwiches & hogies, deserts, BBQ, beer & wine. This accounts for 25% of sales.
  9. Started with one Lincoln conveyor, added a second one. **I’m projecting a major upgrade for ovens in the next 12-18 months.
  10. Started with a couple of Reach-Ins, have now added a custom walk-in and YARDS of refer/fridge space. **SAVED OVER $4000.00 on the walk-in!!
  11. Started with bottled beer, have now added 5 craft beer TAPS.

Hope some of these help you like they did me.

Portion control on CHEESE will be the biggest thing you can do. Next will be setting your price correctly. When analyzing your food costs, don’t forget to add-in all your give-away coupons and discounts. Only then will you see how many $$$$s are walking out the door!!

Sorry to say your probably not going to save on food cost. Its winter time and everything is going up. What my partner and I do to save money is we both work 90 hours a week(all hours were open) instead of paying a cook or a pizza guy(most expensive positions) and we take what we need to pay personal bills and a little extra and keep the rest in the business.