You all are talking about two different things: 1. Menu Cost and 2. COGS. Both are very important and they are related to each other but they are not the same thing:
Menu Cost: The cost to make each item using the ideal portions. i.e. this pizza has a dough ball that weighs 20oz (use batch cost to reach cost for this one) 8oz of sauce (batch cost again), a portion of 11 oz of mozzarella @ $X.XX per pound, 2.5 oz of pepperoni @ $X.XX per pound etc etc. oen 14" box @.XX. This is very important when working through a price model and is directly tied to portion control training to ensure that the employees are using the correct portions (or that the “ideal” portion reflects what is actually happening. If practice and theory are not joined here when it comes to portions the model is useless for pricing.
COGS: =(Starting inventory + new deliveries of food and supplies) - Ending inventory. That is it. It is not related to the amount of anything that goes on a pizza. It therefor takes account of food used for menu items, waste, spoilage, mistakes, theft etc etc and in the end it is holy writ. Menu cost and ideal portions are meaningless if you blow it on COGS.
Some operators break out food, beverages, condiments, paper, supplies and even do a calculation to deduct donations and apply that cost to marketing. I do not have than many hours in the week. If we use it up it is in my COGS. I divide it by net sales and that is my “number” for food cost. (I do do a second calculation that figures COGS sold as a percentage of sales before coupons. Since we record donations as discounted sales that calculation not only washes out the donations it also makes apples to apples comparisons between “normal” periods and times when we are doing more promotions but I find I do not use this number much as the variation is most often not significant)
We calculate COGS weekly. We do Menu Cost analysis when we print new menus and set prices… i.e. once or twice a year.
In my experience, I need a menu cost of several points lower than the total COGS I am shooting for. I also find that menu cost targets vary. I might want 20% on some things like bread sticks and be happy with 30% on items like wings and salad with minimal prep and even 40% on bottled beverages where I have no prep at all. It is a blended picture and flat line rules do not work.
My target is 29% of net sales. Remember that includes everything from red pepper to toilet paper. If we use it up it is in the number. Typical menu cost for a pizza for us is more like 20-23% on actual selling price (net of coupons) depending on what is on it. We use flat pricing for the number of toppings but we do have some toppings that are 2X or 3X price. For example, Wild Elk sausage is a 3X price topping. Nevertheless a veggie pie is going to come in with a lower food cost than a pie with 2-3 meat toppings. The difference between the 20-23% and the target of 29% is, first of all, items like wings or drinks with higher % cost and then food items given away on coupons (free drinks, free ice cream, discounted salads in dinner combos etc) cleaning supplies, condiments, napkins, waste, crew pies, donations, spoilage etc.
