In Essentials of Food Service Management with Denise Duarte, we’re learning about costing. Denise is the General Restaurant Manager at the Radisson Phoenix Airport Hotel in Tempe, and she really knows her stuff.
Costing is the most important part of running an efficient, cost effective operation. It’s important to have food and beverage costs that are in-line with your menu-selling prices. Surprisingly, there are a lot of formulas that are used in the food service industry – cost percentage, cost per servable pound, cost factor, and yield percentage just to name a few. This is an elective at the Golf Academy, but I’m starting to see how knowing formulas like this can be a real asset if I decide to pursue a career in management. That’s exactly why I’m taking this class.
Here is an exercise in costing that we went over in class today. It’s for food and beverage products only and does not include labor or any other non-food products such as linens.
To achieve a base selling price, add up all the wholesale or purchase prices of each item.
Take this New York steak dinner for example:
8 oz. New York steak $6.95
Baked potato .41
Julienne carrots .15
Bread .22
TOTAL $7.73
To achieve your base selling price of the steak if your budgeted food cost percentage is 31%, you would use the following formula. Your budgeted food cost percentage is typically mandated and is based on industry averages or previous financial statements:
$7.73 (your plate cost)/31% (your budgeted food cost percentage) = $24.94
This is only your base selling price. To calculate your monthly food and beverage cost percentage you need the following information:
* All purchases in a time period = $5,200
* All sales in same time period = $17,980
Track inventory for the same period:
Opening inventory (last month’s) = $6,568
Ending inventory (current) = $5,980
Opening inventory – ending inventory = $588
Inventory + purchases = Total costs
$588 + $5,200 = $5,788
To calculate your total cost percentage for the time period, you divide your costs/purchases by sales/revenue.
$588 (total costs)/$17,980 (total sales) x 100 = 32%