10 Techniques for reducing material costs
How can you quickly reduce the food cost in a restaurant to improve ratios and profitability?
This article explains in 10 steps how to manage food costs. Food cost management is essential in the restaurant business. Indeed, the calculation is simple, if the food cost decreases, the production cost decreases and the restaurant's turnover increases.
1 - Make the list of ingredients
First of all, by drawing up a list of the ingredients used in the kitchen and on your menu, you will establish a price list. This price list will then make it easier to negotiate with suppliers. If you do not have a list of products, there is a risk of confusing the products and lowering the quality during negotiations. Especially if you work in a team, it is necessary to have a reference so that everyone uses the same products. In catering this list is called a "mercurial". It also includes the name of the supplier, the purchase price and the unit.
This list is often used to prepare orders.
2 - Negotiate with suppliers.
Once you have established your list of commodities, you can make appointments with all your suppliers to get better conditions and prices. Ideally, you should have at least two possible suppliers for each product. This guarantee allows you to compare prices and to have a solution if your supplier increases its prices. Without this negotiation step, the amount of your purchases can rise byat least 10 to 30% more, which has a heavy impact on the cost of materials.
It's natural, your suppliers want to sell their products as high as possible and make a maximum margin. Suppliers use methods to sell their products at the highest possible selling price. So you need to train yourself as well to avoid being manipulated and to get better prices. Negotiating with suppliers is very profitable, it can give you several extra margin points.
Watch your beliefs! You may think:
- negotiating is degrading to you,
- Lowering prices lowers quality,
- you don't need to negotiate because you're so good at it.
- your suppliers are all your friends...
Maybe you're conditioned?
3 - Checking deliveries to limit material costs
Why take the time to check his deliveries? How much do you stand to gain?
For example, you need 10 kg of meat. So you order 10 kg of meat from your best supplier. Often he is tempted to round up the weight in his favour, adding an extra 3 kg. When checking the delivery, he is asked to take back the extra kilos because they are not needed. This is also a simple way to reduce food waste. The extra 3 kg may not be used and fill your food stock unnecessarily. In some cases, the best before date may have passed and this is a direct loss. Over a short period of time this difference is not shocking but if you calculate with a multiplier keeping the same ratio or if you analyse directly over a year the repercussions can become important.
Another reason to check deliveries: some suppliers may be tempted not to deliver the quantities they invoice.
For example, a fish supplier invoices you for 10 kg of fish and delivers only 6 kg. If you don't check your deliveries, 3 kg multiplied by 52 weeks, with such a ratio imagine the amount of food you have lost over a year.
Even if these practices are rare, they can cause you major problems. Restaurants that do not take the time to check their deliveries are quickly found out. It is therefore necessary to check the purchase of products to improve the management of your business.
4- Checking waste to reduce material costs
One of the major causes of food waste One of the major causes of food waste and increased material costs is the expiration of the shelf life. Wrongly assessed orders, unchecked stock, expired products considerably reduce your margin and therefore your turnover. By checking the waste or even the bins you can identify this kind of drift and optimise your stock correctly. Some restaurants even go so far as to put out transparent garbage bags so that you can visually check the waste that is thrown away. If you have never monitored the waste flow, you may be in for a few surprises. The aim is not to constantly monitor your staff, but the analysis of this waste is necessary to know if you are optimising food resources.
5 - Make regular inventories
Good managers take inventory at least once a month. Indeed, to control stocks and to obtain excellent financial ratios, it is essential to monitor these ratios monthly rather than waiting for the balance sheet.
Another indirect advantage of inventories is that they also allow you to check the use-by dates and reorganise the storage of foodstuffs that might be scattered.
To calculate the gross margin over a period, the expenditure on raw materials is divided by the turnover. If you want a more accurate calculation, add the end-of-period inventory and subtract the beginning-of-period inventory.
6 - Reduce your card
By reducing the number of dishes on your menu you will automatically have fewer ingredients to monitor and a simpler stock to analyse. In addition, you will have fewer recipes to control, fewer technical sheets to draw up and therefore fewer difficulties in production and service. The more dishes you have, the more complex it is to keep track of material costs. And that leads to more :
- expired food
- errors in the recipes.
When the number of dishes on your menu is smaller, you simplify management and you can have more power to negotiate the purchase of these products in larger quantities. You will reduce purchasing costs without reducing sales, so you increase the profitability of your production.
7 - Remove the least profitable and least popular dishes.
The most effective way to reduce the number of dishes on the menu is to remove the least popular dishes and those with low profitability . These dishes generate less margin than the others and represent fewer sales because they are less appealing to your customers. These dishes are called "deadweight" products.
It is these dishes that should be eliminated as a priority.
8 - Draw up technical data sheets.
By drawing up the technical sheets for your recipes with the quantities and ingredients used in the recipe, you can calculate the cost price ratio of the dish. This cost price will be used to calculate the gross margin. The data sheets are processes that allow the staff to follow the recipe in the methods you have established. They respect the quantities of ingredients that you have established beforehand. It is the right mix of these quantities that allows you to respect your ratios. This margin is the key to making a profit in your restaurant.
These technical sheets also make it possible to follow the evolution of the selling prices of your dishes. Then, the evolution of the costs of your dishes depends on the evolution of the prices of raw materials.
Technical data sheets help to reduce material costs and are therefore necessary for good restaurant management.
9 - Offer home-made products to reduce material costs
A simple way to reduce material costs is to prepare "home-made meals".
In general, homemade products are much cheaper and more profitable than purchased products that are already prepared. They guarantee a good margin and high customer satisfaction. Indeed, customers are increasingly looking for home-made dishes with quality products. Showcasing a home-made meal attracts customers and increases your sales.
10 - Checking your invoices
In conclusion, checking invoices line by line often allows many errors to be detected:
- entry error
- pricing error
- reference problem
- wrong amount
When you start checking invoices have detected an average of one error in 10 invoices.
This is therefore a major source of error. This check also makes it possible to follow the evolution of prices.
Our Koust tool makes it possible to carry out these 10 steps in a single program. It is therefore a management solution that will enable you to reduce your material costs, improve your production and your sales. Indeed, the purchase of raw materials is at the beginning of the process and therefore influences the rest of the activity. Finally, the management of material costs is therefore essential in the restaurant business.