Managing Wastage's impact on Food Cost

We correlate wastage with Food Cost and inseparable, so we need to manage it carefully to minimise its impact on COS.

Food Cost directly relates any Restaurant profitability, thus managing food cost is the first skill set of Executive Chef. Maintaining Food Cost in line with standard percentage is always a challenge, being food cost primarily based on perishable products. Also, any over/under purchase or storage of food items impact food cost adversely.

However, the efforts of Executive Chef is always to bring it down from 30% which can be counter productive if reduced too low, say below >28% with various reasons:

1. Outlet Managers need to ensure that they do not overcharge the guests as it can impact future business because competition can take benefit of it.

2. The lower cost also shows that it has not updated the receiving records and this will happen if food cost drop from usual trend but later month. The problem will be that after records updated, it can spike the food cost.

3. The quality of the product is inferior.

4. Closing inventory is not correctly counted, can lead to cost escalation in later months.

Food cost percentage revolves around 30% as an average with +/-2% variation. However, there are instances of higher food cost, mainly because of promotional discount schemes such as 1) Membership discounts, 2) Corporate discount, 3) Event discounts.

Although promotional activities increases food cost percentages, but still it is a manageable activity for food outlet since it also gives additional lift to the revenue. The main issue of an increase in food cost percentage is coming from ‘Wastage’ its impact is substantial and non-beneficial.

However, ‘Wastage’ is a one major reason which inflates food cost and often undetected because there is no obvious way to control wastage in day-to-day works.

Wastage’s being measured accurately because it shows a data which none can predict, be a chef or cost controller

There are few ways to detect Wastage, have summarised below:

a.) Collection of data - To measure Wastage correctly, each day, periodically, we need to record the wastage each day after the kitchen close the shift. So each day, we can record three times, each shift after weighing the waste bin.

b) Tabulate data - The data collected during each shift, to feed into a table form, day-wise. And, each day data to be in one column so we will have 30 column each month. This will create a trend line.

c) Additional information - These data become more informative when we place it next to other trend line such as along daily occupancy level, geographic mix, adults-kids ratio and many more.

d) Analysis - These tables ready for analysis on a weekly basis. Since each column has the occupancy, Guest count of each day thus it will show a co-relation between the wastage each day. Any spike in waste over the trend is unusual and chefs to find out reasoning.

These data analysis’ d regularly by Chef and Cost Controller each day. Any spike in wastage need attention and analysis. They may relate the reason to change in Geo-mix or adult-kids ratio. for example, if a hotel having mainly Chinese origin guest so the chef will focus on their cuisine but if the Geo-mix or nationality-mix changed for few days, the buffet changed based on liking of change in guest nationality else having similar cuisine even with a change in guest mix can increase wastage.

Daily Break-fast (BF) cost being voluminous, impact can be substantial if not tracked and bring in line in time.

For BF costing, there is a standard way of preparing daily item cost and updating it to get average costing. Please refer to the picture showing a template of daily BF Cost.

While doing so, the Wastage count of each day’s buffet plays an important role.

The process is that after buffet finishes, all the remaining items in buffet line weighted and written in the ‘Daily BF sheet’ (please refer to template above). We, therefore, value the cost of remaining items based on receipt cost. Mostly, all leftover cooked food wasted in process. We have to sum-up all these ‘wasted food item cost’ to find out the wastage amount and percentage each day.

A thumb rule or agreed principal of accepting wastage up to 5% of sale value. All expensive items cost transferred in another sheet to find out ‘how much percentage of expensive items wasted’ and based on ABC principal, these items waste need reduction by implementing a regular review process. The efforts needed to minimise wastage based on value, not volume. Total total waste in volume or lets say in kgs can be higher but should not be in value.

Any wastage cost money and thus efforts is to minimise wastage by providing correct dishes based on geographic mix.

Determining ‘wastage’ is along calculating ‘daily food cost’ and an inseparable exercise which will give a correct sign each day or time, the chef or controller wants to use.

It is a quality exercise, being conducted regularly by controllers as a support function to chef so that profitability maintained optimum level.