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RECIPE & FOOD COSTING
Recipe management is a must have to make your inventory and stock maintenance a success. As the raw material is mapped to the billing items, you can view the daily consumption based on the sales along with the stock value so you can monitor the daily stock report listing down the details of Opening stock - consumed stock - purchased stock - sent stock - Remaining stock. This would majorly control the scope of theft or pilferage and also find the misappropriation that is going behind you. Another advantage that you gain from your recipe management is the food costing which helps you in menu management and purchase management as both over-ordering and under-ordering will be disastrous for your restaurant.
One of the major tasks that most restaurant owners find difficult is managing recipes and the food cost. Wherein the cost of food is the biggest operating expense for any restaurant management. On the other hand controlling food cost will help you to figure out the actual profit for your restaurant. Hereby we will let you know how food costing works and also what are the external factors that need to be considered in designing the food cost.
HOW TO CALCULATE FOOD COST?
Let me make it clear that it’s not rocket science to understand the food costing techniques. We will help you in understanding the food cost calculation in detail. Based on the convenience there are two methods that have been adapted for calculating food cost.
Food Cost Based On Recipe Management
Basically food cost will be calculated based on the recipe mapped to the menu items. Let us calculate the food cost for Paneer Gravy.
Step 1: List down the ingredients that are used for Paneer gravy preparation and also determine the purchase unit price for the same.
Fresh Paneer (Rs.70/Pack), Capsicum (Rs.30/Kg), Onion (Rs.20/Kg), Tomato (Rs.21/Kg), Coriander Leaves (Rs.15/Bundle), Ginger (Rs.100/kg), Green Chilly (Rs.40/kg), Garlic (Rs.120/kg), Cooking cream (Rs.50/pack), Gravy Mix (Rs.40/pack).
Step 2: Calculate the price for the portion that is used for preparing one bowl of Paneer Gravy.
→ Cost of 0.5 kg of Fresh Paneer would be Rs.35
→ Cost of 0.04 kg of capsicum would be Rs.1.2
→ Cost of 0.03 kg of onion would be Rs. 0.6
→ Cost of 0.04 kg of tomato would be Rs. 0.84
→ Cost of 0.001 kg of coriander leaves would be Rs. 0.015
→ Cost of 0.002 kg of ginger would be Rs. 0.2
→ Cost of 0.002 kg of green chilly would be Rs. 0.08
→ Cost of 0.002 kg of garlic would be Rs. 0.24
→ Cost of 0.015 kg of cooking cream would be Rs.0.75
→ Cost of 0.2 kg of gravy mix would be Rs. 8
So the total cost of the ingredients would be Rs.46.92 without tax for preparing a single bowl of Paneer Gravy.
Food Cost Based On Inventory Management
Some restaurants would prefer the food costing to be calculated based on the stock value and purchase value as they don’t have a clear cut recipe management.
Food cost for current month = Opening stock value + Purchase cost value – closing stock value / Total sales value
Note down the opening stock value and add all the purchase values to the opening stock value, with this value by subtracting the closing stock and dividing it by the total sales value of the month that you receive from the restaurant, You will arrive at the food cost based on the stock value.
FUNDAMENTALS TO FOOD COST & WASTE MANAGEMENT
Keep track on Inventory: You should be able to track each and every item that has been purchased for the restaurant. Let’s say you are starting to manage inventory for the month, keep a record of the opening stocks and its value and the purchases made on a daily basis and check the closing stock computed based on the consumption through sales.
It is highly recommendable to keep track of the inventory items weekly once or twice or even daily basis. This will help you note down the stock variance based on the manual closing stock taken by the purchase manager. This variance would reflect the wastage, wrongly prepared food, Spoilage and even theft. Through this you can instruct and train the staff on the waste management which will obviously reduce food cost.
Smart Purchase: When you do the above process perfectly, that is tracking the inventory items periodically you will be able to reduce the purchases and use the purchased items effectively. You can also track the purchase price of a product individually based on the supplier, for you to decide where and when to purchase to have reduced the purchase cost.
→ Ingredient Quality: Yes, it is important to concentrate on reducing the purchase cost which has a direct impact on the food cost. But while looking for purchasing the items with less price you should check on the quality as well. Whereas be it a fast moving or top selling item in the restaurant, the taste and the quality will be the key factor for the item to be placed in such a list. So always try to balance between the quality and purchase price, moreover reducing the waste itself would do good for your restaurant.
You will come across the situation where the price of the product will vary from time to time and obviously you won’t be able to change the menu prices accordingly. Here the best way you can manage food cost is by changing the ingredient or reducing the quantity of the ingredient used in the food.
Forecasting the sales is one of the important techniques followed during Stock purchases. Depending on the historical sales data based on year, month and events accompanied at that time you can easily predict the current sales based on which you can make purchase decisions effectively, both over-ordering and under-ordering would go disastrous for your Restaurant.
Menu Price Planning
As discussed above you need to calculate the actual food cost for each menu item and plan your margin accordingly. Moreover the food cost that you have arrived cannot be your perfect food costing as there are certain factors taken into account. These factors would be chef/ employee efforts, kitchen equipment used, No of persons involved in the process of food from preparation to delivering it to the customer table. Your earnings would be 75%, when you multiply the actual food cost by 4. you will arrive at the actual menu price and also take special attention to planning menu prices for the top-selling items of your restaurant.
This is the most finest technique that is followed by most of the top restaurants. You should be cautious in using the ingredients both while cooking as well as serving. Use proper measuring cups and scales to identify the right quantity at every step. This surely has a big impact on the food cost controlling. Moreover it’s all in the hands of the chef who takes care of the above process so training your employees well on this section will have a big difference in food costing.
Variance Between Actual And Theoretical Food Cost
However we plan on the recipe management and food costing perfectly, it’s about how well the chef uses it effectively on the same. During the peak hours where you will get too many orders where you concentrate less on the quantity of ingredients used but on the final taste alone, which will go completely wrong. This can be controlled by noting down the actual stock in the kitchen on a daily basis or periodically. By entering the manual stock values, the system will generate the variance based on the actual consumption that is to be made. Based on this report you can instruct your chef to concentrate much on the portions and use the measuring cups and scales to avoid the variances.