Accurate recipe costs 3 27 ecdi

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Accurate recipe costs 3 27 ecdi

  1. 1. Boost Your Profits With Accurate Recipe Costs & Menu Men EngineeringEconomic and Community Development InstituteColumbus, OH  March 27, 2012© 2012 Return On Ingredients LLC  P.O. Box 2387  Westerville, Ohio 43086-2387  614.423.4410  Fax 614.340.7946
  2. 2. Mark Kelnhofer• BA in Accounting and Business Administration in 1993• Masters in Business Administration (MBA) in 2005 • Ohio Dominican University, Columbus, Ohio• Manufacturing Cost (1993 – 2012) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants• Bravo/Brio Restaurant Group (2002 – 2010)• Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s Pistacia Vera Bob Evans Group V s, Vera, Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co.• Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting• Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
  3. 3. Bravo/Brio Restaurant Group BBRG Food Cost Trend 2005-201030.0% 29.3%29.0% 28.8%28.0% 27.6% 27.4% 27 4%27.0%26.0% 25.5%25.0% 25.1% 25 1%24.0%23.0%23 0% FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Food cost 4.2% = $ millions in savings Return On Ingredients LLC   P.O. Box 2387   Westerville, Ohio 43086‐2387   614.423.4410   Fax 614.340.7946 Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC 
  4. 4. Brio Tuscan Grille – Easton Town Center Columbus, Ohio
  5. 5. Bravo! Cucina Italiana Virginia Beach, VA
  6. 6. Bon Vie – Easton Town Center Columbus, Ohi C l b Ohio
  7. 7. Mark Kelnhofer• BA in Accounting and Business Administration in 1993• Masters in Business AdAdministration (MBA) in 200 ( A) 2005 • Ohio Dominican University, Columbus, Ohio• Manufacturing Cost (1993 – 2012) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants l h• Bravo/Brio Restaurant Group (2002 – 2010)• Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co.• Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting Faculty• Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
  8. 8. Other Food Manufactures…• Restaurants• Casinos• Hotel & Lodging• Sports Arenas• Hospitals• Colleges and Universities• Catering and Banquet Centers• Theme Parks• Horse Race Tracks• ….and others!
  9. 9. Restaurants vs. ManufacturingRESTAURANTS MANUFACTURING Ingredients Raw Materials
  10. 10. Restaurants vs. ManufacturingRESTAURANTS MANUFACTURINGPrep Production Work In Process
  11. 11. Restaurants vs. ManufacturingRESTAURANTS MANUFACTURING Menu Item Finished Goods
  12. 12. Restaurants vs. ManufacturingRESTAURANTS MANUFACTURING BOH ( h f) / (chef) Direct L b Di t LaborFOH (bartender)
  13. 13. Restaurants vs. Manufacturing RESTAURANTS MANUFACTURINGFOH (Waiter/Waitress) Indirect Labor
  14. 14. Restaurants vs. ManufacturingOther manufacturing aspects as well• Prep Time = Labor Routing• Customer Order = Manufacturing Order• O Overhead (Di h d (Direct & I di t Indirect)t)• Recipe = Bill of Material (BOM)
  15. 15. Top Reasons To Know Your Costs! Y C t !
  16. 16. TheRestaurant Industry I d t
  17. 17. The Restaurant Industry2012 Restaurant Industry Forecast in the U.S.• Sales of $ l f $631.8 b ll billion in 2012 compared to d $610.4 billion in 2011, a 3.5% increase• Employs 12.9 million in 2012; forecasted to p y ; be 14.3 million in 2022• In Ohio in 2012, 530,500 people are employed by the industrySource: National Restaurant Association  restaurant.org/research2012 Restaurant Industry Forecast
  18. 18. The Restaurant Industry
  19. 19. Specialty Foods IndustryState of Specialty Foods Industry 2011• Sales of $ l f $70.3 b ll billion with $ h $55.9 b ll billion in retain sales• Specialty foods represent 13.1% of all retail p y p food sales• Cheese and Cheese Alternatives are the largest specialty food category $3.2 billion $3 2• Categories with the greatest percentages of all food sales – refrigerated sauces, salsas and di d dips• Gluten-free product showed sharp gainsSource: National Association of Specialty Food  http://www.specialtyfood.com/nasft/press-office/industry-facts/
  20. 20. The U S U.S.Economy y
  21. 21. General U.S. Economy• General economic indicators • Unemployment is improving • Housing market values are continuing to drop • Unpredictable future actions of Washington p g • States and Cities on the verge of bankruptcy • Cities defaulting on municipal bonds • European Debt Crisis (Greece Italy) (Greece, • 1 in 7 on food stamps• U-3 unemployment rate 8.3% (02/2012)• U-6 unemployment rate 14.9% (02/2012)• Discretionary income drops • E i Eating out d i i decisions are made l d less often f • Highly competitive environment
  22. 22. U-3/U-6 Unemployment18.0%17.0%16.0%15.0%14.0%13.0%12.0%11.0%10.0%10 0% 9.0% 8.0% 7.0% 6.0% 6 0% U-3 U-6 Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
  23. 23. U-3/U-6 UnemploymentU-3 UnemploymentTotal unemployed as a percent of the civilian labor force (official rate) unemployed, rate).U-6 UnemploymentTotal unemployed, plus all persons marginally attached to the labor unemployedforce, plus total part-time employed for economic reasons, as a percentof the civilian labor force plus all persons marginally attached to thelabor force (total rate).Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
  24. 24. Long Term Unemployment Wall Street Journal, 07/21/2011 “Long Term Long Unemployment by State”
  25. 25. General U.S. EconomyThe Wall Street Journal, 03/12/2012
  26. 26. General U.S. EconomyThe Wall Street Journal, 03/03/2012
  27. 27. General U.S. Economy The Wall Street Journal, 03/02/2012
  28. 28. General U.S. EconomyWall Street Journal, “Housing Still Drowning inUnderwater Mortgages”, 03/02/2012
  29. 29. General U.S. EconomyWall Street Journal, 03/02/2012
  30. 30. CommodityCommodit Costs
  31. 31. Food Inflation Cleveland Research Company 01/12/2012
  32. 32. Food InflationReuters / /02/23/2012
  33. 33. Cost of FuelSource: http://fuelgaugereport.aaa.com/
  34. 34. Commodity ResearchSource: American Restaurant Associationwww.americanrestaurantassociation.com1-888-423-4411  Fax 941-953-4034Forecasting and Managing Food and Energy Commodities
  35. 35. ckChees Bloc se, Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  36. 36. Beef, Ground G d Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  37. 37. WCR Pork R Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  38. 38. Pork Ham k Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  39. 39. conPork Belly, BacP Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  40. 40. Wheat Commodity Research Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
  41. 41. Industry Ind strFailure Rate
  42. 42. Restaurant Failure RateThe Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
  43. 43. Restaurant Failure RateThe Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
  44. 44. Restaurant Failure Rate Controls “According to the National Restaurant Association (2009), a “A d h N lR A (2009) typical restaurant in America earns a net profit under 10%. That means 90% of revenues are used to defer the cost of doing f f f g business. Thus, managers that do not understand the importance of cost controls are bound to fail in the restaurant business. Two major costs in the restaurant industry are food cost and labor j t i th t ti d t f d t dl b cost. These two costs together are referred to as prime costs. For a restaurant to succeed, the prime costs are expected to be less p p than 60% of revenues. It is a ‘rule of thumb’ and a good rule to follow. Most restaurants that have failed often were found to have prime costs exceeding 60% indicating greater potential to failure.”The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
  45. 45. The Missing Link +Culinary Arts The Numbers
  46. 46. ROI MethodologyRecipe costing is the base for many other aspects of the operations.
  47. 47. The Reality Is…• Some restaurant operators do not p have any written or documented recipes.• Some have recipes that are written are only for execution, not costing.• The few that have costing in many cases do not take a manufacturing approach. approach• Menu pricing in some cases is not based on proper analysis and data data.
  48. 48. What is in your control? Knowing your costs
  49. 49. What is in your control? Knowing your costs Establishing your selling price
  50. 50. Types of Recipes• Batch or Prep Recipes • Larger quantities • Become their own unique inventory item when produced • Can be used in other recipes• Serving or Menu Item Recipes • Ultimately is what is sold to the guest or customer
  51. 51. Weights & Measures• Portion control thro gh the use of through se utensils (Tbsp, tsp dishers, spoodles, etc.) (Tbsp tsp, dishers spoodles etc ) .• Accuracy of weights and measures is paramount. 1 cup, Basil Leaves 1 cup, Granulated Sugar 0.2 ounce 6.8 ounces
  52. 52. Batch Recipes & Yields• Batch recipes should account for the proper yield (what the result is) including known waste and the g process (labor)• When the purchased product has p p changed form in any way, a batch recipe should be created to account for h f the cost.• If you don’t account for the process and yields, your menu l d i ld level costs i l t in most cases is understated!
  53. 53. Batch Recipe Example #1• We purchased ‘Basil, Fresh’ at p , $8.50/# or $0.531/ozBASIL PICKEDIngredients Quantity UOM Cost ExtendedBasil, Fresh 16.0 oz $0.531 $8.500 Yield 11.0 oz• The new item ‘Basil Picked’ now Basil Picked has a correctly stated value of $0.773/oz or $12.36/#
  54. 54. Batch Recipe Example #2• We purchase ‘P&D 31/40 Shrimp’ p / p at $5.50/# or $0.344/ozP&D 31/40 SHRIMP THAWED / Ingredients Quantity UOM Cost ExtendedP&D 31/40 16.0 Oz $0.344 $5.500Shrimp, frozen Yield 14.2 oz• Th new it The item ‘P&D 31/40 ThThawed’d’ now has a correctly stated value of $0.387/oz $0 387/oz or $6 19/# $6.19/#
  55. 55. Batch Recipe Example #3• We purchase ‘Lobster Bisque Soup’ p q p by the bag/8# for $16.95 bag.LOBSTER BISQUE SOUP YIELDED Ingredients Quantity UOM Cost ExtendedLobster Bisque 1.0 Bag $16.950 $16.950Soup Yield 0.98 gal• Th new it The item ‘L b t Bi ‘Lobster Bisque S Soup Yielded’ now has a correctly stated value of $17.30/gallon or $0 136/oz $17 30/gallon $0.136/oz
  56. 56. Batch Recipe Example #4• We purchase ‘Bananas’ for p $0.513/#.BANANAS PEELED Ingredients Quantity UOM Cost ExtendedBananas 16.0 Oz $0.032 $0.513 Yield 10.5 oz• Th new it The item ‘B ‘Bananas P l d’ now Peeled’ has a correctly stated value of $0.049/oz $0 049/oz or $0.782/# $0 782/#
  57. 57. Packaging• Packaging is part of the raw g g p material cost, similar to the ingredients• Packaging includes: • Boxes • Labels • Wraps
  58. 58. The Costing ProblemIngredients
  59. 59. Prime CostIngredients Labor
  60. 60. Total CostIngredients Labor Overhead
  61. 61. Labor & Overhead Costs• Your labor and overhead can be accounted for in the recipe• Prep Time, Labor Routing • Time/motion studies (stopwatch) • Time (hours) is loaded on every recipe• Standard Labor (BOH) Rates • By market • Includes wages and fringes
  62. 62. Time Motion Studies• Stopwatch time motion study p y• Must be in a live environment• Must be a controlled test• Must be the personnel that will actually execute the recipes y p
  63. 63. Batch Recipe Example Prime Cost• We purchased ‘Basil, Fresh’ at p , $8.50/# or $0.531/ozBASIL PICKEDIngredients Quantity UOM Cost ExtendedBasil, Fresh 16.0 oz $0.531 $8.500Labor 0.167 hr 12.00 $1.999 Total $10.499 Yield Yi ld 11.0 11 0 oz• The new item ‘Basil Picked’ now has a correctly stated value of $0.954/oz or $15.27/#
  64. 64. Direct (BOH) Labor Rate• The direct (BOH) labor rate should ( ) include the base rate plus any other additional fringes associated with those personnel h h l • Unemployment Insurance • Workers Workers’ Compensation • Social Security & Medical • Health, dental and vision insurance plans • 401(k) or other retirement plans • Vacation & Sick Pay • Childcare Child
  65. 65. Overhead Rates Predetermined Overhead Rate• Based on budgeted expenses and g p direct labor hours (BOH) by location.Total Budgeted Overhead = $0.000/hr. Direct Labor BOH Hours Overhead Rate
  66. 66. Overhead Rates Predetermined Overhead Rate• FOH Labor & Fringes• Advertising & Marketing• Repair & Maintenance• Supplies• Training• Utilities• Communications• Landscaping• Research & Development Budgeted• Occupancy Direct Labor• Taxes Hours
  67. 67. Batch Recipe Example Total Cost• We purchased ‘Basil, Fresh’ at p , $8.50/# or $0.531/ozBASIL PICKEDIngredients Quantity UOM Cost ExtendedBasil, Fresh 16.0 oz $0.531 $8.500Labor 0.167 hr $12.00 $1.999Overhead 0.167 hr $40.00 $6.664 Total $17.163 Yield 11.0 11 0 oz• The new item ‘Basil Picked’ now has a correctly stated value of $1.56/oz or $24.96/#
  68. 68. Efficient Batch Designs g• Are the batch or prep recipes p p p designed for efficiency? Batch #1 Batch #2 Yields: 28 oz Uses 24 oz of Batch #1
  69. 69. Efficient Batch Designs g• Are the batch or prep recipes p p p designed for efficiency? Automatically incurs 4 oz of waste each time Batch #1 Batch #2 Yields: 28 oz Uses 24 oz of Batch #1
  70. 70. Sales Mix & ExecutionReview of the sales mix with assigned g recipes for each stationStation #1 Station #2 Station #3 Station #4 Station #5Where is the distribution of the sales mix?
  71. 71. Execution vs. Costing• Recipes are written differently for p y execution than they are for costing. • Execution usually states what utensils to utilize • Costing involves weights and measures
  72. 72. Execution vs. Costing Execution CostingBALSAMIC MARINADE Ingredients Qty UOM Qty UOMOlive Oil Blended 90/10 3.0 cups 24.0 oz gBalsamic Vinegar 1.0 cup p 8.0 ozSalt and Pepper Mix 0.25 cup 2.025 ozChopped Shallots 0.25 cup 1.20 ozChopped Parsley 0.25 0 25 cup 0.45 0 45 oz Yield 38.0 oz
  73. 73. Menu Level Costing
  74. 74. Menu Level Costing Prime Cost
  75. 75. Menu Level Costing Total Cost
  76. 76. Menu Engineering The  GuestCommunity Reputation MENU Families Business Employees
  77. 77. Menu Engineering• Your menu(s) are what y ( ) you are in the business to do.• Types of Menus • Lunch • Dinner • Brunch • Banquet • Kids• Pricing Structures • By Markets, Demographics
  78. 78. Cost-Volume-Profit (CVP)The components that we will be analyzing:• Menu items in the category• Quantity/volume sold• Selling Price PRODUCT COSTS:• U it Cost Unit C t Ingredients, Di I di t Direct t Labor and Variable Overhead• Cost Percentage•GGross Margin Per Pl M i P Plate• Contribution Margin PERIOD COSTS: Fixed Overhead and Profit
  79. 79. Cost-Volume-Profit (CVP)The components that we will be analyzing:• Menu items in the category• Quantity/volume sold• Selling Price TOTAL COSTS:• U it Cost Unit C t Ingredients, Di I di t Direct Labor and Total t Overhead• Cost Percentage•GGross Margin Per Pl M i P Plate• Total Profit PROFIT
  80. 80. My Famous Quote“You cannot place You percents in your pocket! pocket!”
  81. 81. My Famous Quote Change the focus from cost percent to gross margin dollars Menu Item Qty Menu Unit Cost % Unit Sold Price Cost GM $sPasta Fettucine 1 $11.99 $1.98 16.5% $10.01Filet Mignon 1 $32.95 $12.49 37.9% $20.46 Which one would you rather have? Do we focus too much on cost p f percents?
  82. 82. Loss LeadersItems that are sold at a lossthat will result in other menu items being sold at a profit.
  83. 83. Loss LeadersItems that are sold at a lossthat will result in other menu items being sold at a profit. Drive profits!
  84. 84. Dog/Star Graph PlowhorsePopularit Inde % Star ex High PI % Low GM $s %, High Hi h PI %, High GM $ % Hi h $s ty Dog Puzzle Low PI %, Low GM $s Low PI %, High GM $’s Average Unit Gross Margin $
  85. 85. Dog/Star Graph Flaws Flaw #1Traditional Dog/Star reports only analyze entrees only. l l
  86. 86. Dog/Star Graph Flaws Flaw #1Traditional Dog/Star reports only analyze entrees only. l l Flaw #2 The calculation looks as unit gross margin as a base base.
  87. 87. Dog/Star Graph Flaws Flaw #1 Traditional Dog/Star reports only analyze entrees only. l l Flaw #2 The calculation looks as unit gross margin as a base base. Flaw #3The graph plots all entrees together.
  88. 88. Cost Volume Profit ExampleWhich menu item should be reviewed?SALADS Menu in place for 6 months. Menu Item Menu Unit Cost % Unit Price Cost Profit $sChopped Salad $5.50 $0.43 7.8% $5.07Wedge of Iceberg $5.50 $0.33 6.0% $5.17Caesar Salad $5.50 $5 50 $0.41 $0 41 7.5% 7 5% $5.09 $5 09House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09
  89. 89. Cost Volume Profit ExampleWhich menu item should be reviewed?SALADS Menu in place for 6 months. Menu Item Menu Unit Cost % Unit Price Cost Profit $sChopped Salad $5.50 $0.43 7.8% $5.07Wedge of Iceberg $5.50 $0.33 6.0% $5.17Caesar Salad $5.50 $5 50 $0.41 $0 41 7.5% 7 5% $5.09 $5 09House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09If the decision was based on cost percent alone, the‘House Salad’ would be reviewed for action. House Salad
  90. 90. Cost Volume Profit ExampleWhich menu item should be reviewed?SALADS Menu in place for 6 months. Menu Item Qty Menu Unit Cost % Unit Total Sold Price Cost Profit $s Profit $sChopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116Caesar Salad 1,508 1 508 $5.50 $5 50 $0.41 $0 41 7.5% 7 5% $5.09 $5 09 $7,676 $7 676House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09If you would have chosen the ‘House Salad’, you wouldhave reviewed the menu item driving the most dollarsto cover fixed overhead costs and profit and possiblyremoving it from the menu.
  91. 91. Dog/Star CalculationWhich menu item should be reviewed?SALADS Menu in place for 6 months. Menu Item Qty Menu Unit Cost % Unit Total GM MM Rank Sold Price Cost Profit Profit $sChopped S l dCh d Salad 1,664 1 664 $5.50 $5 50 $0.43 $0 43 7.8% 7 8% $5.07 $5 07 $8,437 $8 437 L H Plowhorse? Pl h ?Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star?Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star?House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse? Averages $5.50 $0.41 7.5% $5.09MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08Flaw: Gross margin rank for dog/star calculation isbased on unit level only, not extended contributionmargin dollars.
  92. 92. Dog/Star Graph 35.0% House Salad 30.0% arity Index % Chopped Salad Plowhorse Star 7.5% 25.0% Caesar Salad (¼) * .7 = 17 20.0% Wedge Salad 17.5% 15.0%Popula 10.0% Dog Puzzle $5.08 5.0%P 0.0% $5.00 $5.02 $5.04 $5.06 $5.08 $5.10 $5.12 $5.14 $5.16 $5.18 Menu Item Unit Gross Margin $s $32,475 / 6,396 = $5.08
  93. 93. Stellar / Cellar Graph The Engineer Stellar - The BankPopularit Inde % • Reengineering of Menu Items • Sacred Items • Labor Process Improvements p • Most Profitable Items ex • Alternative ingredients • Menu placement • Price increase possibility ty The Cellar The Push or Sell • New menu item opportunity • FOH Suggestive Selling • Exception: Unique menu item • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue Menu Item Total Profit $s
  94. 94. Stellar / Cellar Graph The Engineer Stellar - The BankPopularit Inde % • Reengineering of Menu Items • Sacred Items • Labor Process Improvements p • Most Profitable Items ex • Alternative ingredients • Menu placement • Price increase possibility ty The Cellar The Push or Sell • New menu item opportunity • FOH Suggestive Selling • Exception: Unique menu item • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue Menu Item Total Profit $s
  95. 95. Stellar / Cellar Graph 35.0% House Salad 30.0% arity Index % Chopped Salad 25.0% The Engineer The 0% 25.0% Caesar Salad Stellar (¼) = 25.0 20.0% Wedge Salad 15.0%Popula 10.0% The Cellar The Push 19P $8,11 5.0% 0.0% $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 Menu Item Total Profit $s $32,475 / 4 = $8,119
  96. 96. Cost Volume Profit ExampleWhich menu item should be removed?SALADS Menu in place for 6 months. Menu Item Qty Menu Unit Cost % Unit Profit $s Sold Price Cost Profit $sChopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116Caesar Salad 1,508 1 508 $5.50 $5 50 $0.41 $0 41 7.5% 7 5% $5.09 $5 09 $7,676 $7 676House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09The proper item to target to be reviewed is the ‘Wedgeof Iceberg’. Iceberg
  97. 97. What are my options?• Review the menu placement• Reengineer an existing menu item g g • Review process • Alternative ingredients te at e g ed e ts • Price increase• Remove the item and create a new item
  98. 98. Engineering a New Menu Item Menu Item Qty Menu Unit Cost % Unit Total Sold Price Cost Profit $s Profit $sWedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116New Menu Item - $TBD $TBD > $5.17 When engineering the new menu item, attempt to create the item that will increase the average gross margin on the item being removed. In this case - $5.17/menu item.
  99. 99. Menu PlacementSALADS Menu Item Qty Menu Unit Cost % Unit Total Sold Price Cost Profit $s Profit $sHouse Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437Field Greens NEW $5.75 $5 75 $0.43 $0 43 7.5% 7 5% $5.32 $5 32Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 Averages $5.56 $0.44 7.9% $5.12 When reading the menu, customers read from top to bottom of the category they are looking at. Place the menu items that drive the most contribution margin to the top. The two top menu items are my highest “The Bank” category items.
  100. 100. Menu Placement & Eye GazeSource: Bowen & Morris, 1995; Hug & Warfel, 1991; Kelson, 1994; Scanlon,1998; Main, 1994; Miller, 1992; Panitz, 2000; NationalRestaurant Association, 2007;Kotschevar, 2008; Pavesic, D.V., 2011
  101. 101. Menu Placement & Eye GazeSource: Livingston, 1978
  102. 102. Front of House (FOH) Sales• If the menu layout is structured with the most profitable items on top, it should not be a secret! p,• FOH personnel can play an active roll in suggesting to the gg g customers items that drive profit!
  103. 103. Where do I start?Step 1: Purchased Items Ingredient Step 2: Batch Recipes level only Step 3: Serving Recipes Step 4: Time Standards Step 5: Labor and Overhead Rates Step 6: Performance Benchmarking
  104. 104. Systems• MBE (Manage By Excel) ( g y )• Systems & Software (do your research!) • Features (i.e. recipes, production, ordering, • invoicing, menu engineering, etc.) • Service • Cost • Your overall plan (short and long term)
  105. 105. Our Systems
  106. 106. Cost Control Audit to ACCURATE Improve RECIPE Efficiencies ffi i i COSTING MENU BenchmarkingENGINEERING (Actual v. Theoretical) JIT Production & Ordering (Dynamic Pars) P )
  107. 107. The h Top 10Takeaways k
  108. 108. The Top 10 Takeaways Takeaway #1Get the competitive edge! p gThe restaurant industry ishighlyhi hl competitive and th titi d the current economic factors f compound that.
  109. 109. The Top 10 Takeaways Takeaway #2The business failure rate has f historically been very large. Use both your culinary skills and data to keep from becoming a statistic.
  110. 110. The Top 10 Takeaways Takeaway #3 Recipe costing is vitally p g yimportant to the success of the operations Recipe operations. costing can be a science. Everything can be accounted for for.
  111. 111. The Top 10 Takeaways Takeaway #4 Your menu is too important to guess at!Guessing i not good enough!G i is t d h!
  112. 112. The Top 10 Takeaways Takeaway #5Writing a recipe for execution g p f is very different than for costing. costing Execution is for the line personnel. Costing is for the management. You need both both.
  113. 113. The Top 10 Takeaways Takeaway #6“You cannot place p p percents in your pockets!”. Shift the focus from cost percents to gross margin dollars per plate and contribution margin dollars.
  114. 114. The Top 10 Takeaways Takeaway #7Make decisions not only based y on the passion and emotion of the menu item – but also empirical data. Be methodical.
  115. 115. The Top 10 Takeaways Takeaway #8 The menu layout and y placement of menu items does matter. Place higher mattercontribution margin itemson top in descending order.
  116. 116. The Top 10 Takeaways Takeaway #9 This is your call to action! yStart the process. If you do not h t have adequate ti d t time orskills, get some professional ,g p f assistance!
  117. 117. The Top 10 Takeaways Takeaway #10 To ensure success – The bottom line is know your costs! Plan for success!Be proactive, not reactive! p ,
  118. 118. Reference BooksThe Book of Yields: Accuracy in Food Costing & Purchasing Francis T. Lynch John Wiley & Sons ISBN 13: 978-0-471-74590-7 978 0 471 74590 7 ISBN 10: 0-471-745909-1Chef’s Book f FCh f’ B k of Formulas, Yi ld & Si l Yields Sizes Arno Schmidt John Wiley & Sons ISBN 10: 0-471-22716-1Note: Neither references is truly comprehensive. You need to p f y p practice the costing methods discussed in this presentation.
  119. 119. Articles Booklet• “Obtaining Accurate Recipe Costs” Obtaining Costs• “Improve Your Menu Engineering”• “The Case For Theoretical Food Costs” The Costs• “The Advantages of Just-In-Time”• “Robust Supply Chain Management” Robust Management• “Line Checks That Create Efficiency”• “Traits of Effective Cost Management” Traits Management http://www.ReturnOnIngredients.com
  120. 120. Other Speaking Events2012• ACF S d k Ch Sandusky Chapter, 01/09 i Mil in Milan, OH• National Assn. for the Specialty Food Trade 01/12 in San Francisco, CA• Southern California Gas Co., Foodservice Equipment Ctr., 01/19 in Downey, CA• ACF Cincinnati Chapter, 01/23 in Cincinnati, OH• North American Pizza & Ice Cream Show, 01/29 – 01/30 in Columbus, OH• Delaware Area Career Center, 02/10, in Delaware, OH• International Restaurant & Foodservice Show, 03/03 - 03/04 in New York, NY• Columbus Culinary Institute, 03/14, in Columbus, OH• Western Illinois University, 03/20 in Macomb, IL• Economic Community & Development Institute, 3/27 in Columbus, OH• Platt College, 04/17 in Tulsa, OK• O Oklahoma Restaurant Association, 0 / , 04/17 in Tulsa, O , OK• San Diego Mesa Community College, 04/24, in San Diego, CA• California Restaurant Association, 04/25, in San Diego, CA• Economic Community & Development Institute, 04/27, in Columbus, OH• Southwestern Foodservice Expo 06/24 in Dallas TX Expo, Dallas,• Western Foodservice & Hospitality Expo – 08/12 – 08/14 in Anaheim, CA• Florida Restaurant & Lodging Show – 09/23 – 09/25 in Orlando, FL
  121. 121. Culinary Schools• This program is offered at no cost to culinary and hospitality schools programs b dh i li h l based on d availability and budget. • San Diego Mesa Community College (San Diego, CA) • Lexington College (Chicago, IL) • Roosevelt University (Chicago, IL) • Western Illinois University (Macomb, IL) • Lake Michigan College (Benton Harbor, MI) • Central Michigan University (Mt. Pleasant, MI) • Guilford Technical Community College (Jamestown, NC) • Midwest Culinary Institute (Cincinnati, OH) • C lColumbus C li b Culinary I tit t (C l Institute (Columbus, OH) b • Owens Community College (Toledo, OH) • Platt College (Tulsa, OK) • Culinary Institute of Charleston (Charleston, SC) y f Please email me at Mark@ReturnOnIngredients.com Or call me directly at Cell 614.558.2239
  122. 122. Questions & Answers Mark Kelnhofer President & CEO Kelnhofer, Return On Ingredients P.O. P O Box 2387 Westerville, Ohio 43086-2387 614.423.4410 614 423 4410 Fax 614.340.7946 Cell 614 558 2239 C ll 614.558.2239 Mark@ReturnOnIngredients.comhttp://www.ReturnOnIngredients.com
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