Both Hospitality Educators and Budding professionals can learn from this presentation

2. ConceptofFoodCostControl
BonophoolBanerjee

4. Presented By
Bonophool Banerjee, QLF
Former Head of the Department,
IHM, Kolkata
Master Trainer for CLF
Concept of Food Cost
& Control
PollEv.com/bonophoolbanerjee174

10. Goalofany
business
To earn a good profit, so keeping the cost at a
minimum while selling at the right price and
providing a good product is what the operators
shouldaimfor.

11. The expense to a hotel or restaurant for goods or services
whenthegoods areconsumedortheservicesarerendered
WhatisCost?
TYPEOFCOST
FixedCosts
VariableCosts
SemiVariableCosts
Controllable
&
Non-Controllable Costs
 Normally unaffected bychangesinSalesVolumes.
 Saidtohavelittle directrelationship tothebusiness volume.
 Allfixedcosts changeovertime.
 Fixeddoesnotmeanstatic orunchanging.
 Directly relatedtothebusiness volume.
 Directly variablecosts aredirectlylinkedtothevolumeofbusiness.
 Consumption ofFoodandbeverageinthehotelsisdirectly relatedtothe
volumeofbusiness itdoes.
 Because Payroll cost has both the fixed elementand the variable element, it is
known as a Semi variable Cost.
 It means that a portion of it changes with short term changes in business
volumes, and another portion does not.
 Those costs thatcanbe changedintheshort term.
 Cost offood andbeverage canbe changedinseveral ways -
 portion sizes, changingingredients, orbychangingboth. Costof labour.
 Certainfixed costs are alsocontrollable. Eg., advertising &promotion, utilities,
repairs andmaintenance, administrative andgeneralexpenses
 Thosecostswhichcannotnormally bechangedintheshortterm.
 theseareusually fixedcosts.
 Rent,interest onamortgage,realestatetaxes,
 licensefees,depreciation.

12. WhatisCostControl?
Identifying andreducingthebusiness
expenses
Toincreaseprofit
BUDGET
• -----
• -----
• -----
StartwithBudgetingprocess
TheBusinessOperators
compares theactualfinancial
resultswiththebudgeted
expectations
Ifactualcostishigherthanthe
planned,themanagement
needstotakeactions

13. WhatisControlProcess?
Isaseriesofcoordinated activitiesthat
helpsmanagersensurethattheactual
resultsofoperationscloselymatchthe
plannedresults.
Establish
Standards
MeasureActual
Results
CompareActualto
Standard
TakeCorrective
Action
ReviseStandards
Accuracy Timeliness Objectivity
Consistency Priority Cost-effective
Realistic Appropriateness Flexibility
Specific Acceptable
ControlCycle

14. FoodCost
Oneofthecommoncostweneed
tominimize
Foodcostpercentage isthetotalcostof the
ingredients yourrestaurantusestocreateeachmenu
itemcompared tothetotalfood salesover aspecific
periodoftime.
Costcontrolistheguidanceandregulationofcostsofoperation
Itisnot aimedatcuttingcostsbutcuttingwaste

15. Whyweneedtoknow
aboutfoodCost?
• Itdetermines yourprofitability
• LowerFoodCost =HighertheProfit
• Proper menupricing
• MenuEngineering
• It’sNOTwhatyouspentonfood

16. CostStructure
S
E
L
L
I
N
G
P
R
I
C
E
CostofRawMaterials(Food
Cost)
LabourCost
FixedCost
NetProfit
KitchenProfit
=
Sellingprice
-
FoodCost
KitchenProfit
=
GrossProfit
NetProfit
=
Sellingprice
-
(F.C+L.C+F.C+N.F.C)
Non-FixedCost

17. FOOD
COST
Plate Cost
PeriodCost
Costoftheplate/SalesPrice*100 =Food Cost
CoGS Formula
Usage/Sales*100 =
PeriodCost
OpeningInventory
+NewPurchase–
ClosingInventory
=Usage
FoodCost<30%
FoodCost>30%
ThePotentialfoodcostshouldbe
between25%to30%
AQfactoristhecostofanything
extrathatisrequired intheproduction
andserviceofthemenuitem.These
includecomplimentary itemslikebread,
butter, andevensaltandpepper. Typical
Q-Factorsaddabout10% tothefood
cost.

18. CoGS formula can be used to determine period cost for any
categoryinyourfoodoutlet
 FoodCost
 BeerCost
 WineCost
 Liquorcost
 Merchandisecost
Makesure:
You are comparing the correct category
purchase & Inventory to correct category sales
period

19. 1
2
3
4
StandardPurchase
Specification
Standard Recipe
StandardPortion Control
StandardYields
BasicToolsforFoodCostControl

20. 1.MenuPlanning
2.Forecasting
3.Purchasing
4.Receiving
5.Storing
6.Issuing
7.Production
8.Service
9.Sales
10.FoodCost Analysis
FOOD COST
CONTROLCYCLE

21. MenuPricingStrategies
• CostPlusMethod
• MarketMinusMethod
• LossLeaderMethod
Costpluspricinginvolvesaddingamarkuptothecostofgoodsandservicestoarriveatasellingprice.
Underthisapproach,youaddtogetherthedirectmaterialcost,directlaborcost,andoverheadcostsfor
aproduct,andaddtoitamarkuppercentageinordertoderivethepriceoftheproduct.
Material Cost+laborCost+Overheadcosts X (1+themarkupamount)=Selling
Price
TodeterminethepriceofanitemusingtheMarketMinusPricingmodel,youstartbylookingatwhatthe
marketwillpayforthedishyouaretryingtoprice..Tocalculatepricesusingthisformula,youworkbackward
fromyourtargetpricetofigureouttheidealrecipecostandthenbuildthedishusingingredientsthatdonot
exceedthatcost.
Practiceofsellingasmall numberofproductseitheratorbelowcost.
Thisis doneontheassumption thatbuyers willpurchaseotherproducts
atthesametimethat areconsiderably moreprofitable.
Gross Profit= Revenue-
COGS
Markup=Gross Profit/
COGS

23. ACTIVITYTIME