Cost of Sales

You will already have negotiated prices for your menu costs and your suppliers, and it is unlikely that in the current economic climate suppliers would consider discounting or reducing prices, however – having a good relationship with your suppliers is vital to assist you both to make commercial decisions for mutual benefit.

Meet with your suppliers and have a good conversation around what opportunities there are for both parties – you may be surprised what you come up with!

If you don’t ask, then you will perhaps not grasp opportunity when there are interesting solutions to reduce your Cost of Sales, and therefore raise your Gross Profit.

Suppliers will be ‘doubling down’ on their most profitable lines, and will be keen to work with you to ensure you continue to use them, and they are providing the right ingredients for you at the right price. It is in both of your interests to stay in business and to grow, so it is vital to have great communication with them.

Conversations with suppliers:

- Are they able to give you better prices for any ingredients?

- Would you be able to change your menus to increase the amount of certain products you use, thus enabling a bulk purchase discount?

- Could you consider using a different, slightly lower quality product which is cheaper WITHOUT compromising your organisation’s values and raison d’etre around ethical, quality, sustainability etc.

Your suppliers may have some solutions you had not considered before, For example:

• Different breed of main protein - beef/pork/chicken etc.
• Using plant based or less processed foods which are cheaper due to the lesser amount of labour which it takes to produce them.
• Locally sourced ingredients with lesser food miles.
• Interesting substitutes for well-used and ‘usual/normal’ products.
• Unusual foods which are in fashion and people are willing to try -  Fermented products/pickled products/new flavours.
• What is happening locally – are there any ‘start up’ businesses that need showcasing? You could do a contra/agreement.
• Are you getting enough ‘contra’ – i.e. if you have an agreement for a specific throughput, is there an alternative which would give you more?

Also – a key decision to be made is of course around your menu and food/drink offering. If your customers/guests are willing to pay a higher price for a quality product, and you have reason to believe this to be the case, INCREASING the prices for a better quality ingredient, and clever pricing could actually yield you more Gross Profit, and would not incur any other increased costs (e.g. labour), and so will produce better profitability/contribution.

Dependent on how complex your food and Beverage production operation is, there will be opportunities to improve the COS% by ensuring that you have a standard operating process, and you are clear about ingredient listings, and method of production, which of course will be in the hands of your kitchen/Bar team.

Whilst there is no requirement to compromise chef flair or creativity, every menu item needs to be strictly controlled and monitored daily to ensure all ingredients are specifically detailed for each dish.

It is a well known fact that British Airways took one olive from a dressed salad that they served to over a million passengers a year and saved hundreds of thousands of pounds a year. Although you may not be dealing with as large numbers, having the correct selling price which yields you AT LEAST 70% Gross Profit, will add up – and costs will go awry if your kitchen team are not adhering to correct portion control.

Every month, go through the costs of ingredients and cost out your menu according to the product plan and Gross Profit model. Rising costs of ingredients may happen without you noticing and will have a notable impact on what you are yielding on each menu item. Click here to see an example.

INVOLVE your kitchen team. They may not agree with – for example – 25g of cheese on a burger and may well be putting nearer 50g. Have you scales nearby? Are they in use? Make it easy to adhere to portion control by having cups, ladles and measuring containers to hand and easily identified through labelling.

Make it easy for people to do what you need them to do – it will pay dividends on the Cost of Sales, and so make you more profit.

Are you monitoring your waste? You may be surprised what you throw away, especially if you trust others. That is not to say that you need to be suspicious of waste, but be clear that you wish to reduce it to zero if possible – that is the challenge!

Your kitchen team may come up with innovative solutions, and enable you to change menus, change supplier ordering frequency or quantities, to alleviate wastage.

Make it easy to record wastage, and involve your kitchen team in the challenge – incentivise if you can – once again make it easy for people to do what you want them to do.

There is much support on the internet on how to maximise menu use – simple things like making soups with waste veg or meats for serving the next day, using home made stocks rather than bought mixes etc.

A look at the menu items which produce the most waste will then enable you to think innovatively and creatively, and save money on waste. You will also save money on less waste collections too, so it is a double positive.

Some ideas:

• Are you peeling potatoes/other vegetables? Skin-on wedges, and even chips/fries are healthier, easier to prepare and waste free.
• Use vegetable peelings to make vegan-friendly vegetable stocks, and this also reduces bulk in the food waste bin.
• Best by/use by dates. Clearly do not compromise safety, and stick to your Food Safety standard practices, HACCP etc, but be mindful that produce which is slightly over it’s ‘best by’ date may still be usable. Eggs, for instance, are in their own hermetically sealed container naturally, so will still be usable and safe after some days – even unrefrigerated. Egg white will not hold as much air in baking, so less than fresh eggs may not be as good in baked goods, but other uses are perfectly acceptable and will lengthen their usable time.
• Use tools to gather data to monitor and learn/adapt menus to your wastage trends. Equipment such as ‘Chef’s Eye’ can impact your operation by informing you over time what you are wasting in what quantity and for what service, so you can amend orders, menu items and even production operation in order to save cost.

Click here to learn more about Chef's Eye and how it can reduce waste and save on costs.

No-one likes to think their team are stealing from them, but it does need to be on your agenda. Trust and respect needs to prevail, but you need to have objective systems, processes and Standard Operating Practices (SOPs) which reduce the likelihood of this happening in your business.

It is known that when you do lose stock and equipment/consumables etc, then the team members who take it, rarely regard it as stealing, and often only remove things or take things home that they feel they are entitled to, or they don’t think it will affect the business.

People are inherently honest, but OPPORTUNITY may present itself, and you need to ensure that this is removed, so you do not lose.

These best practices do not just apply for food deliveries and food production, having these processes in place for all deliveries, - e.g. cleaning materials, toilet tissue, cleaning equipment and all consumables, will all take temptation away by having clear and transparent business practice
REMOVE the opportunity:

• Having all deliveries properly accounted for at the time of delivery.
• Ensuring all records are kept – DAILY/WEEKLY Etc.
• Food cost/food waste and Cost of Sales recorded.
• Appropriate locked storage of all consumable items, and a clear and transparent system of access and hierarchy of trust.
• Having regular updates with the team about figures and cost of sales – so they are aware that you are monitoring all kinds of items regularly.