Essential Food Cost Control
Most hotel food cost control revolves around a transfer model. Inventory is counted monthly in every venue, including one or more restaurants, banquets, room service, minibars, and possibly vending machines. Goods are typically received centrally, and movement to various profit centers is tracked on transfer sheets. It is likely that buffets and banquets contribute a huge percentage of total sales volume (often more than 50 percent). We need to shine a light on the time and effort expended completing these transfer sheets, including the cost calculations involved.
Let’s start with the basic food cost percentage formula:FC%= (BI+P-EI)/S
FC%: Food Cost Percentage
BI: Beginning Food Inventory
EI: Ending Food Inventory
S: Food Sales
To handle hotel operations, the formula for each outlet or activity should be modified as follows:FC%= (BI+P+XFRIN-XFROUT-EI)/S XFRIN: Transfers In
XFROUT: Transfers Out
It is absolutely necessary to use the same dates for sales and purchase activity. And the inventory must be taken after all sales activity has ceased (either late at night or early in the morning). There should be no deliveries during your inventory. Most hotel food cost reports use FIFO for valuing the inventory.
At the heart of the cost formula is a simple food cost calculation:FC=(BI+P+XFRIN-XFROUT-EI)
Twisting this formula slightly, we find food cost equal to purchases plus net transfers plus the change in inventory value:FC=P+(XFRIN-XFROUT)+(BI-EI)
a month between inventories, the purchases and transfers will be more dominant than the inventory change. Let’s examine the formula in finer detail. The total food cost is equal to the sum of the individual item food costs. With 800 items to count, the food cost formula could be expressed as follows:FC=Sn=1 800 (BIn+Pn+XFRINn-XFROUTn-EIn)
So for each item in the inventory, add beginning inventory, purchases, and transfers in. Subtract transfers out and ending inventory. The total food cost figure is the sum of these numbers.
If running these numbers on a spreadsheet, sort the matrix in descending order, using the net cost column. Count the inventory daily for the top 25 items on the page. Calculate the cost of these 25 items daily. I believe finding the cost of these 25 items (as a percent of sales) will provide the answers to many food cost issues. Increase the number of items tracked to 50 if dealing with a diverse menu.
Have a serious debate regarding the inclusion of minor items on transfer sheets. Toothpicks, pre-portioned condiments, spices, and many other low-cost items can be controlled tightly without expending the time and effort needed to complete transfer sheet entries. Take the time saved and start tracking pans of food sent to buffet stations.Joe Dunbar, president of Dunbar Associates, designs and implements portion-control systems for hotels, resorts, restaurants, caterers, and onsite feeders. Dunbar, a contributor to HOTEL F&B OBSERVER, can be reached at email@example.com.