food costs - trainer

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Module 4 Managing Food and Paper Costs STP 3: Part 1

STP 3: Trainer's Guide 8/2009 4 - 1

Module 4 - Managing Food & Paper Costs

Your Role

Successful food and paper management results inpreparing and serving the right amount of high-qualityproducts needed to fill customer orders.

The Assistant Managers goals for daily productmanagement are to:

Ensure that fresh, quality productis always available.

Ensure straws, napkins andcarryout containers are alwaysavailable.

Create prep guides to manage food cost and quality.

Control waste associated with inaccurate salesprojections, out-of-date product, spoilage, theft andmishandling of product.

Ensure proper product prep and handling proceduresare followed, to help make sure only the best quality,safest food is served.

You cast a leadership shadow of We are CustomerManiacsand Go For Breakthrough, two of our How WeWork Together Principles, when you properly managefood and paper costs to meet customer satisfaction.

Prepare

How We Work

Together


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4 - 2 8/2009 STP 3: Trainer's Guide

In this module, you will

Learn to By doing

activity

And using

Evaluate Cost for

Food and Paper

Manuals and procedures used for managingfood and paper costs in your restaurant

Food and paper cost reports Answer System Book 4: Analyzing Financial

Information - Margin Improvement

Identify and

Resolve Food and

Paper Cost

Variances

Food and paper cost reports for the last week

Tools used to identify variances

Contents

4-1

4-2


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Reviewthe module terms and definitions thatfollow.

If the term used in your restaurant is different, writeit in the box provided.

actual usage The amount of product that was really used. It shouldequal beginning inventory plus product received, plustransfers in minus transfers out, minus endinginventory.

beginning inventory Amount of product on hand at the beginning of theinventory period (day/week/period, etc.). This numberis the ending inventory for the previous inventory

period (also called opening stock).buffer amount An extra amount of inventory in addition to projected

usage amounts. Having a buffer amount allows forsales variations and for thawing of frozen foods (alsocalled safety stock).

build-to amount Ideal quantity to have in inventory, in order to fill allcustomer orders without having excess, out-of-dateproduct. It is calculated based on the sales forecast forthe ordering period.

daily inventory count A count of key inventory items. It is usually done

before and after a shift to ensure product availabilityand reduce waste. Typically defined as those itemshaving the largest impact on food cost variances.

food and paper costs The sum of all actual food and paper costs (also calledcost of salesor COS)

ideal usage Amount of product that should have been used basedon the sales of the product and the recipe amount ofthe product, not including waste

Terms


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period inventorycount

An all-inclusive inventory performed at the end ofthe business period (or month). It helps to identifyproblems that result in decreased profits. It is usedto determine the food and paper costs (COS) on theP&L Statement.

prep guide Estimates of how much product will be needed duringa shift. They are based on sales forecast (also calledproduct projection, prep plan).

variance The difference between the ideal and actual usage forproduct(s). Expressed in quantity or monetary value. Ifthe variance is negative, more product was used thanthe ideal amount. If the variance is positive, lessproduct was used than the ideal amount.

weekly inventorycount

An extension of the daily inventory count. Weeklycounts include all items; daily counts do not. Thecount is performed after the restaurant is closed onthe last day of the business week. Managers use it tohelp ensure order accuracy.


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Activi ty Evaluate the Cost of Food andPaper4-1

1. Readthe following:

There are four primary processes involved in deliveringhigh quality, safe products to customers. Theseprocesses are:

Forecasting.

Food and paper ordering, receiving and storing.

Food preparation.

Food production.

The following flowchart illustrates how these processesare connected:

Ordering

Preparation

Forecasting

Determineinventory build-toamounts based onproduct projections.

Order.

Receive. Store

Thaw ingredients basedon product projections.

Prepare ingredients.

Production

Monitor hold timesand temperatures.

Serve quality product. Compare actual

product usage to

projections. Create action plan

and correct anyvariances.

Review past usage. Project future usage.

Show & Tell


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To determine the cost of food and paper you must use:

1. The cost of food items.

2. The cost for paper, drinks (beverage syrup and

CO2).

The food cost is the dollar value of food used from yourinventory during the period. Because food is aninventory item, it is not reflected into the cost until it is

used to make a menu item.Inventory counts give us thenumbers that will be used to calculate the cost of food inyour restaurant.

The formula used for determining your food costs is

shown below:

Formula Notes

Beginning inventory These figures are taken from lastmonths/periods inventory orweek ending inventory.

+ Purchases These figures include food.

+/- Transfers Transfers into the restaurant are

added to the beginninginventory. Transfers out of therestaurant are subtracted fromthe beginning inventory.

Endinginventory of food

= Food costs


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After you have calculated your food costs, you will add thetotal dollar amount spent on paper and drink during theperiod.

Food, paper and drink costs give you total Cost of Sales.

Note:We will define Paper Costs to include drink costs.

To determine the food and paper actual cost percentage,use the formula below:

Example: Cheese

Cheese cost is $1.80 for each pound (lb.).Gross sales = $2890.00.

Formula Example

Beginning inventory(last periods ending)

105 lbs.

+ Purchases

(distributor)

+ 100 lbs.

+/- Transfers(transfer out)

20 lbs.

Ending inventory 150 lbs.

= Amount used 35 lbs. used

X Cost of food = 35 lbs. X $1.80 = $63.00

Food $ used Gross sales = $63 used $2890.00 =

Food cost (cheese) % 2.17%

Cheese costs accounted for 2.17% of net sales, or cost ofcheese is 2.17%.

Grosssales

COS dollars COS %=


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After you determine the actual cost of food and paper, thenext step is to compare your actual results with what youexpected. To do this, you must determine the ideal cost ofthe food items.

The term ideal costis used to identify the quantity of foodthat you should have used, based on the menu items sold(made to recipe specifications). This assumes perfectportioning and no waste.

Ideal cost formula:

To determine how close you are to optimal performance, youwould compare the actual cost to the ideal cost. This is whatis referred to as the ideal variance.

Note: Ideal variance can be measured in do llars or percentage.

Food variances can result from different issues such as:

Prep waste.

Production waste.

Unlogged receipts and transfers.

Replacing customers order.

Theft.

Variances greater than the allowed range will reduce yourprofits. As the Manager, it will be your responsibility formanaging the food and paper process in your restaurant toensure CHAMPS Excellence is achieved every day!

Netsales

Idealproductcost %=

Total ideal usage in units xnational ingredient cost per units

100x

Idealcost

Idealvariance=Actualcost


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2. Answerthe following:

Question Notes

What is the food and paper costpercentage given for the numberslisted below?

Gross sales = $61,698

Food and paper cost used = $19,800

$19,800 $61,698 = .3209 X 100 = 32.09%

Explain the difference between idealfood and actual food cost.

Ideal cost of food to produce productaccording to recipe

Actual actual cost of food used toproduce products

3. Answer the following.

Question Notes

Your sales for last period were$100,000. You want to spend 3.2% onpaper. How do you get a bi-weekly cashamount to spend for each order?

Sales_______________________

Sales x 3.2% = 3200/8 = 400 per order

Analyze actual profit and loss fromtraining restaurant and figure out howmuch you spent for the period/week. Ifover percentage, how much money issitting on the shelves?


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4. Answerthe following.

Question Notes

How are food and paper costsmeasured in your restaurant(i.e., %, $, or variance)?

What is the accepted overall idealfood/paper cost variance range in yourrestaurant?

Answers will vary.


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5. Completethe chart. Listthe items in yourrestaurant that are measured in food andpaper costs.

Food Paper

Example: Cheese Example: Napkins

Example: Meat Example: Cups


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6. Listthe variance ranges for top five food costitems in your restaurant in the chart:

Food Item Ideal Cost Actual Cost Variance

1.

2.

3.

4.

5.


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Activi ty Identify Causes and Solut ions forFood and Paper Cost Variances4-2

1. Read margin guide book section: COS.

2. Readthe following:

The key to controlling food and paper costs (cost ofsales/COS) in your restaurant is identifying what isaffecting the daily and weekly variances. You learnedwhich reports to use to help determine the variances.

After identifying the variances, you need to learn how to

correct them.

Keep in mind that multiple issues may be causing largevariances. Give priority to the most costly issues. Oftenthe Manager in Charge will do everything possible tocontrol portioning, which may be only part of the food andpaper variance problem. For example, if deliveries arenot verified, a missing case of product could cause aneven larger variance. Also, entering product transfers isoften overlooked and may impact variances.

Many factors or a combination of factors can impact yourrestaurant food and paper costs.

Show & Tell


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Finding the causes of food cost variances is a process ofelimination. You will eliminate some factors to find theroot cause.

1. The first step is verifying counts. If counts are

incorrect, coach the Manager who conducted theinventory. If counts are correct, you know youhave another issue.

2. Identify which ingredients are out of tolerantrange.

A variance that is positive or "too good," indicatesunder-portioning or transfer/receipt errors. Youwould want to verify that Managers correctly

accounted for all receipts and transfers.

A very large variance (case size or more) mayalso indicate transfer or receipt errors.

Large negative variances for many ingredientsindicates over-portioning, excessive waste or theft.

By eliminating factors and discovering the root cause,you can target your efforts.


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Variance Factor Suggestions to Minimize

Theft Do not allow duffle bags into kitchen area.All items must be rung up prior to consumption.Monitor back area for used wraps and open sauce packets.

Track deletions, voids, and cash overages and cash shortages.Watch for unusual or constant customer complaints of being

short-changed.Check for frequent calling of orders that have not been rung up

into register.Monitor check average fluctuation on day parts a significant

decline in day part average may indicate theft.Keep back area organized.Use clear trash liners to prevent usable product from being

thrown away.

Break down all boxes before taking to the dumpster.When there is a variance, make it known (for example, using

CHAMPS Communication Board, posting daily variances,conducting mid-shift audits).

Observe restaurant from outside to determine if product isleaving the restaurant.

Compare D/T Timer Car Count to D/T Register Transactions.


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2. Determine solutions for variances.

Refer to Answer System Book 4: Margin Improvement

Complete the chart. Determinethe impact to therestaurant of the food and paper cost variance factorslisted. Then givepossible solutions.

Cause Impact to Restaurant Possible Solution

Under-portioning Affects repeat sales if

customers believe productsare short on ingredients.

Sends the wrong messageto Team Members.

Use a scale.

Enforce use of job aids. Show team how to make a

perfectly portionedproduct.

Coach Team Members.

Over-portioning Negative impact on profit.

Creates inconsistency ofproduct within brand.

Use a scale.

Enforce use of job aids.

Show team how to make aperfectly portionedproduct.

Coach Team Members.Excessive waste Negative impact on profit.

Can impact loss of bonusfor management and meritincreases for TeamMembers.

Track waste by shift.

Identify root cause ofwaste.

Coach and support team asneeded.

Theft Can impact loss of bonusfor management and meritincreases for TeamMembers.

May lower morale.

Team may feel the workenvironment is not safe.

Monitor back door.

Monitor bags andpackages being taken outof the restaurant.

Follow your lossprevention guidelines.


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Cause Impact to Restaurant Possible Solution

Transfer or receipterrors

Can impact loss of bonusfor management and meritincreases for Team

Members. May impact record

keeping.

May impact relationshipwith vendors that are notpaid properly.

Review process withmanagement team.

Inaccurate counts Impact profit. Retrain management teamon proper processes.

Coach, support, and followup with management team

on inventory counts.

Training Team Members who are nottrained in product productionmay be preparing food towrong specs.

Train.


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3. Discussanswers to the followingquestions with your Trainer:

Question Notes

What daily routine does the restaurantuse to manage food costs?

Answers will vary based on location.

How can equipment operation andmaintenance affect food and papercosts?

If ovens/equipment are not properlycalibrated, it can impact cooking andportioning of product.

If CO2

What methods are used to monitorwaste in your restaurant?

tank is not working properly, it

can allow too much syrup, whichwould impact costs.

Answers will vary based on location.

Weighing and recording waste onshifts.

Entering waste into tracking system.

How is waste communicated to theteam?

Answers may vary based on location, butshould include:

CHAMPS Communication Board.

Pre-shift meetings. Team meetings.

What might a large, negative varianceindicate?

Deliveries not verified properly(missing a case of ingredient).

Transfers are not being enteredcorrectly.

Theft.

If the food and paper cost reports

indicate a big difference between thisweek and last week, what might youcheck?

Check inventory counts.

Check delivery receipts.


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4. Analyze Food and Paper Costs

(COS) Variances.

Readthe case study andanswer thefollowing question:

Case 1 According to the reporting system, food variances have

been climbing for several key ingredients over the last four

weeks. You have already checked the system and

inventory. The entries, inventory counts and portioning are

correct. You have a true waste problem.

Your goal has been to reduce wait times at the restaurant.

To reach this goal, you have emphasized with all Managers

in Charge the importance of having enough product on

hand to fill orders quickly. Given the latest reports, you nowhave unacceptably high COS variances in four of your ten

most expensive ingredients.

Question Notes

Given that your Team Members andManagers are experienced and welltrained, what areas of product

management and waste control shouldyou emphasize to allow you to reducewaste and continue to keep wait timesshort?

Ensure prep guide is being usedproperly.

Monitor actual sales to ensure that

product preparation meets customerdemand, and adjust ingredientpreparation, if necessary.

Show ways to prepare items so thatthey are ready when customers orderthem, but are not in holding cabinetstoo long, which increase the likelihoodof waste


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Analyze Food Costs

Print orgatherthe food costs reports for the lastweek.

Use your restaurant checklists or tools to identifyvariances, or completethe chart below to analyzeyour food costs.

Determinea plan to correct each variance.

OngoingProblem?

Item Variance (+/-) Yes No Plan for Correction

Guided Practice

Answers will vary.


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Answerthe questions below:

Question Notes

What items seem to have the greatestvariance?

Can you isolate food cost problems to aspecific shift? If yes, how?

How can you coach your TeamMembers to improve in the areas thatneed improvement?

How is the restaurant doing overall onfood cost management?

Answers will vary.


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You have completed all the activities in the module. Letyour Trainer know that you are ready to be certified.

You will:

Take the Knowledge Test found in the CertificationBook.

Demonstrate what you have learned while yourTrainer observes, using the Skill Observation list.

Follow-up


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STP 3: Skills Observation / Trainer 8/2009 4 - 25

Show Your KnowledgeAnswerthe following questions:

Knowledge Test

1. What might a large negative food and paper variance

indicate?a. Under-portioning.b. Theft.

2. The buffer amount is:a. An extra amount of inventory in addition to

projected usage amounts .b. The amount of product on hand at the beginning of

the inventory period.c. An acceptable amount by which the actual inventory

can vary from the ideal inventory that the systemsays should be on hand.

3. Which formula will determine the COS %?

a. COS dol lars Gross sales.b. Ending Inventory + Purchases.

4. Which formula will determine the Ideal Variance?

a. Net sales production waste x ideal cost.b. Ideal cost Actual cost.


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Short Answer

1. What is the impact of waste on restaurant profits and

the delivery of CHAMPS?

2. What is the impact of product quality on profits andcustomer satisfaction?

3. How is the Manager accountable for ensuring thatquality product is served to the customer while stillmaintaining ideal food and paper costs?

High waste negatively impacts profits. Also, it couldimpact availability of product, which impacts salesand profit.

Meeting product quality standards satisfies customers.Satisfied customers usually return more often, leadingto increased sales and profit.

The Manager must ensure that the team followsproduct recipe specifications and production

standards. Proper portioning helps the restaurantmaintain ideal costs.

food costs - trainer

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