Article

Food cost control Playing the G.A.M.E.

December 16, 2010

By Libby Libhart

The manager was puzzled. For the third month in a row things were not adding up quite right. He was ecstatic that the restaurant was busier than they had been in months. Customer counts were up, yet oddly enough the sales and projected profits did not reflect the increase in business. He was now dejected at the lost bonus that would have been associated with higher profits. “How could this be?” he pondered. “What in the world is going on?” Faced with this reality, where does he start in solving this mystery?

Controlling and preventing losses presents a unique challenge in the quick service restaurant or fast casual environment. Losses occur from many sources, including neglected policies and procedures, poor training, unsafe work habits and conditions, undisciplined supervision andtheft. The biggest expense on the P & L of a fast food restaurant is food cost. Addressing profit leaks in this key component of the restaurant business requires a comprehensive approach in education, training and discipline.

Let’s start by answering this question.

The main food item(s) negatively affecting food cost in my restaurant is:

Dessert items
Chicken strips/wings
Bacon
Hamburger patties/bread
Cheese

The answer: The fact that you KNOW what item(s) most affects your food cost is the right answer and the first step in addressing the shortage issue. If you don’t know what item(s) are negatively affecting your food cost, we’ll outline some ideas and resources to help you.

One of the most often overlooked and potentially highest drain on profitability is the cost related to theimproper ordering, storing, inventory, preparing, cooking and selling of the food. If uncontrolled, each can be responsible for a serious drain on profits. When several of these areas are not controlled, the resulting losses can be devastating to the health of the business. A comprehensive loss controlprogram can sort it all out and address the issues that put people and profits at risk.

Sound restaurant loss prevention programs place an emphasis on controlling the issues that may negatively affectfood cost. Establishing and improving routines in these key areas will improve restaurant profit margins. Restaurant loss control professionals utilize the G.A.M.E. problem solving model to identify and resolve the areas that drain your profits.

G - Gather facts to identify the problem

Review the Quality Cost Report (QCR) that breaks down food cost components, identifies areas of opportunities, and provides actual versus target goals. Other valuable resources to review are purchase orders, raw product costs, product yields, cashier performance reports, raw and completed waste reports, inventory counts, exception reports, cash audits, employee meal receipts, inventory check-in and discrepancy reports, and food transfer records. Determine if there are plastic bins to gather raw and completed waste to be counted and documented. If the waste is immediately thrown in trash cans, the counts will not be accurate, if taken at all. Identify the top 3 to 5 items that are the farthest from the targeted goals and have the greatest impact on profitability. Focus the plan on improving them.

If routine audits of cash, security, safety and food management are not in place that can identify issues related to high food cost, consult with a restaurant loss prevention professional to design and implement them as part of a comprehensive loss control program.

A- Analyze to determine why it may be happening

Review the reports and current operational procedures for discrepancies and exceptions to policies, procedures and expectations. In your analysis, determine the root cause of the problem. It could be leadership, training, complacency, theft or a combination. Make certain that food purchase orders are right for the amount of projected sales. Over ordering can result in too much stock that may not be used before freshness expiration dates and lost to waste. Under ordering may result in frustrated customers, loss of sales and customer confidence.

Review inventory check-in and inventory counts for accuracy and that the stock is properly rotated to ensure “First In, First Out." Determine if shift managers are doing the right things, right. Observe if they follow procedures in back door control, cashier performance and discipline, and that all waste and employee meals are properly documented for each shift. Check if there are exceptions or indications that cashiers may be manipulating transactions and stealing cash with excessive over rings, refunds, price reductions, voids and no-sales. Reference cashier average check compared to the restaurant average for discrepancies. A pattern may indicate theft. By manipulating transactions the cash drawers may not reflect cash shortages, but will adversely affect food cost.

If you have a security camera system, review late night operations, and particularly the closers as they exit the building. See if they are utilizing industry best practices of security and safety protocols. Check if they are leaving with bags of food. Late night employees have been known to make extra food to take home after closing that has not been documented with sales or employee meals. Look for late night food exchanges with neighborhood competitors. It’s a very real possibility that is often overlooked.

M - Make a plan

From your analysis, compile a list of issues that may be negatively affecting your food cost. Your plan to address them will need to be comprehensive. From your findings, set priorities and how they can best be addressed. Retraining and education may be required to gain compliance on policies and procedures that are unknown, misunderstood, or deliberately violated. The crew may need additional tools and resources to be more effective in their performance. Get your entire staff involved in correcting the food cost issues by communicating clearly with them on food cost targets and soliciting their input on the tools and resources they need to accomplish the task. Assign responsibility and accountability for action oriented tasks and follow up on them routinely. Communicate your leadership expectations from your management team.

E - Execute the plan

The issues have been identified, the plan has been developed and the expectations have been communicated. It is now time to launch. Retrain where needed and follow up on the execution of assignments and make the corrections and adjustments as necessary to maintain progress. Ensure that the controls that were lax are now enforced with vigor and violations of policy are addressed with appropriate progressive discipline.

Communicate to your entire staff to keep those items top of mind throughout the day on how food is handled, cooked, rung up, served and documented as waste if thrown away. If the product has not cooked it should be documented as raw waste. If the item has been cooked and thrown away, it should be documented as completed waste. Review QCR reports daily for improvement. As they become empowered to become part of the solution, they will take ownership in delivering the results you covet. Reward and recognize the entire staff as goals and targets are achieved. Reap the rewards of a well trained staff that executes the fundamentals of a comprehensive loss prevention approach to food cost issues that make your restaurant more profitable. Eliminate the question, “What in the world is going on?” You will know precisely.

* D.B. “Libby” Libhart has more than 30 years of experience in the loss prevention industry. He has provided security and safety leadership in retail settings such as department stores, drug stores and quick-service restaurants. Before launching his own company, LossBusters, Libby served as the Senior Director of U.S. Security and Safety for McDonald’s Corp. He entered the QSR industry with Taco Bell and subsequently YUM! Brands.