All profitable restaurant operators know that the Cost of Goods Sold (COGS) is likely one of the most crucial parts of managing a restaurant profitably. Unfortunately, controlling or lowering COGS is sort of difficult when meals prices elevated a mean of 43% final yr, based on full-service restaurant homeowners surveyed nationwide for the 2023 State of Restaurants annual report from TouchBistro.

So how does an operator management the price of items offered with this sort of inflation?

Most operators – whether or not of a single restaurant or restaurant group – have been preventing rising meals prices partly by implementing confirmed back-of-house practices. These could embody important features that may be tedious and time-consuming however have to be performed to remain in enterprise, corresponding to guide stock administration and putting cellphone orders for stock primarily based on a number of vendor tariffs and in-house spreadsheets. Many operators personally evaluate vendor pricing or assign managers to proactively analyze vendor tariffs so merchandise will increase don’t go unnoticed. Catching ingredient or provide value will increase early may also help keep and even improve revenue margins. They may additionally calculate gross sales in Excel spreadsheets, manually enter knowledge right into a separate accounting program, and routinely transfer issues round on the storage cabinets to make sure recent meals are seen and used earlier than spoiling.

The excellent news for all of the hard-working, devoted restaurant operators is that applied sciences are actually obtainable to automate these operations, making tried and true greatest practices simpler to perform quicker at a decrease value with much less staffing than beforehand attainable. Some of the present applied sciences obtainable in cell apps and on-line are even in a position to report insights on what to order, when to order, and from which suppliers to attain the specified revenue margins – primarily based on subtle programming algorithms that correlate what has been offered traditionally towards current stock, provider pricing, and plenty of different related elements.

For restaurant operators that need to lower back-of-house bills and are able to digitally rework their operations or increase their current front-of-house POS processes, listed below are seven confirmed greatest practices to assist management and cut back COGS. Restaurant operations of any measurement can implement these greatest practices fairly quickly with a wonderful ROI through the use of the best know-how.

Operators with single and a number of venues which have taken the digital transformation leap constantly report a 3% to 10% discount in COGS simply by automating these greatest practices.

1. Inventory administration: One of essentially the most tedious duties of back-of-house operations is taking guide stock, which is unavoidable in controlling COGS. However, the method and general stock administration could be a lot extra environment friendly when automating lots of the steps with a back-of-house app that gives these features:

• Scanning the UPC of the stock on the cabinets with a hand-held cell gadget that mechanically uploads the product particulars into the app. The stock taker(s) then simply information the variety of objects counted, eliminating the necessity for paper, pencils, clipboards, and re-entering the information into spreadsheets.

“Before doing inventory by hand would take three or four days. Now [using our app on a mobile device] it’s down to just 30 minutes. That’s including inventory from the freezer, cooler, and frontline.” – Southern Oklahoma Tech Food Service Manager

• Scanning suppliers’ invoices into the app to mechanically add new stock objects bought.
• Integration with provider catalogs together with product pricing.
• Integration with accounting software program.
• Integration with a POS to trace stock utilization towards gross sales. (See extra particulars beneath)

TIP: Do stock weekly of high-priced objects and month-to-month of every little thing else. If working a bar, rely top-shelf alcohol each different day. The extra useful the product is, the extra regularly it must be counted.

2. Recipe costing: To handle the price of items, it’s important to know the price of a person serving of a recipe, together with the price of the precise quantity of every ingredient used within the recipe. Once recipe costing is completed, the revenue margin could be factored in to find out the promoting worth and whether it is attainable to make a revenue on the merchandise at a gross sales worth diners are keen to pay or if it is likely one of the extra worthwhile objects that may be supplied on the menu. Recipe costing may additionally reveal more cost effective substances must be used to extend profitability.

The trivialities of recipe costing could take time upfront, however as soon as performed for all menu objects, this underpins all the opposite elements that go into decreasing prices. Recipe costing is a useful function within the app for correct profitability evaluation.

“Instead of giving the managers broad information like ‘your food cost is high,’ [with recipe costing] we are now able to tell the managers exactly which specific products we are having issues with.” – Los Tacos operator

3. Supplier pricing integration with recipes: Choose an app that may assist alter recipe costing methods if a provider adjustments costs. Once provider catalog/pricing integration is completed and recipe costing is uploaded to the app, arrange alerts for irregular pricing. This alerts stock managers that quickly growing costs on essential substances and even provider adjustments should be made to take care of recipe profitability. Supplier contracts typically don’t require notifying operators of merchandise worth will increase, so proactive alerts on elevated merchandise prices are important. Increases in recipe prices straight have an effect on profitability, so sustaining the gross sales margins for every menu merchandise requires agile reporting capabilities to reply adequately.

4. Supplier pricing visibility: It is important that the app can present provider pricing and fluctuations so all necessary data wanted to put an order is present and handy, bills being incurred could be immediately calculated, and updates could be transferred to the accounting system. The app must also have the ability to observe vendor credit and calculate these within the closing prices.

5. Waste (spoilage) monitoring: Ensure the app permits logging any time there’s stock waste or spoilage, together with its cause. It must also present a report exhibiting waste historical past, actions taken to right the issue, and whether it is getting higher or worse.

“Our waste has been cut in half since we started using our app to log and track it. Also, having employees log waste events really keeps them on their toes.” – Potato Champion proprietor/operator

6. Theft/Shrinkage Tracking: Inventory that’s misplaced can have a big influence on COGS. These are objects that may’t be tracked to gross sales or manufacturing. It must be on the cabinets, but it surely isn’t. To management theft/shrinkage, use an app that may present an precise versus theoretical (AvT) utilization report.  This is calculated with the system: opening stock plus vendor purchases minus closing stock (precise utilization) ought to equal gross sales (theoretical utilization). However, if there’s a important variance that has not been logged as waste, it might be attributed to theft.

7. Ordering evaluation and streamlined course of: Ordering is likely one of the most crucial components of managing a restaurant and controlling COGS. Once a product has been ordered, it’s going to both be offered or wasted. Look for an app to investigate historic POS gross sales knowledge to find out present optimum PAR ranges for every stock merchandise dynamically. The app must also have the ability to place orders and take cost on-line (by means of the cloud or on a cell gadget) with out having to jot down out, fax, e-mail, cellphone in, or textual content the orders individually. This will increase the accuracy and timeliness of product acquired.

Ideally, the app ought to have the ability to present enterprise intelligence and reporting for a complete image of the operation’s value of products over time. For a restaurant group, it ought to have the ability to show this data for the overall portfolio and every restaurant location. Evaluating this data and these seven greatest practices supplies any operator with important instruments to assist handle and cut back COGS.

Automation performance and ease of use may also help fight rising labor prices. Make positive the app chosen has an intuitive interface that’s straightforward to study and use. This can go a good distance towards reducing job stress and tedium, which can assist cut back the employees turnover that’s regularly a expensive downside for restaurant homeowners.

Wink Jones is the CEO of Meal Ticket, a number one software program resolution supplier centered on the worldwide foodservice provide chain and eating places since 2011. As a part of the founding crew at Meal Ticket in 2011, Wink was impressed by the strategic imaginative and prescient of bringing fashionable know-how to an underserved trade, one which beforehand relied on decades-old know-how to go to market and handle its operations. Previously, he was a associate at Lacuna Capital the place he was concerned in pre- and post- funding actions, together with due diligence, valuation, negotiation, strategic planning, and board exercise.

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