Measurements and Equivalents. Recipe Basics Recipe Adjustments.
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Boost Your Profits With Accurate Recipe Costs & Men Engineering Menu Engineering
Economic and Community Development InstituteColumbus, OH March 27, 2012
© 2012 Return On Ingredients LLC P.O. Box 2387 Westerville, Ohio 43086-2387 614.423.4410 Fax 614.340.7946
Mark Kelnhofer
• BA in Accounting and Business Administration in 1993
• Masters in Business Administration (MBA) in 2005Masters in Business Administration (MBA) in 2005
• Ohio Dominican University, Columbus, Ohio
• Manufacturing Cost (1993 – 2012)
• Plastics, Lighting, Tire Repair Kits, Buses, RestaurantsPlastics, Lighting, Tire Repair Kits, Buses, Restaurants
• Bravo/Brio Restaurant Group (2002 – 2010)
• Return On Ingredients (2009 – Present)
• Bravo/Brio Restaurant Group Eddie V’s Pistacia Vera Bob Evans Bravo/Brio Restaurant Group, Eddie V s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co.
• Ohio Dominican University (2007 – Present)
• Adjunct Faculty, Financial & Managerial Accounting
• Midwest Culinary Institute (2011 – Present)
• Adjunct Faculty, Food, Beverage & Labor Cost Controls
Bravo/Brio Restaurant Group
30.0%
BBRG Food Cost Trend 2005-2010
29.3%
28.8%
27.6%27 4%
28.0%
29.0%
27.4%
25.5%25 1%
26.0%
27.0%
25.1%
23 0%
24.0%
25.0%
23.0%FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010
Food cost
4.2% = $ millions in savings
Return On Ingredients LLC P.O. Box 2387 Westerville, Ohio 43086‐2387 614.423.4410 Fax 614.340.7946Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC
Brio Tuscan Grille – Easton Town CenterColumbus, Ohio
Bravo! Cucina ItalianaBravo! Cucina ItalianaVirginia Beach, VA
Bon Vie – Easton Town CenterC l b OhiColumbus, Ohio
Mark Kelnhofer
• BA in Accounting and Business Administration in 1993
Ad ( A) 200• Masters in Business Administration (MBA) in 2005
• Ohio Dominican University, Columbus, Ohio
• Manufacturing Cost (1993 – 2012)
l h• Plastics, Lighting, Tire Repair Kits, Buses, Restaurants
• Bravo/Brio Restaurant Group (2002 – 2010)
• Return On Ingredients (2009 – Present)
• Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co.Zauber Brewing Co.
• Ohio Dominican University (2007 – Present)
• Adjunct Faculty Financial & Managerial AccountingAdjunct Faculty, Financial & Managerial Accounting
• Midwest Culinary Institute (2011 – Present)
• Adjunct Faculty, Food, Beverage & Labor Cost Controls
Other Food Manufactures…
• Restaurants
• Casinos
• Hotel & Lodging
• Sports Arenas
• Hospitals
Colleges and Universities• Colleges and Universities
• Catering and Banquet Centers
• Theme ParksTheme Parks
• Horse Race Tracks
• ….and others!
Restaurants vs. Manufacturing
RESTAURANTS MANUFACTURING
Ingredients Raw MaterialsIngredients Raw Materials
Restaurants vs. Manufacturing
RESTAURANTS MANUFACTURING
Prep Production Work In ProcessPrep Production Work In Process
Restaurants vs. Manufacturing
RESTAURANTS MANUFACTURING
Menu Item Finished GoodsMenu Item Finished Goods
Restaurants vs. Manufacturing
RESTAURANTS MANUFACTURING
BOH ( h f) / Di t L bBOH (chef) / FOH (bartender)
Direct Labor
Restaurants vs. Manufacturing
RESTAURANTS MANUFACTURING
FOH (Waiter/Waitress) Indirect LaborFOH (Waiter/Waitress) Indirect Labor
Restaurants vs. Manufacturing
Other manufacturing aspects as wellOther manufacturing aspects as well• Prep Time = Labor Routing• Customer Order = Manufacturing Order
O h d (Di t & I di t)• Overhead (Direct & Indirect)• Recipe = Bill of Material (BOM)
Top Reasons Top Reasons To Know To Know
Y C t !Your Costs!
The The Restaurant Restaurant
I d tIndustry
The Restaurant Industry
2012 Restaurant Industry Forecast in the U.S.
l f $ b ll d• Sales of $631.8 billion in 2012 compared to $610.4 billion in 2011, a 3.5% increase
• Employs 12.9 million in 2012; forecasted to p y ;be 14.3 million in 2022
• In Ohio in 2012, 530,500 people are employed by the industryemployed by the industry
Source: National Restaurant Association restaurant.org/research
2012 Restaurant Industry Forecast
The Restaurant Industry
Specialty Foods Industry
State of Specialty Foods Industry 2011
l f $ b ll h $ b ll• Sales of $70.3 billion with $55.9 billion in retain sales
• Specialty foods represent 13.1% of all retail p y pfood sales
• Cheese and Cheese Alternatives are the largest specialty food category $3 2 billionlargest specialty food category $3.2 billion
• Categories with the greatest percentages of all food sales – refrigerated sauces, salsas
d diand dips
• Gluten-free product showed sharp gains
Source: National Association of Specialty Food Source: National Association of Specialty Food http://www.specialtyfood.com/nasft/press-office/industry-facts/
The U S The U.S. Economyy
General U.S. Economy
• General economic indicators• Unemployment is improving
• Housing market values are continuing to drop
• Unpredictable future actions of Washingtonp g
• States and Cities on the verge of bankruptcy
• Cities defaulting on municipal bonds
• European Debt Crisis (Greece Italy)• European Debt Crisis (Greece, Italy)
• 1 in 7 on food stamps
• U-3 unemployment rate 8.3% (02/2012)
• U-6 unemployment rate 14.9% (02/2012)
• Discretionary income dropsE i d i i d l f• Eating out decisions are made less often
• Highly competitive environment
U-3/U-6 Unemployment
15.0%
16.0%
17.0%
18.0%
10 0%
11.0%
12.0%
13.0%
14.0%
6 0%
7.0%
8.0%
9.0%
10.0%
6.0%
U-3 U-6
Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
U-3/U-6 Unemployment
U-3 UnemploymentTotal unemployed as a percent of the civilian labor force (official rate)Total unemployed, as a percent of the civilian labor force (official rate).
U-6 UnemploymentTotal unemployed plus all persons marginally attached to the labor Total unemployed, plus all persons marginally attached to the labor force, plus total part-time employed for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force (total rate).
Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
Long Term Unemployment
Wall Street Journal, 07/21/2011
“Long Term Long Term Unemployment by State”
General U.S. Economy
The Wall Street Journal, 03/12/2012
General U.S. Economy
The Wall Street Journal, 03/03/2012
General U.S. Economy
The Wall Street Journal,03/02/2012
General U.S. Economy
Wall Street Journal, “Housing Still Drowning in Underwater Mortgages”, 03/02/2012
General U.S. Economy
Wall Street Journal, 03/02/2012
Commodit Commodity Costs
Food Inflation
Cleveland Research Company01/12/201201/12/2012
Food Inflation
Reuters02/23/2012/ /
Cost of Fuel
Source: http://fuelgaugereport.aaa.com/
Commodity Research
Source: American Restaurant Association www.americanrestaurantassociation.com1-888-423-4411 Fax 941-953-4034Forecasting and Managing Food and Energy Commodities
Commodity Researchck
se, Blo
cC
hee
s
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchd
Gro
un
dBee
f, G
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity ResearchR
Pork
WC
R
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchk H
amPork
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchco
nll
y,
Bac
Pork
Be
P
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchh
eat
W
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Ind str Industry Failure Rate
Restaurant Failure Rate
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
Restaurant Failure Rate
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
Restaurant Failure Rate
Controls“A d h N l R A (2009)“According to the National Restaurant Association (2009), a typical restaurant in America earns a net profit under 10%. That means 90% of revenues are used to defer the cost of doing f f f gbusiness. Thus, managers that do not understand the importance of cost controls are bound to fail in the restaurant business. Two
j t i th t t i d t f d t d l bmajor costs in the restaurant industry are food cost and labor cost. These two costs together are referred to as prime costs. For a restaurant to succeed, the prime costs are expected to be less p pthan 60% of revenues. It is a ‘rule of thumb’ and a good rule to follow. Most restaurants that have failed often were found to have prime costs exceeding 60% indicating greater potential to
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
prime costs exceeding 60% indicating greater potential to failure.”
The Missing Link
+
Culinary Arts The Numbers
ROI Methodology
Recipe costing is the base for manyRecipe costing is the base for manyother aspects of the operations.
The Reality Is…
• Some restaurant operators do not phave any written or documented recipes.
• Some have recipes that are written are only for execution, not costing.
• The few that have costing in many cases do not take a manufacturing approachapproach.
• Menu pricing in some cases is not based on proper analysis and databased on proper analysis and data.
What is in your control?
Knowing your costs Knowing your costs
What is in your control?
Knowing your costs Knowing your costs
Establishing your selling price
Types of Recipes
• Batch or Prep RecipesBatch or Prep Recipes• Larger quantities
• Become their own unique Become their own unique inventory item when produced
• Can be used in other recipes
• Serving or Menu Item Recipes• Ultimately is what is sold to the
guest or customer
Weights & Measures
Portion control thro gh the se of • Portion control through the use of utensils (Tbsp tsp dishers spoodles etc )(Tbsp, tsp, dishers, spoodles, etc.).
• Accuracy of weights and measures Accuracy of weights and measures is paramount.
1 cup, Basil Leaves 1 cup, Granulated Sugar
0.2 ounce 6.8 ounces
Batch Recipes & Yields
• Batch recipes should account for the • Batch recipes should account for the proper yield (what the result is) including known waste and the gprocess (labor)
• When the purchased product has p pchanged form in any way, a batch recipe should be created to account f h for the cost.
• If you don’t account for the process d i ld l l t i and yields, your menu level costs in
most cases is understated!
Batch Recipe Example #1
• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz
Ingredients Quantity UOM Cost Extended
Basil, Fresh 16.0 oz $0.531 $8.500
BASIL PICKED
• The new item ‘Basil Picked’ now
Basil, Fresh 16.0 oz $0.531 $8.500
Yield 11.0 oz
The new item Basil Picked now has a correctly stated value of $0.773/oz or $12.36/#
Batch Recipe Example #2
• We purchase ‘P&D 31/40 Shrimp’ p / pat $5.50/# or $0.344/oz
/Ingredients Quantity UOM Cost Extended
P&D 31/40 16.0 Oz $0.344 $5.500
P&D 31/40 SHRIMP THAWED
Th it ‘P&D 31/40 Th d’
P&D 31/40 Shrimp, frozen
16.0 Oz $0.344 $5.500
Yield 14.2 oz
• The new item ‘P&D 31/40 Thawed’ now has a correctly stated value of $0 387/oz or $6 19/#$0.387/oz or $6.19/#
Batch Recipe Example #3
• We purchase ‘Lobster Bisque Soup’ p q pby the bag/8# for $16.95 bag.
Ingredients Quantity UOM Cost Extended
Lobster Bisque 1.0 Bag $16.950 $16.950
LOBSTER BISQUE SOUP YIELDED
Th it ‘L b t Bi S
Lobster Bisque Soup
1.0 Bag $16.950 $16.950
Yield 0.98 gal
• The new item ‘Lobster Bisque Soup Yielded’ now has a correctly stated value of $17 30/gallon or $0 136/ozvalue of $17.30/gallon or $0.136/oz
Batch Recipe Example #4
• We purchase ‘Bananas’ for p$0.513/#.
Ingredients Quantity UOM Cost Extended
Bananas 16.0 Oz $0.032 $0.513
BANANAS PEELED
Th it ‘B P l d’
Bananas 16.0 Oz $0.032 $0.513
Yield 10.5 oz
• The new item ‘Bananas Peeled’ now has a correctly stated value of $0 049/oz or $0 782/#$0.049/oz or $0.782/#
Packaging
• Packaging is part of the raw g g pmaterial cost, similar to the ingredients
• Packaging includes:
• Boxes
• Labels
• Wraps
The Costing Problem
Ingredients
Prime Cost
Ingredients Labor
Total Cost
Ingredients Labor
Overhead
Labor & Overhead Costs
• Your labor and overhead can be accounted for in the recipe
• Prep Time, Labor Routing• Time/motion studies (stopwatch)
• Time (hours) is loaded on every recipe
• Standard Labor (BOH) Rates• By market
• Includes wages and fringes
Time Motion Studies
• Stopwatch time motion studyp y
• Must be in a live environment
• Must be a controlled testMust be a controlled test
• Must be the personnel that will actually execute the recipesy p
Batch Recipe ExamplePrime CostPrime Cost
• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz
Ingredients Quantity UOM Cost Extended
Basil, Fresh 16.0 oz $0.531 $8.500
BASIL PICKED
Basil, Fresh 16.0 oz $0.531 $8.500
Labor 0.167 hr 12.00 $1.999
Total $10.499
Yi ld 11 0
• The new item ‘Basil Picked’ now has a correctly stated value of
Yield 11.0 oz
has a correctly stated value of $0.954/oz or $15.27/#
Direct (BOH) Labor Rate
• The direct (BOH) labor rate should ( )include the base rate plus any other additional fringes associated
h h lwith those personnel• Unemployment Insurance
Workers’ Compensation• Workers Compensation
• Social Security & Medical
• Health, dental and vision insurance plans
• 401(k) or other retirement plans
• Vacation & Sick Pay
Child• Childcare
Overhead Rates
• Based on budgeted expenses and
Predetermined Overhead Rate
g pdirect labor hours (BOH) by location.
Total Budgeted OverheadTotal Budgeted Overhead
Direct Labor BOH Hours = $0.000/hr.
OverheadRate
Overhead Rates
• FOH Labor & Fringes
Predetermined Overhead Rate
• FOH Labor & Fringes• Advertising & Marketing• Repair & Maintenance• Supplies• Training• Utilities Utilities • Communications• Landscaping• Research & Development• Research & Development• Occupancy• Taxes
BudgetedDirect Labor
HoursHours
Batch Recipe ExampleTotal CostTotal Cost
• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz
BASIL PICKEDIngredients Quantity UOM Cost Extended
Basil, Fresh 16.0 oz $0.531 $8.500
Labor 0.167 hr $12.00 $1.999
Overhead 0.167 hr $40.00 $6.664
Total $17.163
Yield 11 0 oz
• The new item ‘Basil Picked’ now has a correctly stated value of
Yield 11.0 oz
has a correctly stated value of $1.56/oz or $24.96/#
Efficient Batch Designsg
• Are the batch or prep recipes p p pdesigned for efficiency?
Batch #1Yields: 28 oz
Batch #2Uses
24 oz of Batch #1
Efficient Batch Designsg
• Are the batch or prep recipes p p pdesigned for efficiency?
Automatically incurs 4 oz of waste each time
Batch #1Yields: 28 oz
Batch #2Uses
24 oz of Batch #1
Sales Mix & Execution
Review of the sales mix with assigned grecipes for each station
Station #1 Station #2 Station #3 Station #4 Station #5
Where is the distribution of the sales mix?Where is the distribution of the sales mix?
Execution vs. Costing
• Recipes are written differently for p yexecution than they are for costing.• Execution usually states what utensils
to utilize
Costing involves weights and • Costing involves weights and measures
Execution vs. Costing
Execution Costing
BALSAMIC MARINADEIngredients Qty UOM Qty UOM
Olive Oil Blended 90/10 3.0 cups 24.0 oz
Balsamic Vinegar 1.0 cup 8.0 ozg p
Salt and Pepper Mix 0.25 cup 2.025 oz
Chopped Shallots 0.25 cup 1.20 oz
Chopped Parsley 0 25 cup 0 45 ozChopped Parsley 0.25 cup 0.45 oz
Yield 38.0 oz
Menu Level Costing
Menu Level Costing
Prime Cost
Menu Level Costing
Total Cost
Menu Engineering
The Guest
MENU
ReputationCommunity
MENU
BusinessFamilies
Employees
Menu Engineering
• Your menu(s) are what you are in ( ) ythe business to do.
• Types of Menus• Lunch
• Dinner
• Brunch
• Banquet
• Kids
• Pricing Structures• By Markets, Demographics
Cost-Volume-Profit (CVP)
The components that we will be analyzing:The components that we will be analyzing:
• Menu items in the category
Quantity/volume sold• Quantity/volume sold
• Selling Price
U it C tPRODUCT COSTS:I di t Di t • Unit Cost
• Cost Percentage
G M i P Pl
Ingredients, Direct Labor and Variable
Overhead
• Gross Margin Per Plate
• Contribution Margin PERIOD COSTS:Fixed Overhead
and Profit
Cost-Volume-Profit (CVP)
The components that we will be analyzing:The components that we will be analyzing:
• Menu items in the category
Quantity/volume sold• Quantity/volume sold
• Selling Price
U it C tTOTAL COSTS:
I di t Di t • Unit Cost
• Cost Percentage
G M i P Pl
Ingredients, Direct Labor and Total
Overhead
• Gross Margin Per Plate
• Total Profit PROFIT
My Famous Quote
“You cannot place You cannot place percents in your percents in your
pocket!”pocket!
My Famous Quote
Change the focus from cost Change the focus from cost
percent to gross margin dollars
Menu Item Qty Sold
MenuPrice
Unit Cost
Cost % UnitGM $s
Pasta Fettucine 1 $11.99 $1.98 16.5% $10.01
Filet Mignon 1 $32.95 $12.49 37.9% $20.46
Which one would you rather have?Do we focus too much on cost percents?f p
Loss Leaders
Items that are sold at a loss Items that are sold at a loss that will result in other menu items being sold at a profit.
Loss Leaders
Items that are sold at a loss Items that are sold at a loss that will result in other menu items being sold at a profit.
Drive profits!Drive profits!
Dog/Star Graphex
%
StarHi h PI % Hi h GM $
PlowhorseHigh PI % Low GM $s
ty I
nd
e High PI %, High GM $sHigh PI %, Low GM $s
pu
lari
t
PuzzleDog
Po Puzzle
Low PI %, High GM $’sDog
Low PI %, Low GM $s
Average Unit Gross Margin $
Dog/Star Graph Flaws
Flaw #1Flaw #1Traditional Dog/Star reports only
l lanalyze entrees only.
Dog/Star Graph Flaws
Flaw #1Flaw #1Traditional Dog/Star reports only
l lanalyze entrees only.
Flaw #2The calculation looks as unit
gross margin as a basegross margin as a base.
Dog/Star Graph Flaws
Flaw #1Flaw #1Traditional Dog/Star reports only
l lanalyze entrees only.
Flaw #2The calculation looks as unit
gross margin as a basegross margin as a base.
Flaw #3The graph plots all entrees together.
Cost Volume Profit Example
Which menu item should be reviewed?
Menu Item MenuPrice
Unit Cost
Cost % UnitProfit $s
SALADS Menu in place for 6 months.
Chopped Salad $5.50 $0.43 7.8% $5.07
Wedge of Iceberg $5.50 $0.33 6.0% $5.17
Caesar Salad $5 50 $0 41 7 5% $5 09Caesar Salad $5.50 $0.41 7.5% $5.09
House Salad $5.50 $0.48 8.7% $5.02
Averages $5.50 $0.41 7.5% $5.09
Cost Volume Profit Example
Which menu item should be reviewed?
Menu Item Menu Price
Unit Cost
Cost % UnitProfit $s
SALADS Menu in place for 6 months.
Chopped Salad $5.50 $0.43 7.8% $5.07
Wedge of Iceberg $5.50 $0.33 6.0% $5.17
Caesar Salad $5 50 $0 41 7 5% $5 09Caesar Salad $5.50 $0.41 7.5% $5.09
House Salad $5.50 $0.48 8.7% $5.02
Averages $5.50 $0.41 7.5% $5.09
If the decision was based on cost percent alone, the ‘House Salad’ would be reviewed for action. House Salad would be reviewed for action.
Cost Volume Profit Example
Which menu item should be reviewed?
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Total Profit $s
SALADS Menu in place for 6 months.
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
Caesar Salad 1 508 $5 50 $0 41 7 5% $5 09 $7 676Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Averages $5.50 $0.41 7.5% $5.09
If you would have chosen the ‘House Salad’, you would have reviewed the menu item driving the most dollars to cover fixed overhead costs and profit and possibly to cover fixed overhead costs and profit and possibly removing it from the menu.
Dog/Star Calculation
Which menu item should be reviewed?
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit
Total Profit $s
GM MM Rank
Ch d S l d 1 664 $5 50 $0 43 7 8% $5 07 $8 437 L H Pl h ?
SALADS Menu in place for 6 months.
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 L H Plowhorse?
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star?
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star?
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse?
Averages $5.50 $0.41 7.5% $5.09
MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08Flaw: Gross margin rank for dog/star calculation is based on unit level only, not extended contribution based on unit level only, not extended contribution margin dollars.
Dog/Star Graph
35.0%House Salad
25.0%
30.0%
dex
%7
.5% StarPlowhorse
Chopped Salad
Caesar Salad
15.0%
20.0%
arit
y I
n.7
= 1
7
17.5% Wedge Salad
5.0%
10.0%
Pop
ula
(¼)
*
.08
Dog Puzzle
0.0%
$5.00 $5.02 $5.04 $5.06 $5.08 $5.10 $5.12 $5.14 $5.16 $5.18
P
$5
Menu Item Unit Gross Margin $s$32,475 / 6,396 = $5.08
Stellar / Cellar Graphex
%
Stellar - The Bank• Sacred Items• Most Profitable Items
The Engineer• Reengineering of Menu Items
• Labor Process Improvements
ty I
nd
e p• Alternative ingredients• Menu placement
• Price increase possibility
pu
lari
t
The Push or Sell• FOH Suggestive Selling
The Cellar• New menu item opportunity
Po • FOH Contests
• Review price with value proposition; price too high?• Quality or flavor issue
• Exception: Unique menu item
Menu Item Total Profit $s
Stellar / Cellar Graphex
%
Stellar - The Bank• Sacred Items• Most Profitable Items
The Engineer• Reengineering of Menu Items
• Labor Process Improvements
ty I
nd
e p• Alternative ingredients• Menu placement
• Price increase possibility
pu
lari
t
The Push or Sell• FOH Suggestive Selling
The Cellar• New menu item opportunity
Po • FOH Contests
• Review price with value proposition; price too high?• Quality or flavor issue
• Exception: Unique menu item
Menu Item Total Profit $s
Stellar / Cellar Graph
35.0%
House Salad
25.0%
30.0%
dex
%0
%
25.0%Chopped Salad
Caesar SaladThe
StellarThe Engineer
15.0%
20.0%
arit
y I
n =
25
.0
Wedge Salad
Stellar
10.0%
Pop
ula
(¼)
19
The Cellar The Push
0.0%
5.0%
$2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000
P
$8
,11
Menu Item Total Profit $s$32,475 / 4 = $8,119
Cost Volume Profit Example
Which menu item should be removed?
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Profit $s
SALADS Menu in place for 6 months.
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
Caesar Salad 1 508 $5 50 $0 41 7 5% $5 09 $7 676Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Averages $5.50 $0.41 7.5% $5.09
The proper item to target to be reviewed is the ‘Wedge of Iceberg’of Iceberg .
What are my options?
• Review the menu placement
• Reengineer an existing menu itemg g
• Review process
• Alternative ingredientste at e g ed e ts
• Price increase
• Remove the item and create a new itemRemove the item and create a new item
Engineering a New Menu Item
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Total Profit $s
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
New Menu Item - $TBD $TBD > $5.17
When engineering the new menu item, attempt to create the item that will increase the average create the item that will increase the average gross margin on the item being removed. In this case - $5.17/menu item.
Menu Placement
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Total Profit $s
SALADS
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Field Greens NEW $5 75 $0 43 7 5% $5 32Field Greens NEW $5.75 $0.43 7.5% $5.32
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
Averages $5.56 $0.44 7.9% $5.12
When reading the menu, customers read from top to bottom of the category they are looking at. Place the menu items that drive the most contribution margin to the top. The two top menu items are my highest “The Bank” category items.
Menu Placement & Eye Gaze
Source: Bowen & Morris, 1995; Hug & Warfel, 1991; Kelson, 1994; Scanlon,1998; Main, 1994; Miller, 1992; Panitz, 2000; National Restaurant Association, 2007;Kotschevar, 2008; Pavesic, D.V., 2011
Menu Placement & Eye Gaze
Source: Livingston, 1978
Front of House (FOH) Sales
• If the menu layout is structured • If the menu layout is structured with the most profitable items on top, it should not be a secret!p,
• FOH personnel can play an active roll in suggesting to the gg gcustomers items that drive profit!
Where do I start?
Step 1: Purchased Items Step 1: Purchased Items
Step 2: Batch Recipes Ingredient level only
Step 3: Serving Recipes
Step 4: Time Standards
Step 5: Labor and Overhead Rates Step 5: Labor and Overhead Rates
Step 6: Performance Benchmarking
Systems
• MBE (Manage By Excel)( g y )
• Systems & Software (do your Systems & Software (do your research!)• Features (i.e.
recipes, production, ordering,
• invoicing, menu engineering, etc.)
• Service
• Cost
• Your overall plan (short and long term)
Our Systems
Cost Control
ACCURATE RECIPE
Audit to Improve ffi i iRECIPE
COSTINGEfficiencies
MENU ENGINEERING
Benchmarking (Actual v.
Theoretical)
JIT Production &
Ordering(Dynamic
P )Pars)
hThe
Top 10 Top 10
kTakeaways
The Top 10 Takeaways
Takeaway #1Takeaway #1
Get the competitive edge!p g
The restaurant industry is hi hl titi d th highly competitive and the current economic factors f
compound that.
The Top 10 Takeaways
Takeaway #2Takeaway #2
The business failure rate has fhistorically been very large. Use both your culinary skills Use both your culinary skills
and data to keep from becoming a statistic.
The Top 10 Takeaways
Takeaway #3Takeaway #3
Recipe costing is vitally p g yimportant to the success of
the operations Recipe the operations. Recipe costing can be a science.
Everything can be
accounted for accounted for.
The Top 10 Takeaways
Takeaway #4Takeaway #4
Your menu is too
important to guess at! G i i t d h!Guessing is not good enough!
The Top 10 Takeaways
Takeaway #5Takeaway #5
Writing a recipe for execution g p fis very different than for
costing Execution is for the costing. Execution is for the line personnel. Costing is
for the management.
You need bothYou need both.
The Top 10 Takeaways
Takeaway #6Takeaway #6
“You cannot place percents in p pyour pockets!”. Shift the
focus from cost percents to focus from cost percents to gross margin dollars per plate and contribution
margin dollars.margin dollars.
The Top 10 Takeaways
Takeaway #7Takeaway #7
Make decisions not only based yon the passion and emotion of the menu item but also of the menu item – but also
empirical data. Be methodical.
The Top 10 Takeaways
Takeaway #8Takeaway #8
The menu layout and yplacement of menu items does matter Place higher does matter. Place higher contribution margin items on top in descending order.
The Top 10 Takeaways
Takeaway #9Takeaway #9
This is your call to action!y
Start the process. If you do t h d t ti not have adequate time or
skills, get some professional , g p fassistance!
The Top 10 Takeaways
Takeaway #10Takeaway #10
To ensure success –
The bottom line is
know your costs!
Plan for success!Plan for success!
Be proactive, not reactive!p ,
Reference Books
The Book of Yields: Accuracy in Food Costing & Purchasing
Francis T. Lynch
John Wiley & Sons
ISBN 13: 978-0-471-74590-7ISBN 13: 978 0 471 74590 7
ISBN 10: 0-471-745909-1
Ch f’ B k f F l Yi ld & SiChef’s Book of Formulas, Yields & Sizes
Arno Schmidt
John Wiley & Sons
ISBN 10: 0-471-22716-1
Note: Neither references is truly comprehensive. You need to practice the f y p pcosting methods discussed in this presentation.
Articles Booklet
• “Obtaining Accurate Recipe Costs”Obtaining Accurate Recipe Costs
• “Improve Your Menu Engineering”
• “The Case For Theoretical Food Costs”• The Case For Theoretical Food Costs
• “The Advantages of Just-In-Time”
• “Robust Supply Chain Management”• Robust Supply Chain Management
• “Line Checks That Create Efficiency”
“Traits of Effective Cost Management”• Traits of Effective Cost Management
http://www.ReturnOnIngredients.com
Other Speaking Events
2012ACF S d k Ch 01/09 i Mil OH• ACF Sandusky Chapter, 01/09 in Milan, OH
• National Assn. for the Specialty Food Trade 01/12 in San Francisco, CA
• Southern California Gas Co., Foodservice Equipment Ctr., 01/19 in Downey, CA
• ACF Cincinnati Chapter, 01/23 in Cincinnati, OH
• North American Pizza & Ice Cream Show, 01/29 – 01/30 in Columbus, OH
• Delaware Area Career Center, 02/10, in Delaware, OH
• International Restaurant & Foodservice Show, 03/03 - 03/04 in New York, NY
• Columbus Culinary Institute, 03/14, in Columbus, OH
• Western Illinois University, 03/20 in Macomb, IL
• Economic Community & Development Institute, 3/27 in Columbus, OH
• Platt College, 04/17 in Tulsa, OK
• Oklahoma Restaurant Association, 04/17 in Tulsa, OKO , 0 / , O
• San Diego Mesa Community College, 04/24, in San Diego, CA
• California Restaurant Association, 04/25, in San Diego, CA
• Economic Community & Development Institute, 04/27, in Columbus, OH
• Southwestern Foodservice Expo 06/24 in Dallas TX• Southwestern Foodservice Expo, 06/24 in Dallas, TX
• Western Foodservice & Hospitality Expo – 08/12 – 08/14 in Anaheim, CA
• Florida Restaurant & Lodging Show – 09/23 – 09/25 in Orlando, FL
Culinary Schools
• This program is offered at no cost to culinary d h i li h l b d and hospitality schools programs based on
availability and budget.• San Diego Mesa Community College (San Diego, CA)
• Lexington College (Chicago, IL)
• Roosevelt University (Chicago, IL)
• Western Illinois University (Macomb, IL)
• Lake Michigan College (Benton Harbor, MI)Lake Michigan College (Benton Harbor, MI)
• Central Michigan University (Mt. Pleasant, MI)
• Guilford Technical Community College (Jamestown, NC)
• Midwest Culinary Institute (Cincinnati, OH)
C l b C li I tit t (C l b OH)• Columbus Culinary Institute (Columbus, OH)
• Owens Community College (Toledo, OH)
• Platt College (Tulsa, OK)
• Culinary Institute of Charleston (Charleston, SC)y f
Please email me at [email protected]
Or call me directly at Cell 614.558.2239
Questions & Answers
Mark Kelnhofer President & CEOMark Kelnhofer, President & CEO
Return On Ingredients
P O Box 2387P.O. Box 2387
Westerville, Ohio 43086-2387
614 423 4410614.423.4410
Fax 614.340.7946
C ll 614 558 2239Cell 614.558.2239
http://www.ReturnOnIngredients.com