Food recipe cost sheet

As margins deteriorate in the hospitality industry, some of the common management methods are no longer appropriate. One in particular — calculating cost of goods by the value of monthly purchases — is fast becoming redundant.

The reason we want to calculate cost of goods is to establish the percentage of each dollar of sales (either food or beverage) that goes to pay your suppliers, in order to maintain ultimate profit margins. In the past, when margins were as much as three times higher than they commonly are now, a coarse control system which gave you a rough idea how you were going was quite appropriate. This is not the case at present.

Maintaining a consistent budgeted food cost percentage requires knowledge (and use) of a range of management tools. These tools, when used consistently will alert you to food cost related issues before they have a serious negative impact on your profit.

A Head Chef today cannot expect to preside over a profitable kitchen operation flying by the seat of their pants.
The Chef needs to be able to respond rapidly to price fluctuations in cost of goods (cogs) and be able to identify possible problem areas of the kitchen operation. This is extremely difficult to do consistently and effectively if you are not properly prepared and able to track your revenue and costs on a daily basis.

With cost of goods being the second largest expense in your business, you need to ensure that you keep them at an appropriate level. This leads towards a healthy balance sheet which is absolutely necessary for you to get the work/life balance you may be seeking, putting your business under management or laying the foundations for expansion.

Back to Cost Control (Wages & F&B)

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