Food and Beverage cost are the biggest cost for any restaurant which ranges between 30-40% of revenue depending on the style of the restaurant. Food cost affects the restaurant’s profitability to a significant level and can be volatile due to a few reasons beyond hotel controls (such as sudden inflation or shortage of supply etc). (learn more about hospitality cost control)
Basic Calculation and control preparation methods
- Calculate the standard Food and beverage cost for each menu item based on f&b recipe. Cost calculation should be based on market price and kitchen menu ingredient. Market price for ingredients keep changing hence standard cost % need to be updated atleast every six months.
- Set the selling price by comparing with competitor price and hotel signature dish popularity. Selling price proposal preparation done by chef, cost team and management / owner approve the selling price.
Above two steps would provide budgeted / estimated overall ideal food cost % which is the very first step in cost control process. Cost % will vary based on recipe, menu style & variety. Larger menu will carry high food cost due to mis-em-place and variety making kitchen par higher.
- Calculate Monthly Food and Beverage Cost – To prepare monthly food & beverage cost following data would be require.
- Monthly total purchase amount for food & beverage categories base on daily receiving record.
- Inter Kitchen transfer for ‘Food to Bar’ and ‘Bar to Food’ outlets.
- Physical Inventory closing Stock from all F&B kitchens, outlets and Storage Area.
- Those closing balance should be base on system closing balance.
- System closing balance should be match with actual ground stock balance and
- any discrepancy should be monitored and if there are losses (its investigated and adjusted to food cost)
- Credits from Food cost
- complimentary, entertainment, officer meal, welcome Fruit and Drink.
- Guest Supply such as tea and coffee.
- F&B promotion and discounted bills.
- Draft calculation for food & beverage cost % is as below
Opening Balance + Purchase – Closing Balance = Gross consumption
Gross Consumption – Other Credit bill such as non-chargeable amount = Cost of Good sold
(Cost of goods sold / Revenue )*100 = F&B cost %
Apart from Calculating the cost report, F&B cost controllers usually need to review below mentioned reports as well.
- Breakage and Loss report for operation equipment.
- Spoilage and Damage of food & beverage items (to ensure spoilages and breakages are not exceeding tolerance levels)
- Monthly slow moving & non-moving report
- Menu Engineering / Sale Mixed report
Typcial Cost control process is outlines below.
- Cost controlling process start from purchasing. It is very important that purchase processes are adequate to ensure
- price remains within original estimates.
- quality is as determined in the initial setup and there are enough controls to ensure compensation for loss due to deviation in yield and quality.
- There needs to be a adequate control for approval of purchase requisition (PR), purchase order (PO) to ensure only adequate and relevant material is sourced.
- Cost control department have checked the purchase requisition to ensure maintenance of PAR levels, minimum re-order levels (more about setting up PAR levels)
- After purchasing process, material would be received at hotel / restaurant premises. There are series of controls which are necessary to follow at receiving area
- Check the item quality and quantity as agreed in quotation/contract specification.
- Chefs are checking the quality of items received specially for fresh items
- Temperature control items are received in special vehicles and immediately transferred to storage area to maintain shelf life.
- Wastage / packaging materials are not included in real weight or enough allowance is made to ensure hotel pays for real material only.
- Cost Control Department or assignment person randomly conducts few test to ensure quality / yield of material received is as per specifications.
- “butcher/yield test” is one of the most important tests in controlling quality and quantity of food items (Learn more about yield test/butcher test in this online course)
- Compare portion cost after trimming with ready-made item purchase prices to ensure the hotel does not pay extra.
- Visual inspection especially for near expiry material.
- Food Storage controls are equally important. Cost controller must ensure that,
- goods should be properly store and issue base on hotel inventory method LIFO, FIFO etc.
- Material is issued based on approved process and as per delegation of authority
- Storage of good need to be accordance with store policy & procedure (light / moisture / pest controls).
- hygiene standard at store facility to ensure no loss or damage to the food items.
- Monthly cost control spot check to ensure all above processes are working as designed.
- Monthly Bar Spot check and Kitchen Spot Check
- Market Survey conducting together with Purchaser and Chef: Team
- Receiving and Store area inspection counted and weight.
- Controlling the store issue and stock movement.
- Monitoring monthly physical inventory taking and checking variance between physical ground stock and book balance.
- Buffet Testing, Yield/Butcher test need to done at least 3 month 1 time.