Maintaining a running inventory of some of your key products is one of the most fundamental and effective inventory and food cost controls in the restaurant industry. Yet I’m constantly amazed at how many restaurant operators don’t do it. If you are one of those who doesn’t, you have an opportunity to cut your food cost and start making more money beginning tomorrow.
The Products That Drive Your Food Cost
In my restaurant management days, we had 10 products that we kept a running inventory on every day. These products were chosen because they were either a high-cost or a high-use product. High-use products like fries may have a low unit cost but often make up a large portion of a restaurant’s overall food cost.
We had a worksheet, similar to the one below, that helped us keep track of how much inventory we should have on hand for each of these 10 key products at the end of each shift.
Let’s look at one of the products we tracked daily, beef patties:
Running Inventory: A.M. Shift
Opening Inventory 20
Adjustments + (-) 0
Ending Inventory - Ideal 80
Ending Inventory - Actual 78
Difference - over (short) (2)
Monday morning the opening manager started out with 20 patties on the shelf. Later that morning, 100 patties were received in a meat delivery. At the end of the shift, the point of sale told us that 40 were sold and that there should have been 80 patties left in inventory. At the beginning of the next the shift, the P.M. manager did a quick physical count of patties and came up with 78. There were 2 patties missing. Does the opening manager have a problem?
Maybe not a major problem, but what if there were 20 or 30 patties missing? Yes, in that case, we know there’s a problem. Notice the key words in the last sentence are “we know.” If we don’t bother to track the usage of patties, chances are we “don’t” know if there is a box or case missing.
What About Cheese?
You may use cheese in several different portion amounts, depending on the size and type of pizza ordered. You may also use several different types of cheese.
This, of course, makes the job of tracking the use of cheese a little tricky. But it is doable. It helps if you have a point-of-sale system that tells you the size or types of pizza you sell each day. If you have a standard cheese portion for each type of pizza, all it takes is a little math to figure out how much cheese you should have used during the day and then reconcile that amount with the actual amount used. If you use several types of cheese, don’t account for each one separately. Most pizza operators consider all their cheese as one product when figuring their running inventory.
While you will rarely be 100 percent “on the money” in reconciling your “ideal” cheese use to your “actual” cheese use, you’ll know when something is wrong and way out of line.
If pizza is a large portion of your business, keep in mind that in many pizzerias cheese can make up 40 percent or more of the total food cost. If you do a good job of managing just your cheese use, you’re monitoring and controlling a big portion of your food every day.
Psychological Controls in the Kitchen
The real benefit of tracking certain inventory items daily comes from the psychological and behavioral impact it has on employees. Do employees notice management counting and keeping track of products? You bet they notice.
Let’s say someone is contemplating walking out the back door with a case of New York strips. Do you think the fact that management counts New York strips every day and will know if any are missing might have any impact on that person’s decision? Yes, especially when compared to the common scenario of managers not having a clue if a case or two of New York strips has “disappeared”—and employees knowing it.
I’ve had operators tell me that if they hadn’t started tracking key products daily they probably would have gone out of business. I know you might think this sounds like a lot of extra work, this counting products every day, but how often do you count your cash? How much cash do you think you’d have if you only counted it once a month? What’s inventory? Inventory is CASH!
Does it make any difference if the cashier pockets a $20 bill out of the register or someone makes off with a $20 box of Cheddar? Not to your bottom line it doesn’t.
Walk Before You Run
If you’re not keeping a running inventory now, don’t go in tomorrow thinking you’re going to start off with 10 to 12 products. Start with just “one” product, then after a few days add another, then another. The people involved will soon get very efficient at it and you’ll quickly work up to a sufficient number of products.
When you get up to maintaining a running inventory on the 10 to 12 products that make up the biggest portion of your food cost, it’ll often represent 50 to 60 percent of your total. If you monitor the products that make up 60 percent of your food cost every day, chances are you WILL control your food cost.
This is one of those “high impact” controls that will absolutely, positively lower your food cost. If you are not keeping a running inventory on your key products, I encourage you to give it a try. You will see positive results immediately! Guaranteed!
See Jim Laube at International Pizza Expo® / Click Here to Register for Pizza Expo
Inventory and food cost control are just two of the topics longtime restaurant business consultant Jim Laube will be covering during his pre-show Monday workshop, “How to Turn Your Good Restaurant Into a Great Business.” Jim (online at RestaurantOwner.com) will also present seminars on benchmarking your business against industry standards and how to control the food production process.