As hospitality businesses with restaurant operations continue to experience increasing pressure on costs throughout the profit and loss account, it is critical that managers and food and beverage controllers closely monitor and manage their cost of sales – that is the cost value of food and beverage used including sales to customers and wastage. According to the Financial Times in November 2024 global food prices reached the highest level in 18 months with the UN Food and Agriculture Organisation’s food price index rising by 5.5% compared to October last year. Whilst food prices remain below the staggering level reached in March 2022, this latest increase is likely to fuel the pressures on food and beverage operators coupled with the impacts on payroll arising from the recent UK Budget.
For hospitality businesses to protect vital cash flow and to ensure their business is sustainable, every stage of the purchasing cycle and costing process needs to be frequently reviewed to maintain profitability and to prevent wastage. Most food and beverage operations set targets for the cost of sales and resulting gross profit to ensure that each sale generates sufficient gross profit to cover the remaining operational costs and make a profit.
For example, a business with a 25% cost of sales target is aiming to achieve 75% gross profit. This may sound high but with wages and salaries potentially reaching 50% of revenue for some businesses the gross profit is quickly eroded leaving many businesses with a very low profit percentage.
The following top ten tips will help to ensure that targets are met:
- Keep reviewing and negotiating supplier prices
- Ensure all deliveries are safely received and stored and returns are recorded
- Rotate stock in the storage areas, first in first out, to reduce wastage
- Monitor the number of different stock items being held – does each item have at least two uses
- Calculate how long stock is being held for and promote products to increase stock turnover
- Use standard recipes to calculate the menu item cost and keep these updated to check selling prices are correct
- Control portion sizes in line with the standard recipe to meet your GP targets
- Monitor storage, production and plate waste
- Review the popularity of all items you sell and define what you want to sell more
- Measure, monitor and manage.
To find out more:
- Complete the form below to download our free eBook on Food Cost Control
- Join us for our next webinar on Food Cost Control
- Sign up for a subscription to our online finance4hospitality academy for just £9.99 (£8.33 ex VAT) per month find out more
- Contact use for more information at hello@arena4finance.co.uk
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