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 the food and beverage products used in every menu item which then impacts on the food gross profit margin.
According to the Office of National Statistics, UK food prices rose by a total of 38.6% between November 2020 and November 2025 with most of this increase in late 2021 to mid 2023. Currently food inflation stands at 3.0% but the Food and Drink Federation predict that food inflation will rise to 9 -10% by December 2026 which will impact food gross profit margins.
The cost of food is a substantial cost in the caterers Profit and Loss report. For example, a business with a 25% cost of sales will then have 75% gross profit. This may sound high but other costs need to be deducted from this and with wages and salaries potentially reaching 50% of revenue for some businesses, the gross profit is quickly used up covering payroll and other operational expenses leaving very little left for the bottom line.
For hospitality businesses to protect vital cash flow and to ensure their business remains sustainable, every stage of the purchasing cycle and costing process needs to be frequently reviewed to maintain profitability and to prevent wastage.
The following top ten tips will help to ensure that targets are met:
- Keep reviewing and negotiating supplier prices to get the best possible price and switch products if necessary
- Carefully check all deliveries of produce and provide suppliers with feedback to ensure the quality and the shelf life is acceptable
- Rotate stock in the storage areas such as stock rooms, fridges and freezers and train your teams to ensure they follow first in first out to reduce wastage
- Monitor the number of different stock items being held – every item should have at least two uses to reduce the possibility of wastage
- Calculate how long stock is being held for and promote products to increase stock turnover and reduce wastage
- Use standard recipes to calculate the menu item cost and keep these updated with the latest prices from suppliers to check selling prices are correct
- Revisit your menus on a regular basis to ensure the cost of key ingredients are still in line with your costings
- Monitor food wastage at every point – storage, production and also plate waste and then you can develop a strategy for each
- Review the popularity and profitability 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 with tips on how to manage the gross profit margin
- Join us for our next course 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
