It can be difficult to run a restaurant, a school or a service.To keep your business going, you need to make regular and accurate calculations of your food costs.The maximum allowable food cost is the most important calculation because it tells you how much you can spend on food.Making the adjustments and tweaking that ensure your business' long-term success will be helped by comparing these three figures.
Step 1: Understand why you need this calculation
The maximum is the percentage of your business's operating budget that can be spent on food.Without knowing this number, you can't tell if your food cost is on target to produce your desired profit margin.
Step 2: Calculating your operating budget is the first thing to do.
The operating budget is the sum of your current and projected expenses.To calculate the month-to-month operating budget, you need to keep the following amounts in mind.Salaried labor (managers, owners, head chef, etc.).There are utilities (gas, electric, water, etc.).Fixed costs include rent, mortgage payments, insurance, etc.Fees and licenses include taxes, liquor licenses, business licenses and food handling permits.Cleaning supplies, plates, carryout packaging, and non-food cooking supplies are supplies.
Step 3: Determine how much money you can scrounge up each month.
It is a big risk to open a small business.To give your restaurant or catering company a fighting chance, you have to be willing to invest in it, but also protect your own interests to make sure you don't bankrupt yourself.Private banks and federal programs can be used to take advantage of small businesses loans and grants.If you want to increase your investment, consider taking on a business partner who will work in the business with you or invest funds and collect profits.To assess your personal finances, create a monthly household budget that includes rent/mortgage, vehicles, food, personal insurance, and all other personal considerations.For the sake of your business, don't sacrifice your personal stability.Take a look at the repayment options on your loans.If you plan to make minimum payments or begin paying off the loan as soon as possible, you should also be aware of your interest rates.How much of your money will be used to repay your loan?Is there any left over?Taking personal finances and loan repayment into account, determine how much money can be invested in the business on a monthly basis.You can compare this amount to your budget.If you can't afford it, you should adjust your budget.Consider getting the help of your accountant or bank to figure out how far you can stretch your finances.
Step 4: You can calculate a budget percentage for each of these costs.
Once you've figured out how much you can spend every month, figure out what percentage of your budget is allotted to each of the monthly costs.You can afford to spend $70,000 a month on your restaurant.You and your manager get paid $3,500 per month.10% of your budget is spent on salaries, which cost $7,000 a month.
Step 5: Figure out how much you can spend on food each month.
Add up the amounts if you have a percentage for each of them.The maximum amount you can spend on food is the percentage left over in your budget.75% of your maximum budget is devoted to everything.If you want to calculate your maximum food cost, subtract 100%.If your monthly budget is $70,000, you can afford to spend up to 70% of it on food to reach 5% profit every month.
Step 6: Pick a date that will begin the assessment period.
You pay rent, utilities, etc.You should calculate your food cost on the same day each month.Before or after the kitchen opens, you should analyze your inventory at the same time every week.Outside of business hours, no food is being delivered or cooked.
Step 7: Determine how much you have in your opening inventory.
On the day that begins your fiscal week, do a thorough inspection of all the food products in your kitchen.You should look at your receipts to see how much you paid for each food item.You may have paid $48 for 35 lbs.5 lbs. of frying oil.The fiscal week begins at the beginning.How much is that 5 lbs?The opening of your inventory period is when oil is worth the most.5 lbs.You have about $6.86 worth of frying oil at the beginning of the fiscal week if you solve for X.You should repeat the calculation procedure for every food item you have.The opening inventory is the dollar amount for the food in your kitchen at the beginning of the fiscal week.
Step 8: Track the purchases.
Depending on what's selling best on your menu, you will order more food supplies throughout the week.If you keep purchase receipts neatly organized in your office, you will know how much you spent on food during the day.
Step 9: You should take inventory at the beginning of your next week.
The process outlined in Step 2 can be repeated.The opening inventory for the next week and the ending inventory in the current week are served by this number.You now know how much food you bought and how long you spent with it.
Step 10: How much did you make in food sales during the week?
The restaurant manager should calculate total sales at the end of each shift.You can calculate your weekly food sales by looking at your sales reports for each day of the week.
Step 11: You can calculate the food cost for the week.
The maximum allowable food cost is calculated as a percentage of the total budget.You need to figure out what percentage of your budget is spent on food.If you compare the percentages to each other, you can see if you're spending too much money on food.The following equation is used to calculate the actual food cost.Let's say the beginning inventory is $10,000, the purchases are $2,000, and the food sales are $5,000.
Step 12: Take the allowable and actual food costs into account.
There is a maximum allowable food cast of 25% and an actual food cost of 30%.The person is spending too much money on food to reach their target profit.Keep your inventory in check by adjusting your purchasing every week.You want your food cost to be less than your maximum allowable cost.You should keep in mind that this calculation can go wrong if you count items in different ways than the pricing of the item, for example by counting 10 cans of tomatoes, but not charging them by the case for that item.
Step 13: Take your total cost and divide it by the number.
Determine how much it costs to make each item on your menu.The breakdown for a cheeseburger is as follows: $0.06 for 1 oz. and $0.21 for the bun.$0.06 for 1 onion slice, $0.14 for 2 tomato slices, and $0.80 for 8 ounces of mayonnaise.The price for 14 oz. of burger meat is $0.02.The price is $0.06 for 4 slices of pickle and 1 ounce of mustard.For 2 slices of American cheese and a side of French fries, you'll get $0.18 and $0.23 respectively.The price for a cheeseburger on the menu is $1.83.Divide the food cost by how many portions of that item are sold each week.You can find your total cost by adding all of those sums together.Let's say you have a total cost of $3,000.That's the amount of money you spent to make the food you ate this week.All of your items should be portion controlled.It will help to make sure that every chef serves the same meal.
Step 14: Take your total sales and divide them by them.
You need to figure out how much money you made off of each item after you've calculated the amount you spent to feed your customers.Divide the sales price by how many portions of the menu item were sold in a week.You can calculate your total sales by adding the sale amounts for every item on your menu.Let's say you took in $8,000 in sales for the week.
Step 15: Find out how much you could be paying for food.
Divide your total sales by 100 to calculate your potential food cost.The following equation is what we would complete in our example.37.5% of our budget is the potential food cost.
Step 16: Take a look at your potential food costs.
You know how much money you can make off your menu items.If your menu's prices need adjustment, compare that against your maximum allowable food cost.The maximum allowable food cost from Part 1 is 25%, and our potential cost is 37.5%.The potential food cost percentage needs to come down so that we reach the 25% figure.We raise the prices on our menu.If your items are fairly inexpensive, you may be able to raise the price of every item on your menu by a small amount.You can see which menu items are popular by looking at your sales figures.People will be willing to pay more for popular items than less popular ones.Get rid of dishes that don't sell well.They don't have a lot of money.It's important to make sure you're moving all of the product in your inventory.