Runaway Food Costs Keeping You up at Night? Rezku POS has Built In Tools to Get it Under Control

When asked, the majority of restaurant owners admit that keeping track of food costs is one of the most difficult challenges of running a business. However, regardless of how challenging the task may be, calculating your food costs is a crucial component of a successful restaurant.

Calculating food costs for your restaurant is a daunting task, but with the right tools built into your POS you can manage your inventory and ingredient spending with ease.

Read More: Choosing a Restaurant Business Structure

Why Track Your Food Costs?

Tracking food costs allows you to set competitive prices for your products. By understanding the true cost of your menu items, you can set prices that entice guests while also turning a steady profit for each sale. Higher margins on your sales can allow you to invest in other facets of the business such as employees, marketing, or even taking the vacation you’ve been putting off.

With the use of modern POS systems, reporting tools can be set up to automatically track most of the important information for you. Thankfully, Rezku POS has you covered. Rezku POS has all of the tools you need to simplify inventory management and reporting that will simplify your role as a restaurant owner.

This guide covers the basics of calculating food costs, and introduces the tools offered by Rezku POS that will streamline the entire process.

How to Determine Your Food Costs

In order to understand what your margins for your food costs are, you must first calculate your food cost percentage. By knowing your food cost percentage, you can quickly determine if the general prices of your products are too high or too low. On average, a food cost percentage of around 25% or 30% is a standard among dine-in and quick-service restaurants.

To calculate your weekly food cost follow these steps:

1. Determine ingredient prices: In order to begin tracking food costs, you need to start by determining the cost of your ingredients. The price of ingredients may change depending on the season or product availability, so be sure to keep track of current vendor prices to calculate the most accurate food costs. You can track your prices by comparing ingredient invoices over time.
2. List amount of ingredients purchased: Create a list of ingredients you purchased for the week and how much. Be sure to include additional purchases that were made within the week to supplement ingredient stock. You can use your ingredient invoice to find this information quickly.
3. Calculate how much was spent on these ingredients: Using your list of ingredient prices and list of ingredients purchased for the week, calculate how much money was spent this week on ingredients.

   EXAMPLE

   Price: $1.50 per head of lettuce

   Purchased: 32 heads of lettuce

   Total spent: $48.00

   Total used: 28 heads of lettuce

   Cost for the week: $42.00

   Do this for every raw ingredient.

   Add the total spent for each ingredient to get your total weekly ingredient cost.

4. Capture your food sales: Add up the total dollar amount of food sales for the week using your POS reporting features. This is your total food sales.

Read More: Choosing a Restaurant Business Structure

Calculate Your Food Cost Percentage

You can now discover your food cost percentage by following this formula.

• Step one: Weekly sales ($) - Weekly inventory cost ($) = Weekly profit ($)
• Step two: Weekly profit ÷ Weekly sales = Food cost percentage (convert from decimal to percent)

After calculating the difference between your sales and your costs, you can decide if you need to make changes to your menu pricing.

A food cost percentage higher than 25%- 30% may indicate that you need to increase menu prices to maintain a profit. A food cost percentage significantly lower than 25% or 30% may indicate that you could lower your prices or run more promotions to be more competitive.

Price Your Products Like a Pro

Knowing your weekly food cost percentage for all food will give you a sense of your overall restaurant profitability. But for true insight into your costs, you’ll do this analysis for each item in your menu.

To calculate a food cost percentage for every product:

1. Determine the food cost on a single dish: Add the cost of all ingredients for the dish together, and multiply the sum by the number of servings sold in a week.
2. Determine the sales of a single dish: Multiply the menu price of the dish by the number of servings sold in a week.
3. Calculate the product’s food cost percentage: You can now discover the food cost percentage for a single product with this simple formula.

[Weekly cost of a single dish ÷ Weekly sales of a single dish] = Food Cost Percentage of a Single Item

Compare your results to your total food cost percentage, and decide whether or not the price of each menu item needs to be adjusted.

Understanding the difference between your total weekly food cost percentage and the ingredient cost percentage of an individual menu item may help you to discover ingredient waste or theft.

Ideally, your goal should be to ensure that the food cost percentage for each item is equal to or lower than your weekly total food cost percentage. One way you can accomplish this is to set the price of your most popular menu items by your idealized total food cost percentage.

1. Determine the serving cost of your popular dishes: Add the cost of ingredients together for a single dish.
2. Calculate a general price: Divide your serving cost by your ideal total food cost percentage.
3. Keep your prices simple: Round the price up or down to keep the menu clear and concise.

Maximize Profit by Optimizing Food Costs

Now that you understand food cost percentage, you need to know how to use that information to make changes and increase profits. These tips will help you to reach your idealized total food cost percentage:

• Track ingredient waste, and do what you can to limit it as much as possible. Train servers and kitchen staff to take orders and prepare food accurately and make fewer mistakes.
• Use reporting features to discover which of your products are the best sellers. These products should be your priority when adjusting your prices.
• Don't make large price changes all at once. Try changing the price of your items by small margins at a time. Customers won't appreciate large price hikes in their favorite products.
• Adjust your recipes to include ingredients that can be bought in bulk cheaply. Using starchy ingredients like pasta and potatoes can help you improve your margins.
• Design your menu with your top products in mind. Menu design is a subtle thing, but there are small tips and tricks that can help you to maximize sales.
• Make sure dishes are not being returned half eaten. When portion sizes are too large, you are wasting ingredients on average.
• Do your research and find the best ingredient vendors. Form a good relationship with them, and keep up with price changes.
• Keep up with seasonal price changes for your ingredients. As the prices of your recipes change, you may reach a point where a dish is no longer profitable. Adjust your prices to keep up with these changes.

Read More: Choosing a Restaurant Business Structure

Rezku POS is Here to Help

In order to track all of this information, you need a POS system that is fully equipped to keep up. Rezku POS includes all of the tools you need to maintain your inventory and track sales data.

With Rezku POS, you can create a list of all of your ingredients and apply a unique quantity of each ingredient to your menu items. When sales are made, your inventory will automatically update to reflect the amount of ingredients used for each product. You can even set reminders to alert you when your ingredient stock is running low.

The reporting features of Rezku POS give you all of the information you could possibly need to manage your business. With over 70 reports, you have instant access to your restaurant’s data from anywhere. You can easily view all of the information you need to calculate your food cost percentages with minimal effort.

Summary

Calculating your food cost percentage is a necessary step for restaurants. Keeping track of this information will help you to understand your menu prices and possible ingredient waste or theft. Calculate your weekly food cost percentage by dividing your inventory costs by your sales for the week. Using this number, you can quickly gauge whether or not your prices should be adjusted to remain profitable and competitive. Once you have calculated your weekly food cost percentage, you can focus on adjusting the price of your menu items.

Rezku POS includes the reporting features and inventory management that you need to keep track of all of this information. Inventory management can be set up to automatically update your stock when sales are made. Rezku reports are easy to read, include all of the information you need, and can be accessed from anywhere on a smart device.

Sign up today for a free trial and demo so you can see everything Rezku POS has to offer.