Restaurant Doctor Management Resources

Know Your Food Cost ... Every Day ... Without an Inventory

Cost Control CompassAre You On Course?

How much better will you sleep when you have a handle on all your most critical costs ... all the time?

Effective management requires taking the right actions at the right times for the right reasons ... something you cannot do without accurate cost information. Nowhere is this ability to act quickly more critical for restaurateurs than in decisions concerning food and beverage costs.

You simply cannot afford to wait until your monthly financial statements come out – often 45 days after the start of the accounting period – to learn these critical numbers ... and now you don’t have to.

C3 is a simple computer program that finally gives you a quick and easy way to know your key cost percentages ... every day ... without an inventory ... usually within ½ of 1% of the actual number ... and it is deceptively easy.

Each morning, it only takes one of your staff a few minutes to enter the previous days’ invoices for food, liquor beer and wine, along with sales in each of those categories into C3. You already have the invoices in a pile anyway and the sales figures are easy to pick up. There is no real accounting or computer skill needed. With one click of the mouse, you can quickly see if your costs are in line ... or you will know if you need to start asking questions. What could be easier?

How to Use Cost Control Compass (C3) to Keep Yourself On Course

Compute Cost from Purchases
In most foodservice operations, the dollar value of the inventory changes very little from month to month ... because there is simply not enough room to build up large stockpiles of product.

Barring unusually large deliveries, after two weeks, the value of food products purchased, divided by the sales for those two weeks, will yield a food cost percentage that is within ½ of 1% of the actual figure ... but without the need to take and extend physical inventories ... except at the end of your accounting periods.

C3 makes it quick and simple to calculate this figure as a rolling average over any period of time you choose. For food, we recommend a calculation that covers at least the preceding 7-14 days and the preceding 28 days for food. Because beverage inventories tend to represent more days' sales than does the food inventory, take a look at the rolling average for the preceding 28 days.

Monitor the Number of Days’ Sales in Inventory
Keeping inventory levels at a low, yet adequate level is a key element to control your food and beverage costs. Problems like over-portioning, spoilage, theft, excessive trim. waste and general carelessness toward your costly products are common when you allow inventory levels to get too high.

All operators take inventories sooner or later, but most just use the figure to compute food cost percentage ... and they miss out on a valuable tool. C3 will also tell you how many days’ worth of sales are represented by your inventory figure. For example, if your food cost was 33% and your average daily food sales were $3000, you would use $1000 in food products each day. If your inventory value was $10,000, you would have ten days of sales in inventory.

Why would you want to know this? As the number of days’ sales in inventory drops, food cost generally decreases as well. Savvy operators always try to maintain their inventories at the lowest possible level consistent with the needs of the operation. This frees up cash, assures fresher ingredients for their guests, reduces pilferage opportunities and lowers overall food costs. Some even use the number of days’ sales on hand every week as part of the incentive program for their chefs and ordering personnel.

What would it be worth to always know your costs?

If this were an ad for MasterCard, the answer would be "priceless" ... and that could well be the answer here as well. However, you can gain this peace of mind for only $179.00.

For perspective, one of the first people to use the program discovered that he had been running over a 55% food cost for the past six weeks ... and he never knew it. Using C3, in a matter of minutes he was able to identify that he had a problem and started taking corrective action.

Six weeks or more of financial bleeding! Do you think it was worth $179 to find that out ... sooner rather than later? Best of all, now he can keep tabs on it every day and avoid any more unpleasant surprises.

So what have you got to lose? Pick up a copy of C3 and give it a test drive. I doubt that you will ever want to let it go. As always, you must be totally delighted or I will send you an immediate refund, no questions asked. It doesn't get any easier than that!

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