3 Food Costing Significance in A Restaurant

Food cost has repeatedly been mentioned in many notable restaurant management blogs; from the steps of food costing to ways of calculating them. You must be wondering, what is so important about food costing that food bloggers are constantly discussing about, right?

Food cost is the ratio of your business’ cost of ingredients to the revenue that those ingredients generate once your dishes are sold. It is essentially the first consideration that goes into a restaurant’s pricing. You can learn how to price your restaurant menu here! Considering that many factors influence every restaurant’s food costs, let’s first explore the three significance of managing food costs in the food and beverage industry. 

1. Food Costing Maximises Profit!

When talking about food costs, the first thing that would pop out to mind is, “how can I reduce it?” Of course, there wouldn’t be a time that any restaurant owners would not consider this. Simply, it is because cutting costs means maximised profitability. The magic seesaw is: when the production cost is low, then your profit gets higher! However, we understand that there are too many things to consider in restaurant management. Let us clear the air for you.

Food cost management is a continuous practice of using various methods to reduce your business expenses to boost your profits. We need to face the fact that food cost constantly changes, as does your sales, staff, menu, and many other factors. So, restaurant management needs to adapt to this change every day by identifying and reducing the variables influencing food cost control. 

Let me tell you a secret; there are actually tons of ways to boost your profit by strategically managing your food costs. Here are some time tips just for you: 

  1. Provide employee training so that your business productivity increases and becomes more efficient. This way, you can also reduce the turnover rate and reduce training costs every time you hire. 
  2. Prepare a standardised recipe and procedure. This way, you will save a lot of time and also minimise food cost from overspending due to inconsistent production management.
  3. Minimalise your menu item by listing only the best-selling foods and your signature dish. This way, you can avoid overspending on ingredients for menu items that are less ordered by your customers.

These three tips may seem simple, but it works wonders to cut your restaurant’s food cost and at the same time, will help boost your profit margin!

2. You’re in control!

The F&B market is an ever-fluctuating industry. The raw materials and ingredients prices can always increase and consequently cause your food cost to rise. This uncontrollable factor will give you a disadvantage for your profit margin. A bad restaurateur will just succumb to this fluctuation and not make any changes to their price.

A good restaurant owner has food costing in the palm of their hand. Constantly monitoring this fluctuating market change gives you the flexibility to set your food price. It also allows you to maintain a good profit margin percentage for your business. Once you get the hang of it, it will give you the advantage to get a head start whether you are still on the right track or have gone beyond your target food cost percentage. When you are in control, you can now easily plan to reduce the costs wherever possible.

Not just that, food costing also allows you to keep track of each menu item’s profit margin and lets you be in charge of which ones to put forward through sales and promotion. 

This way, you are also protecting your inventory from over-plating, unnecessary waste, and theft. Simply saying, food costing gives you more control over your business! How cool is that? 

3. Strategic price planning

We are all well informed that sometimes restaurants can only land a razor-thin amount of profit margin. You can overcome this problem if you have strategic price planning from food costing. However, managing the pricing can be a dainty task to do. It needs to be periodically responded to in order to adapt to the change in the market. 

Strategic pricing gives you a huge advantage over your competitors, as you can now set your prices in line with the current consumer market. This is because you have examined the way they price their dishes against an industry benchmark. With food cost management, you are getting more aware of the changes in the industry and can quickly amend your price appropriately. This is also useful as food pricing lets you stay on top of your vendors and watch their pricing whenever it changes.

If you ever wondered if any systems can accommodate this problem, wonder no more! Food Market Hub’s system allows you to be in control of your business. Our system guarantees a transparent vendor pricing of raw materials besides being able to select the cheapest supplier in our market. Stay on top of your game and easily sign up with our app now!

There are many ways you can plan a pricing strategy. Firstly, conduct thorough research on food pricing strategies and go wild with as many as possible. There are tons of useful methods on the internet that you can make use of. So, you can now list down your ideas down on a piece of paper and discuss them with your team. Sometimes, you tend to miss out on petty things that could cause your business huge trouble. Therefore, it is best to listen to what your team says, as two heads are definitely better than one.

Finally, execute your plans accordingly and see how your business blooms with the help of good marketing and sales strategies as well. That’s how you can excel in the industry with flying colours. 

Conclusion

In conclusion, every restaurant owner who wants to change their business strategy should take food costing very seriously. Plan well, and integrate with an inventory and procurement management system to maximise your profit today. If you’re wondering which system is the best, choose Food Market Hub and see why!

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