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Four Focus Areas to Improve Product Cost

Q: I’m interested in improving my margins this year.

I don’t want to overhaul my menu, and I think my prices are where they need to be. Where should I start on the cost side?

A:
The largest cost target on the restaurant P&L is prime cost, which is made up of cost of goods sold and fully loaded labor. Cost of goods sold is primarily made up of food cost and beverage cost. The discipline for running great costs in cost of goods is the same whether it’s food or beverage. It begins with the purchase and ends with the sale. Everywhere in between is ripe for improvement. Regardless of restaurant size, any business can be world class and improve margins by functioning tightly in the following areas:

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Proactively manage increasing product costs

Q: I know product costs are going to continue increasing. What are the realities we’re facing in 2013?

A: The summer of 2012 brought a severe drought throughout the mid-west and much of the United States. Though some prices have increased, substantial price increases will hit in 2013 according to the USDA Economic Research Service (http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx). 

Increases are expected to be 3.0 to 4.0 percent. This cost increase is another $8,400 per $1 million in sales with an 80 percent food sales mix and a 30 percent food cost. Beverage pricing will continue to feel pressure as well. Implement these recommendations to avoid falling victim to inflation pressure:

Click here to read more »

Proactively manage increasing product costs

Q: I know product costs are going to continue increasing. What are the realities we’re facing in 2013?

A:
The summer of 2012 brought a severe drought throughout the mid-west and much of the United States. Though some prices have increased, substantial price increases will hit in 2013 according to the USDA Economic Research Service (http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx).

Increases are expected to be 3.0 to 4.0 percent. This cost increase is another $8,400 per $1 million in sales with 80 percent food sales mix and a 30 percent food cost. Beverage pricing will continue to feel pressure as well. Implement these recommendations to avoid falling victim to inflation pressure:

Click here to read more »
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