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Boost Your Profits With Accurate Recipe Costs & Men Engineering Menu Engineering
Economic and Community Development InstituteColumbus, OH March 27, 2012
• Bravo/Brio Restaurant Group Eddie V’s Pistacia Vera Bob Evans Bravo/Brio Restaurant Group, Eddie V s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co.
Return On Ingredients LLC P.O. Box 2387 Westerville, Ohio 43086‐2387 614.423.4410 Fax 614.340.7946Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC
Brio Tuscan Grille – Easton Town CenterColumbus, Ohio
Bravo! Cucina ItalianaBravo! Cucina ItalianaVirginia Beach, VA
Bon Vie – Easton Town CenterC l b OhiColumbus, Ohio
Mark Kelnhofer
• BA in Accounting and Business Administration in 1993
Ad ( A) 200• Masters in Business Administration (MBA) in 2005
• Ohio Dominican University, Columbus, Ohio
• Manufacturing Cost (1993 – 2012)
l h• Plastics, Lighting, Tire Repair Kits, Buses, Restaurants
• Bravo/Brio Restaurant Group (2002 – 2010)
• Return On Ingredients (2009 – Present)
• Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co.Zauber Brewing Co.
Other manufacturing aspects as wellOther manufacturing aspects as well• Prep Time = Labor Routing• Customer Order = Manufacturing Order
O h d (Di t & I di t)• Overhead (Direct & Indirect)• Recipe = Bill of Material (BOM)
Top Reasons Top Reasons To Know To Know
Y C t !Your Costs!
The The Restaurant Restaurant
I d tIndustry
The Restaurant Industry
2012 Restaurant Industry Forecast in the U.S.
l f $ b ll d• Sales of $631.8 billion in 2012 compared to $610.4 billion in 2011, a 3.5% increase
• Employs 12.9 million in 2012; forecasted to p y ;be 14.3 million in 2022
• In Ohio in 2012, 530,500 people are employed by the industryemployed by the industry
Source: National Restaurant Association restaurant.org/research
2012 Restaurant Industry Forecast
The Restaurant Industry
Specialty Foods Industry
State of Specialty Foods Industry 2011
l f $ b ll h $ b ll• Sales of $70.3 billion with $55.9 billion in retain sales
• Specialty foods represent 13.1% of all retail p y pfood sales
• Cheese and Cheese Alternatives are the largest specialty food category $3 2 billionlargest specialty food category $3.2 billion
• Categories with the greatest percentages of all food sales – refrigerated sauces, salsas
d diand dips
• Gluten-free product showed sharp gains
Source: National Association of Specialty Food Source: National Association of Specialty Food http://www.specialtyfood.com/nasft/press-office/industry-facts/
The U S The U.S. Economyy
General U.S. Economy
• General economic indicators• Unemployment is improving
• Housing market values are continuing to drop
• Unpredictable future actions of Washingtonp g
• States and Cities on the verge of bankruptcy
• Cities defaulting on municipal bonds
• European Debt Crisis (Greece Italy)• European Debt Crisis (Greece, Italy)
• 1 in 7 on food stamps
• U-3 unemployment rate 8.3% (02/2012)
• U-6 unemployment rate 14.9% (02/2012)
• Discretionary income dropsE i d i i d l f• Eating out decisions are made less often
• Highly competitive environment
U-3/U-6 Unemployment
15.0%
16.0%
17.0%
18.0%
10 0%
11.0%
12.0%
13.0%
14.0%
6 0%
7.0%
8.0%
9.0%
10.0%
6.0%
U-3 U-6
Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
U-3/U-6 Unemployment
U-3 UnemploymentTotal unemployed as a percent of the civilian labor force (official rate)Total unemployed, as a percent of the civilian labor force (official rate).
U-6 UnemploymentTotal unemployed plus all persons marginally attached to the labor Total unemployed, plus all persons marginally attached to the labor force, plus total part-time employed for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force (total rate).
Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/empsit.t15.htm
Long Term Unemployment
Wall Street Journal, 07/21/2011
“Long Term Long Term Unemployment by State”
General U.S. Economy
The Wall Street Journal, 03/12/2012
General U.S. Economy
The Wall Street Journal, 03/03/2012
General U.S. Economy
The Wall Street Journal,03/02/2012
General U.S. Economy
Wall Street Journal, “Housing Still Drowning in Underwater Mortgages”, 03/02/2012
General U.S. Economy
Wall Street Journal, 03/02/2012
Commodit Commodity Costs
Food Inflation
Cleveland Research Company01/12/201201/12/2012
Food Inflation
Reuters02/23/2012/ /
Cost of Fuel
Source: http://fuelgaugereport.aaa.com/
Commodity Research
Source: American Restaurant Association www.americanrestaurantassociation.com1-888-423-4411 Fax 941-953-4034Forecasting and Managing Food and Energy Commodities
Commodity Researchck
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Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchd
Gro
un
dBee
f, G
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity ResearchR
Pork
WC
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Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchk H
amPork
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchco
nll
y,
Bac
Pork
Be
P
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Commodity Researchh
eat
W
Source: American Restaurant Association (ARA), http://www.americanrestaurantassocaition.com
Ind str Industry Failure Rate
Restaurant Failure Rate
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
Restaurant Failure Rate
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
Restaurant Failure Rate
Controls“A d h N l R A (2009)“According to the National Restaurant Association (2009), a typical restaurant in America earns a net profit under 10%. That means 90% of revenues are used to defer the cost of doing f f f gbusiness. Thus, managers that do not understand the importance of cost controls are bound to fail in the restaurant business. Two
j t i th t t i d t f d t d l bmajor costs in the restaurant industry are food cost and labor cost. These two costs together are referred to as prime costs. For a restaurant to succeed, the prime costs are expected to be less p pthan 60% of revenues. It is a ‘rule of thumb’ and a good rule to follow. Most restaurants that have failed often were found to have prime costs exceeding 60% indicating greater potential to
The Dick Pope Institute for Tourism Studies, UCF Rosen College of Hospitality, Parsa/Green/Terry
prime costs exceeding 60% indicating greater potential to failure.”
The Missing Link
+
Culinary Arts The Numbers
ROI Methodology
Recipe costing is the base for manyRecipe costing is the base for manyother aspects of the operations.
The Reality Is…
• Some restaurant operators do not phave any written or documented recipes.
• Some have recipes that are written are only for execution, not costing.
• The few that have costing in many cases do not take a manufacturing approachapproach.
• Menu pricing in some cases is not based on proper analysis and databased on proper analysis and data.
What is in your control?
Knowing your costs Knowing your costs
What is in your control?
Knowing your costs Knowing your costs
Establishing your selling price
Types of Recipes
• Batch or Prep RecipesBatch or Prep Recipes• Larger quantities
• Become their own unique Become their own unique inventory item when produced
• Can be used in other recipes
• Serving or Menu Item Recipes• Ultimately is what is sold to the
guest or customer
Weights & Measures
Portion control thro gh the se of • Portion control through the use of utensils (Tbsp tsp dishers spoodles etc )(Tbsp, tsp, dishers, spoodles, etc.).
• Accuracy of weights and measures Accuracy of weights and measures is paramount.
1 cup, Basil Leaves 1 cup, Granulated Sugar
0.2 ounce 6.8 ounces
Batch Recipes & Yields
• Batch recipes should account for the • Batch recipes should account for the proper yield (what the result is) including known waste and the gprocess (labor)
• When the purchased product has p pchanged form in any way, a batch recipe should be created to account f h for the cost.
• If you don’t account for the process d i ld l l t i and yields, your menu level costs in
most cases is understated!
Batch Recipe Example #1
• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz
Ingredients Quantity UOM Cost Extended
Basil, Fresh 16.0 oz $0.531 $8.500
BASIL PICKED
• The new item ‘Basil Picked’ now
Basil, Fresh 16.0 oz $0.531 $8.500
Yield 11.0 oz
The new item Basil Picked now has a correctly stated value of $0.773/oz or $12.36/#
Batch Recipe Example #2
• We purchase ‘P&D 31/40 Shrimp’ p / pat $5.50/# or $0.344/oz
/Ingredients Quantity UOM Cost Extended
P&D 31/40 16.0 Oz $0.344 $5.500
P&D 31/40 SHRIMP THAWED
Th it ‘P&D 31/40 Th d’
P&D 31/40 Shrimp, frozen
16.0 Oz $0.344 $5.500
Yield 14.2 oz
• The new item ‘P&D 31/40 Thawed’ now has a correctly stated value of $0 387/oz or $6 19/#$0.387/oz or $6.19/#
Batch Recipe Example #3
• We purchase ‘Lobster Bisque Soup’ p q pby the bag/8# for $16.95 bag.
Ingredients Quantity UOM Cost Extended
Lobster Bisque 1.0 Bag $16.950 $16.950
LOBSTER BISQUE SOUP YIELDED
Th it ‘L b t Bi S
Lobster Bisque Soup
1.0 Bag $16.950 $16.950
Yield 0.98 gal
• The new item ‘Lobster Bisque Soup Yielded’ now has a correctly stated value of $17 30/gallon or $0 136/ozvalue of $17.30/gallon or $0.136/oz
Batch Recipe Example #4
• We purchase ‘Bananas’ for p$0.513/#.
Ingredients Quantity UOM Cost Extended
Bananas 16.0 Oz $0.032 $0.513
BANANAS PEELED
Th it ‘B P l d’
Bananas 16.0 Oz $0.032 $0.513
Yield 10.5 oz
• The new item ‘Bananas Peeled’ now has a correctly stated value of $0 049/oz or $0 782/#$0.049/oz or $0.782/#
Packaging
• Packaging is part of the raw g g pmaterial cost, similar to the ingredients
• Packaging includes:
• Boxes
• Labels
• Wraps
The Costing Problem
Ingredients
Prime Cost
Ingredients Labor
Total Cost
Ingredients Labor
Overhead
Labor & Overhead Costs
• Your labor and overhead can be accounted for in the recipe
• Prep Time, Labor Routing• Time/motion studies (stopwatch)
• Time (hours) is loaded on every recipe
• Standard Labor (BOH) Rates• By market
• Includes wages and fringes
Time Motion Studies
• Stopwatch time motion studyp y
• Must be in a live environment
• Must be a controlled testMust be a controlled test
• Must be the personnel that will actually execute the recipesy p
Batch Recipe ExamplePrime CostPrime Cost
• We purchased ‘Basil, Fresh’ at p ,$8.50/# or $0.531/oz
Ingredients Quantity UOM Cost Extended
Basil, Fresh 16.0 oz $0.531 $8.500
BASIL PICKED
Basil, Fresh 16.0 oz $0.531 $8.500
Labor 0.167 hr 12.00 $1.999
Total $10.499
Yi ld 11 0
• The new item ‘Basil Picked’ now has a correctly stated value of
Yield 11.0 oz
has a correctly stated value of $0.954/oz or $15.27/#
Direct (BOH) Labor Rate
• The direct (BOH) labor rate should ( )include the base rate plus any other additional fringes associated
If you would have chosen the ‘House Salad’, you would have reviewed the menu item driving the most dollars to cover fixed overhead costs and profit and possibly to cover fixed overhead costs and profit and possibly removing it from the menu.
Dog/Star Calculation
Which menu item should be reviewed?
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit
Total Profit $s
GM MM Rank
Ch d S l d 1 664 $5 50 $0 43 7 8% $5 07 $8 437 L H Pl h ?
SALADS Menu in place for 6 months.
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 L H Plowhorse?
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star?
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star?
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse?
Averages $5.50 $0.41 7.5% $5.09
MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08Flaw: Gross margin rank for dog/star calculation is based on unit level only, not extended contribution based on unit level only, not extended contribution margin dollars.
The proper item to target to be reviewed is the ‘Wedge of Iceberg’of Iceberg .
What are my options?
• Review the menu placement
• Reengineer an existing menu itemg g
• Review process
• Alternative ingredientste at e g ed e ts
• Price increase
• Remove the item and create a new itemRemove the item and create a new item
Engineering a New Menu Item
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Total Profit $s
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
New Menu Item - $TBD $TBD > $5.17
When engineering the new menu item, attempt to create the item that will increase the average create the item that will increase the average gross margin on the item being removed. In this case - $5.17/menu item.
Menu Placement
Menu Item Qty Sold
Menu Price
Unit Cost
Cost % UnitProfit $s
Total Profit $s
SALADS
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Field Greens NEW $5 75 $0 43 7 5% $5 32Field Greens NEW $5.75 $0.43 7.5% $5.32
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
Averages $5.56 $0.44 7.9% $5.12
When reading the menu, customers read from top to bottom of the category they are looking at. Place the menu items that drive the most contribution margin to the top. The two top menu items are my highest “The Bank” category items.