If you own or manage a restaurant, chances are you’ve asked yourself, “Why is my food cost so high?”
This simple question may have a not-so-simple answer.To begin proactively fighting your high food cost, you need to first determine the root of the problem. There can be a number of reasons for your heightened food cost, but the following will be some of the most common.
1. Menu Mistakes
As your expenses increase, your initial reaction will likely be to increase your menu prices. While this is a potential solution, it shouldn’t be your go-to decision. Food prices always fluctuate, so there is no reason to make a rash decision like increasing your menu prices on a whim. Doing so will only turn off your loyal customers.
Instead, focus on your most popular menu items. Promote those items to current customers through limited-time-offers, discounts, and other promotional tactics.
In addition, take the time to invest in your staff. Prep your wait staff on the items you want to sell the most of (yes, these can be your most expensive dishes or popular items).
If after implementing these changes you’re still running a high food cost or if food prices have increased so greatly that these tactics won’t work, reconsider marking up your menu items. Avoid significantly rising prices, and if possible, only raise the prices on those items that are costing you the most money, like beef and other proteins.
2. Purchasing Problems
Most restaurateurs tend to purchase inventory and supplies from the same vendors without evaluating other options in the industry. While it is important to honor these handshakes, at the end of the day, you have to make the best decision for your business and livelihood. No ifs, ands, or buts about it. If that means purchasing inventory from another vendor whose prices are 40% cheaper than your current vendor’s, you should feel justified in your decision to switch.
Remember, you can always revisit doing business with your original vendor(s) if/when prices decline.
If changing vendors is completely out of the question for you, consider purchasing alternatives to the items on your inventory list. For example, instead of purchasing chopped red onion, opt for a whole red onion. Yes, prepping these raw items will require more labor from your kitchen staff, but think of the money you’ll save.
3. Undesirable Weather Conditions
Weather is one of those factors that is completely out of your control or anyone else’s for that matter. Poor weather conditions can result in poor harvests. Poor harvests can result in shortages, which lead to price hikes. Insufficient rains, flooding, and harsh winters don’t only hurt produce production, but also livestock including beef, chicken, and pork.
4. Contagious Diseases
Livestock, just like humans, are subject to suffering from disease and illness. When any sector of the livestock industry is riddled with disease, the supply is lessened, resulting in a shortage. Last year, you may remember paying unusually high prices for pork products. This was due to a major outbreak of PEDV, which negatively affected the pork industry across the U.S. Similarly, this year’s egg prices have skyrocketed due to a major outbreak of Avian Flu in American poultry farms.
5. Fuel Prices
Because the majority of your inventory is not produced locally, it must be transported. As gas and oil prices increase, transportation costs increase as well. In order to cover heightened transportation expenses, vendors will have to increase their prices in order to make up for the difference.
6. Ill-Equipped Kitchen Staff
It is pertinent that your staff be trained on all processes and systems present in your restaurant. Chefs should practice proper portion control, as preparing dishes with larger portions that what recipes call for will undoubtedly increase your food cost. The wait staff should be trained on your restaurant’s POS system. Input errors, including item prices, substitutes, and portions, within the POS will result in unreliable data and an inaccurate food cost percentage.
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