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Don't be afraid to implement a good food cost control (Part II)

Ernie Daza
by Ernie Daza August 22, 2011

If you read our first blog, probably you agree now that going for an “Only Real Food Cost percentage” as a cost control strategy helps, but it may not be enough to deter internal theft.
Unfortunately a big number of restaurant operators take that short route as it is customary to think that any other way is just too complicated and maybe not even worth the extra effort.

Initially, we are going to discuss what happen to those 4 or 5 extra percentage points that you as an operator can’t control as a result of a deficient cost control management system. The least of your trouble is the missing inventory taken as a raw material by the back door, or the free food for friends and family or inventory wasted by poor ordering, turnover and product going bad.

The best commodity for an internal thief is your cash, and that means the revenue generated by your sales. This is where your finances take a toll..

The typical cash thief work this way:

Once he or she decides to star this new profitable venture, it is going to start slow. maybe 10 dollars day and wait for a someones reaction.

The thief’s first safety check is going to be after next week’s inventory count. When nothing happens or no management reaction, maybe it is time to give it a try for 20 dollars per shift.
The safety checks will give your new partner enough confidence to increase his profits until a reaction is noticed. If that happens at 100 dollars a day. then $90 it’s ok as a daily take home extra pay..
To complement this exercise for analysis sake. let's make some hypothetical numbers to see the impact on your food cost.

So the internal thief took $90 a day for 20 days worked. That comes to $1800 in one month.

Lets say your monthly sales are 100k a month and you work with a 33% food cost.
The food cost of of the stolen sales is only 600 so your new food cost is

$33600 (Your Food Costo) / $98200(your new sales) = 34.2%. (New Food Cost %)

Your food cost went up only by 1.2 % and you didn't even noticed your lost sales.

Now, if you have two of this new partners working for your, you will only have 2.4 % cost increase.

By stopping this, your sales will increase close to 4%.

Most restaurants working with the only “Real Food Cost strategy” are around 5% over their ideal Food Cost and 3/4 of that is related to internal theft.

According to the US Chamber of Commerce, Theft accounts for $50 billion in annual losses industry wide, and those losses directly contribute to one in five restaurants failing.

In our next blog I will discuss the effects of implement a non technical Cost Control Management System


Ernie Daza
CEO
FBHconsulting Grupo inc.
www.fbhauditing.com
edaza@restaurantauditor.com

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