After you have your item list broken down into purchase units (e.g. case) and inventory units (e.g. #10 can), you can begin to visualize the production process. For each ingredient, make a list of units commonly called in recipes. This will vary depending on how many different recipes use each item.

Three common portion methods for recipe ingredients are weight, volume and count. Meat items are often portioned by weight and count. When portioning by the piece, you may have more than one portion size. A strip steak could be sold in two or three portion sizes. For each portion size, imagine the entire strip will be used. You need to answer a simple question. How many steaks would you expect if you only cut the one size from the strip? Repeat the exercise for each portion size.

Use the average weight for popular random weight items. Generally, each case will always have the same number of large cuts (ribs, strips, loins, etc.). The total case weight will vary. Huge weight variances from the average will impact the number of portions per piece. It helps to keep accurate records of the butchering and fabrication process.

Yields may change from week to week. If you expected an 80% yield for a particular cut and you actually hit a 70% figure, your costs would run higher by over 11%. The variance is due to the poor yield alone. Add a price variance and some spoilage and the gross margin will begin to disappear. Portion control steaks provide operators with a consistent yield – one portion. When deciding to purchase portion control meat, you need to consider the hidden costs. Look at the whole picture including labor, equipment, risk of injury, and poor yield in your comparison.

Items portioned by volume or weight are straight forward. It is helpful to know the common conversion units for each method. Volume is expressed in gallons, quarts, pints, cups, liters, fluid ounces, milliliters, shots, tablespoons, teaspoons and fractions of each. Weight may be expressed in pounds, ounces, kilograms, grams, etc. A #10 can has about 6 pints (96 fluid ounces) and often about 6 pounds. Check all weight to volume relationships.

When developing standards, you may find your specifications are different than some of the excellent books. If you trim your produce quickly, the yield will probably be lower than the expectation. One way to reduce the variance is to portion produce items by the piece. A 24 head case of iceberg lettuce will yield 144 wedges if sliced in six pieces per head. Cutting the heads into larger wedges of four per head would yield only 96 portions.

Think of this step as the recipe model equivalent of the prep process. Having accurate recipe costs depends on accurate unit and yield data. The recipe costing programs will re-cost your recipes over and over as prices change. Spend the time initially to get this critical information correct for your operation. Don’t worry about benchmarks for portion size. Use your unique portion sizes in determining the conversions between inventory count units and the units called for in recipes.

Joe Dunbar
Dunbar Associates
(703) 425-6052
(202) 315-3664 eFax
jdunbar401@aol.com
www.joedunbar.com

Image Credit Flickr.com

You may have lots of cookbooks, proprietary recipes, books with food yield statistics, market data, shopping lists, inventory count sheets, supplier quotes, product mix reports, quarterly tracking reports and other documents. A professional recipe model should be designed to integrate all of this useful information. The person working on this project needs to wear many hats: purchasing agent, steward, prep cook, line cook, and chef.

Rather than using a cookbook approach, start with your shopping lists. Use your shopping lists to create a spreadsheet with all your ingredients. Make columns for the name, category, primary supplier, purchase unit, storage area and storage unit.

Since the unit you purchase is used on orders, this is our starting point. It’s helpful to know your alternate sources for each ingredient. You may want to categorize each item by the storage method. For example, frozen, refrigerated, dry bulk, canned goods, frozen goods, baked goods, etc. Feel free to add these columns. It’s impossible to get too much information for your ingredient list.

[We'll eventually need to know the usage units for each ingredient and portion information. This will be discussed in Part2 (later this month).]

Once the list begins to come together, envision the flow for each item from loading dock to the table. Most items are purchased by the case and are stored as purchased. Some items are immediately transformed into other items through fabrication. Visualize the process of moving from the purchased unit of measure to the storage unit of measure first.

You may simply remove six #10 cans from a case and place the cans in a rack. The purchase unit is case and the storage unit is a #10 can. Focus on the storage unit and the divisor (6 in our example). Breaking down every item you purchase into logical storage units is one of the most important steps in creating a professional recipe costing model.

Each #10 can is valued at 1/6 of the case cost. Don’t worry about the actual cost of each can. Focus on the number of storage units in each purchase unit.

Our work will eventually involve many calculations using units of measure, various blends, yield formulas, conversions, reciprocals and standard portion data. The simple exercise of developing a purchase unit to storage unit model is the ideal starting point. Once you complete this exercise, future conversion work will be more intuitive.

Joe Dunbar
Dunbar Associates
(703) 425-6052
(202) 315-3664 eFax
jdunbar401@aol.com
www.joedunbar.com

Image Credit Flickr.com

One of the toughest challenges in our industry is staffing a year round operation with a short, very busy tourist season. There are seasonal challenges. It’s necessary to grow the staff before the peak days for training purposes. Often the best staff from the peak season are asked to help either part-time or full-time in the decline. Unfortunately, it is sometimes necessary to cut battle tested help during the low months.

I have seen some excellent strategies in play at seasonal operations. The common denominator is a strong core staff onboard year round. Most of the top operators have a flex-staff available whenever they are needed. These part-time people are typically well compensated and fill in gaps at big parties or special events. A number of savvy operators take advantage of college internships when hiring for the peak season.

During this month, I have received quite a few emails from those who wish to remain anonymous. I want to encourage all readers to participate in this dialogue. Specifically, tell us what works and does not work in your seasonal staffing strategy.

We had to staff the 1988 Winter Olympics in Calgary to handle food service and housekeeping for the media and the Nordic athletes at Canmore. The two weeks took place during the school year and little help was available from local students. Housing of out-of-town help was cost prohibitive. Our contract specified top notch food service at each venue.

To give every detail of our strategy would take too long for this blog. We rented trailers used in the arctic to house personnel and borrowed old school buses from local districts to bus our help. The workers were recruited from all over Canada. Most of the staff would have been chefs at their normal workplace. These pros were happy to help out Canada in it’s bid to host a memorable two weeks for the athletes.

The Nordic athletes like lots of carbohydrates. You can’t offer too many grains and starches. Macaroni and cheese is a favorite. They really do not load up on sweets. The diet is very nutritious and I would imagine marathon runners would be at home in a Nordic camp.

Our chefs adapted rapidly to the demands and produced high quality meals which satisfied the athletes. Our team received accolades for the wonderful quality and attention to patron wishes. In the end, it was tough to see all the talented people leave our company and return to their positions around the country. Seasonal operators do this each and every year.

Image Credit: dvdmerwe

Joe Dunbar
Dunbar Associates
(703) 425-6052
(202) 315-3664 eFax
jdunbar401@aol.com
www.joedunbar.com

Variance reports help cost accountants identify unprofitable production and service activities. If your dinner house served a 1 pound steak for $30 and the meat costs $6 and sides run another $1.50, your margin is $22.50. That’s a profit margin of 75%.

Meat prices vary over time and the 1 pound steak can go as low as $4.50 and as high as $7.50. This rate variance has a huge impact on your profits. At $4.50 per pound, marginal profit soars to $24 or 80%. It gets tough to pay the rent for your high profile location when higher priced meat hits the loading dock. Your margin drops to $21 or 70% at the $7.50 per pound level.

In this example, our standard price per pound is $6. If our example steak accounted for 40% of dinner business, how do we measure the impact of a price increase? Using this standard rate, we will run a cost of sales of 25% on this menu item. A $1.50 rise in the cost per pound will run the cost of sales up to 30%. Since this 5% increase has a 40% impact value, this one ingredient – a 1 pound steak – is responsible for a 2% increase in the overall food cost.

Rate variances on key items have a major impact on your results. These variances may be difficult to control. Major steak chains use futures and options to reduce the risk. Minimum future requirements eliminate this option for most operators.

The industry has become focused on the usage variance since the degree of control is higher. If you sell 1,000 of these steaks a week and you closely track usage, you may experience a usage variance of 10%. Instead of using 1,000 pounds of steak, you needed 1,100 pounds. At the $6 standard cost per pound, the usage variance costs $600. Repeat this performance for 50 straight weeks and you’ll be missing $30,000 of profit. Your food cost percentage for the steak will soar by 2%. Looking at the entire food cost percentage, this unfavorable variance has a 0.8% impact.

Imagine a week with the same usage variance combined with the big rate variance. The impact of serving the $7.50 per pound meat and an extra 100 steaks is $2,250. The extra steaks cost $750 and the extra $1.50 per pound on the 1,000 standard is $1,500.

Companies using variance reports wisely tend to eliminate usage problems faster. These same companies isolate key items and develop an effective purchasing strategy. Their competitors tend to run rambling meetings when food cost numbers are high. Inventory counts and extensions become their focus. In the long run, you won’t solve a usage variance or a price variance through inventory value manipulation.

Joe Dunbar
Dunbar Associates
(703) 425-6052
(202) 315-3664 eFax
jdunbar401<A-T>aol.com
www.joedunbar.com

Image Credit: peagreenchick