Food cost control

It can be defined as guidance and regulation of cost of operations. Under taking to guide
and regulate cost needs to ensure that they are in accordance of the predetermined
objectives of the business. Hence the guidance and regulations of cost are set as per
expressed in the policy statements and budget of undertakings:
Food cost control means that:
1. You have a stick to your predetermined standards. You exercise restrains or
directions over the price you paid, buy, prepare and sell goods.
2. You have your market as each food operation cater to a specific market. Standards
vary from different markets. You set standards appropriate to your market before
you buy, prepare and sell food.
3. You prepare cost control procedures.

Objectives of food cost control

1. To analyze income and expenditure:

In financial accounts stress is usually placed on the ascertainments of total cost
and profit i.e. cost of sales, gross profit. In food cost control on the other hand much
stress is placed on the various departments or a section of a business.

Gross profit = sales – food cost

Net profit = sales – (food cost + labour cost + overheads)

2. Pricing of food:
Another major objective of food cost control is to provide a sound basis for menu
pricing. It will also help in costing price for various types of banquets and functions.
It also helps in giving quotations.

Sale = food cost + labour cost + overheads + profit

(30%) (10%) (10%) (50%)

3. Prevention of inefficiencies:
We know that purpose of control is to ensure the current result are in accordance
with the predetermine objectives which were expressed in terms of targets, costs,
selling and profit margins. If such objectives are to be reached all possible forms of
wastage and inefficiency should be prevented. In order to be effective in preventing
waste inefficiencies a system of food cost control must cover the whole field of
catering operation right from the purchase of foodstuff to the sale of prepared meal.

4. Data for the management:

The system of food cost control has an important function to fulfill in providing of
data for individual reports on food operations.
Factors affecting the percentage of food cost

Factors affecting the percentage of food cost are:

1. Food Purchasing
2. Menu Planning
3. Method of pricing
4. Culinary Skills
5. Service Skills
6. Avoiding Wastage

1. Food purchasing:
As a matter of fact the control starts from this very activity. Skillful buying is quite an
art and the proper discharge from this function may result in considerable cost
control. The following points doing purchasing helps in reducing food cost:
• Buy the right amount of stock
• Determine the realistic stock level
• Buy according to the standard purchase specification

2. Menu pricing:
It is the most important step in controlling the food cost.
This is recognized by the progressive categories. A careless menu planning results in
undue wastage of resources hence is responsible for excessive. Most of caterers
Think that offering a variety of food and adding more items to the list will increase
their reputation in the market. But at the same time it increases food cost which is not
a healthier item.
• If the number of items is more, the customer gets confused.
• Sometimes the lack of skilled labour.
• Lack of proper equipments.

3. Method of pricing:
A haphazard price of pricing will eventually result in a financial disaster. The price
should be realistic and must be based on facts. To keep the desired rates each item of
the menu must be carefully considered in terms of its cost and in relation to the
selling cost. The market forces must determine the selling price. Hence one of the
responsibilities in any food service is an art full working. To keep the desired weights
each item of the menu.

4. Service skills:
a) Portion control
b) Careful order taker
 5. Avoiding wastage:
This particular activity starts with the receiving of food. All the procedures for
avoiding wastage is observed at each level i.e. in the store, during transportation,
from the store to kitchen, during preparation of food item and during service.

Phase of control procedures

The control procedure consists of 3 broad phases:
1. Planning
2. Operational
3. Control after the event

Planning:
First of all the basic policies have to be defined. Policies are nothing but predetermined
guidelines laid down by the management of the organization. It outlines such matters as
the market that is being aimed at, how it is to be catered at the level of profitability,
which is to be achieved. The policy should be clearly defined before the business is
commenced. It can be charged but whenever a major change takes place a new policy
should be written down. Three basic policies, which need to be considered, are:
a) Financial:
It will determine profitability and the contribution to the total profit. Setting of the
target that has to be achieved, the financial policy is prepared for each single unit as
well as for the whole organization. A budget is prepared at the beginning of the year
for the whole organization.

b) Marketing policy:
It will identify the broad market that has to be served. It will also identify the
immediate and future consumer requirement in order to maintain the broad market. A
large city hotel could be broken down into a segment of the various types of users i.e.
in a coffee shop, Chinese restaurant, Indian restaurant, etc. each unit having a specific
customer. Marketing policy also defines customer, market share, turnover,
profitability, average spending power of customer, product and customer satisfaction.

c) Catering policy:
It is normally evolved from the marketing and financial policy. It will also define the
many objectives of operating f & b facilities and will also describe the method by
which the objectives are to be achieved. It will usually include the following:
 The type of customer
 The type of menu
 Beverage provision necessary for operation
 Food quality standard
 Method of pricing
 Type and quality of service
 Degree and décor and comfort
 Type and style of table and chairs
Operational:
After defining the policies it is important to outline that how they are to be interpreted
onto the day control activities of the catering operation. The operational control consists
of:
 Purchasing
 Receiving
 Storing
 Issuing
 Production control
 Sales control

Management control after the event:

It consists of three main stages:
a) F & B cost reporting:
The cycle of production is often perishable so it is compulsory to update your f & b
cost reporting weekly or monthly.

b) Assessment:
In case of a large unit it is necessary that someone from the f & b department analyses
the f & b reports and confirm them with the budget & with potential food cost.

c) Correction:
Control system does not cure or prevent problems occurring when the analysis of a
performance of a department states that there is a problem. A corrective measure has
to be taken to set aside any problem.

CALCULATION OF FOOD COST

There are several basic terms, which are used in the calculation of the food cost.

Food cost- this refers to the cost of food incurred in preparing meal severed.

Gross profit- the excess of sales over the cost of the food expressed as a percentage.
Potential food cost- the food cost under perfect condition.

METHOD OF FOOD CONTROL

Weekly/monthly food cost report-

This system is used by small organization where manager controls each activity as
daily routine. It is a reconciliation report of daily activities. The calculation procedure
is
Opening stock + total purchase for the period – closing stock = total food sale