I travel the country a lot, and there is a common misbelief to this day. After decades in this business, restaurant operators and general leaders are still obsessed with food costs. Although that’s important, it’s a fallacy. And in this episode, I’m gonna tell you why, and I’m gonna tell you really what’s important and how to maximize the bottom line performance of your operation.

So stay tuned. I’m sure you’ve heard about my Restaurant Academy, but if you’re really looking to uplevel your operation, finances, marketing staff, training salesmanship. Even logistics on how to purchase another restaurant or negotiating a lease. Everything is in the academy, it’s turnkey, and the best part is you don’t follow it from point A to point B.

You decide what’s most important, what are the priorities in your business to improve that business and its performance. Any member of your staff can learn any of the courses in the academy to execute and improve your business.

It is a win-win situation. So check that out at academy.restaurantrockstars.com. Now on with this episode all about boosting your bottom line.

You are tuned in to the restaurant Rock Stars Podcast, powerful ideas to Rock your restaurant. Here’s your host, Roger Beaudoin.

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Go to fora financial.com/rockstar. That’s FORA financial.com/rockstar. Funding subject to terms and conditions. So what’s this fallacy I’m talking about? The fallacy is our industry is obsessed with food cost. And yes, food cost is important, but what you should be focused on is profit, menu. Profit is the bottom line. Needle mover, you take profit to the bank and not food cost. I would rather sell steaks at a high food cost all day long versus a lower pizza or profit item that has a lower food cost and a lower profit.

But I’m gonna tell you exactly how to get a low food cost. A low food cost comes from one efficient ordering, two cross utilizing ingredients. You don’t bring in one or two ingredients if they only go across one or two menu items. Ideally, you want every ingredient to go across multiple dishes, and that lowers your waste and your spoilage.

That’s really important. Shopping ingredients. Now your suppliers, maybe you work with a big box supplier or smaller suppliers, but they know what you’re buying now. But these suppliers, they buy big volume of their ingredients and sometimes they’re bringing in new products all the time, and maybe they bought a larger quantity of this product versus the one you’re buying.

So you don’t ask, you don’t get, I always ask my suppliers, you know what I’m buying now? Is there anything comparable where I can taste a sample? And if I think that the quality is there and the flavor profile. Is the same and the guest won’t know the difference. Why wouldn’t I order that product? I was always asking that question and they always knew to bring new items to my attention that would be profitable or more profitable than I’m what I’m selling portion controls.

A long time ago, I started a wood-fired pizzeria over. 30 years ago, I was open for a couple of weeks and I just happened to be standing on the pizza line and I’m watching three different pizza makers make the exact same pepperoni pizza. Now, one pizza maker put 10 slices of pepperoni on it, and I’m counting.

And then I watched the next person who put 12 and then the next person put 13. And this is a true story, I went to my kitchen manager. I like to call all my managers leaders, and maybe you know why. But anyway, ask my kitchen leader. What’s the spec call for on this pepperoni pizza? She’s 10 slices.

I’m like I just watched two other pizza makers put, two or three extra slices of pepperoni. We’re selling a couple hundred of these pizzas a day. We’ve been open a couple of weeks. How much is this impacting our food cost and our profit? So again, portion control standards were put in place.

That is super, super important. Lemme talk about cash cows. Cash cows lower. Your food cost. Why A cash cow is an item that has wow factor. A guest, looks at it when it’s put in front of them at the table and they say wow to the other guests, and they pull their phone out and they take a picture.

They don’t even wanna cut into it, but it has very high perceived value. It looks great. It tastes great. It smells great. The kicker is it doesn’t cost you very much to put on the plate. Now, I can tell you later. A whole bunch of cash cows that you can put on your menu. I’ll tell you how to get those.

But anyway, cash cows, lower your food cost, low waste and spoilage. Okay? Efficient preparation and efficient ordering, of course, because you don’t wanna bring in more things than you need, but you don’t want to. 86 things. That is a sweet spot balance. But again, low spoilage. Low waste, and of course eliminating theft if possible.

Cameras do what you can, state your policies very clearly and just make sure that you eliminate the theft and you minimize waste and spoilage. Okay, let’s talk about inventory, because inventory is key to the process. I’ve told you this before, but I see so many restaurants traveling when I travel the country that think inventory is placing next week’s order.

No inventory is calculating the true value of both your food and beverage costs at a given point in time. Inventory is very important ’cause you can’t accurately calculate your food costs unless you take a regular inventory. So let me tell you some best practices on inventory. The first thing you need to do is arrange all of your goods most efficiently throughout your storage areas, in the way that you would physically count them.

So all of us have a walk-in cooler, maybe a freezer or two sandwich fridges. Dry storage areas. All these are areas that we store our food. Okay, so what’s the most efficient way to order things Now? I have a template, I’ll tell you about that later. That will help put an inventory system in place. So one person would take the physical count and the other person would enter the data either into the computer.

Or on a clipboard and then transfer it to the computer later. Whatever’s most efficient. But it usually helps to have two people take inventory. I recommend strongly that you take inventory every single week for four weeks. Why? Because you need to establish, again, that consistent sweet spot.

Let’s just say you take your physical counts the first week you do inventory, and maybe you get a. 30% food cost, and maybe that’s good for your business and you’re happy with that. You take inventory counts one week later and now you get a 32%. Wow. It just spiked 2%. You take it the third week, now you got a 34.

Wow. And then you take it again and it’s a 29 and a half. Your food cost is all over the place. You don’t know what your food cost is. What you need to do is get 30%, 30%, 30 and a half percent, 30%, okay? And then you know you’ve got a consistent system and a process, and then, and only then you don’t have to do it every weekend anymore.

Then you can go to a 30 day inventory. But that’s a necessary process. Okay? Now when’s the best time to count? The best time to count your goods is when your inventory is at its absolute lowest point. And when is that? That is usually at the end of a busy weekend, either a Sunday night or early Monday morning.

Now, maybe you’re burned out Sunday night after, working hard all weekend or whatever, and maybe Monday morning is the best time, but it’s gotta be early. Why? Because the last thing you want is for your delivery trucks to be pulling in when you’re in the middle of inventory and they’re wheeling in the goods.

And you’re counting the goods, you gotta avoid that entirely. So it’s very important to take inventory at the same time each week and before the deliveries start rolling in. So there’s a formula once you’ve got your template. All right, maybe you use my template, maybe you have your own, I’ll tell you about that later.

But let’s just say you take your first physical count. And that gives you a dollar value. My template automatically calculates the value. If you accurately enter how many cases, how many units of anything that you have into the template, it’ll give you that inventory value. Okay, so let’s just say you start with beginning inventory.

That’s the very first time you count it. If you’ve never done this before, you take all your physical counts and then. That’s your very first week. Okay? That’s your beginning inventory. Now the next piece is your purchases. I mentioned your delivery trucks are gonna be coming in. Maybe you order three times a week, maybe four times a week, doesn’t matter.

The template has all of your vendors, and it’s got places that you put the date that the goods came in the door, and then these are food purchases. But this formula also holds true for beverages, but this is a separate process for both, even though it’s the same formula. Okay? Beginning inventory plus purchases.

And I see a lot of restaurants make mistakes sometimes because it should only count food if it goes on a plate or if it’s a to-go container that goes out the door, which you should count now because takeout and delivery is such a huge part of business. But it should not be plastic wrap and mop. Pads and rubber gloves, and soda straws and fruit that goes on the bar.

No, it should be food items only. So here we go. Beginning inventory plus your purchases. Now, a week later, you count the goods one more time. Sunday night or Monday morning. That is your ending inventory. Now the formula on the template automatically calculates. Usage, and I’m gonna summarize this formula in a minute, but what is usage?

Usage is everything that you sold to a guest. I like to call them guests, not customers. Everything you sold to a guest for full price. Anything you sold to a team member at a discount? Anything that got comped or voided off a. Check anything that got thrown in the trash wasted or stolen, okay? That is your true food cost, and that is usage.

But again, that’s automatically calculated in this formula. The only other variable that you need to plug in is your food sales, and it’s for that weekly period, a seven day period only never ate or else your food cost is gonna be wildly skewed. So once your inventory system in place, you have the template, you’ve got all your ingredients listed and the most of.

Efficient way that you would count them. And you get a number four weeks in a row, you take it the first week, that is your beginning inventory. One week later, that is your ending inventory. So the formula beginning inventory plus purchases for the week, food only. Okay. Minus ending inventory. Equals usage.

And I just explained that was divided by sales equals your food cost percentage. And again, you do the very same process for your beverages. If you sell liquor and draft beer and wine and soft drinks, you should take a separate inventory for those. And the formula remains the same as is the system.

Alright, so what do you do? What’s the most important thing after you take inventory and you figure out your food costs? Let’s talk about the food costs. Now. It’s vitally important that you cost out your menu. Every item, every category, all the time. Why? Because there’s a inefficiencies that I see in restaurants everywhere, and they’re losing money every single day because one, they haven’t costed out their menu.

They might find out that they’re losing money. Selling certain items. But again, there’s a template for that and I call it the menu profit accelerator. I’ll, if it’s interesting to you, I’ll tell you how to get it. It’s in the academy. But anyway, let’s talk about the process. Cost out your menu, that means you have a cost sheet for every single menu item.

And yes, there’s a little bit of homework upfront, but once the homework is done, it’s a system, but it’s vitally important to cost out every single menu item. It’s gonna tell you. A menu plate. Cost sheet is gonna tell you three things. It’s gonna tell you what it costs you to serve that dish to your guests.

No labor included, just ingredients. It’s gonna show you the profit per item. Because you know what? You charge the guest for that item. You simply subtract the plate cost from what you charge the guest, and that’s your profit. And then the simple math gets divided and it tells you your food cost. It starts with a cost sheet.

Every item, every category. Don’t miss them. What do you do next? You rank. Every item in each category, one at a time from the most profitable item to the least profitable item. And you might have three or four or five appetizers. You might have, a couple of soups and salads, burgers, sandwiches.

These are all separate categories. Of course, you probably have entrees, maybe you have 6, 7, 10, 12 entrees and desserts. Maybe you have four or five. Desserts. These are all categories. You need a cost sheet for every single item because overall you could be losing a ton of money. So once you’ve ranked them, okay, if you’ve got a cost sheet, I don’t care if it’s on the computer, I don’t care if it’s, a bunch of papers.

And its cost sheets in each category. This is most profitable. This is the second most, the third most profitable. You get the idea. It’s so important to know because next you’re gonna run a point of sale report. Now, I like a lot of data if you don’t change your menu, but once a year you’ve got 12 months of rock solid data that shows a volume of sales for every single menu item.

If you change your menu twice a year, at least you have six months of data. But the more data. The better next thing you do, whether it’s on the computer, in my template or just on pieces of paper, you would have the volume of sales attached to every single item in each category, because now you’re comparing profit to volume.

Okay. And that’s so important. So the template, the menu, profit Accelerator does all this. All you have to do is cost out your menu and plug in the information, go to the point of sale, plug in the information. It’s gonna show you are leaving money and profit on the table every day. And I’m betting because I’ve seen this several times, that your lower profit items are stealing sales from what you want to be selling, what you could be selling, your most profitable items.

Now, I’m not suggesting that every guest wants to buy the most profitable item. But there is a template and a formula to shrink that spread or that profit difference so that you’ve got a reasonable menu that delivers a strong profit across the board and that is your goal. Lemme give you a couple examples.

I did this when I owned restaurants for decades and I always had my menus costed out accurately, regularly. And then we constantly ran point of sale reports looking at volume of sales, and we tightened our menus up and tightened our menus up. And every time we had a new menu, we. Ensured that it was really tight.

Okay. I recommend you do that because I’ve consulted with numerous clients, and I’m gonna give an example. I worked with two $3 million operations, busy lunch and dinner restaurants, and I showed them in the past year, they had lost a potential profit of over $350,000. Each across their lunch and dinner menus.

Wow. Why? Because the profit difference in each category was many dollars, and the lower profit items were the most popular items in the place. I just wrapped up a consulting gig with a pizzeria chained five location pizzeria, and across their entire menu. They left a potential profit of $885,000 on the table.

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Now no restaurant can afford to lose a couple hundred thousand or just under a million. This is a vital exercise to do. Okay? I’m pretty sure it’s happening across the board in many operations regardless of price point. So check it out. Alright? You cannot control inflation.

You can’t control the highest labor costs ever or the volatility of goods, but unless you own, 10, 20, 30 restaurants or a big chain, okay? And I hope you don’t have leverage, you don’t have economies of scale. The only thing that you can control is your menu profit, and that’s why I’m putting such a strong emphasis on this, okay?

You can only move the needle by knowing what your menu profit is and tightening the spread. Now, what do you do? Once you find out which items are the most profitable items, you can immediately reprint your menu and highlight those most profitable items. Box them in, highlight them in yellow. Put little icons next to them, or little words that say most popular guest favorites, whatever.

Then train your staff to recommend those items. Every table. Every time talk to your suppliers. I mentioned earlier that you might not know that there are other options available across your menu that you could be buying for less money every single week. And that’s not only gonna lower your food costs, but it’s gonna increase your profit at the same time, but you don’t ask.

You don’t get, okay? So that’s super, super important. Alright? Train your staff. So important to train them to suggest those items use their unique personalities. Be entertainers. This is show business, but suggest those items that are most profitable and deliver amazing dining experiences portion controls.

Let’s go back to the I importance of portion controls. I told you about my pizza makers, oh my gosh. Three extra slices of pepperoni for weeks, times, hundreds of pizzas. I think about it today. What else do you do? A photograph of every single menu item that shows the plate, how it should look, how does the dish look?

How should it be plated? How many ingredients, whether it’s pepperoni or how many ounces of chicken, whatever it is, what’s the size of the starch or the vegetable or whatever it is. Everything should be documented. And then you train your people on this in how to make those dishes. And then the third piece is checks and balances.

I told you I was standing on the pizza line just randomly watching, and I saw this. So train your dining room leader. Or train a top server or train your kitchen managers just to routinely spot check this stuff all the time so that your people know that you’re watching and that you insist on portion control standards.

Okay, that’s super important. Drop the low profit items. If you’ve got items that are selling huge, you can either raise the price significantly because you know the customer will pay that, the guest will pay that price, or if you just can’t raise it anymore, but it’s a huge seller. You’ve gotta bring in an alternative.

You gotta drop that off the menu ’cause it’s stealing your profit folks. Okay? And then you wanna tighten up, you wanna go back to the drawing board and redesign a menu that maximizes profit across the board. Now here’s my standard for lower priced items on your menu. We’re talking about soups and salads and desserts.

I’ve always insisted on a 50%, or I’m sorry, 50 cent. Or less profit spread or difference. You want every item in those categories to be within a 50 cent profit of each other, okay? You want every entree or more expensive item to be within $1 or less of each other, but never many dollars.

I told you about those restaurants I worked with in every category. The appetizers were losing these restaurants, $3, $4, $5, the entrees or the pizzas. In that five location pizzeria, I saw anything from. $3 to over $10 in lost profit. It’s unbelievable. And if that’s really the volume of sales, and every time you sell this, you’re losing $10 from what you could be selling.

That’s why your bank account is not growing, even though you’re filling your seats. Now I want you to go out there and rock your restaurant. Deliver guest experiences that are memorable, that’ll bring them back, that lead to positive online reviews. Train your team to be personalities, to be actors and actors on stage to make friends with your guests and train them in service and salesmanship.

Create really powerful loyalty. Don’t run a restaurant, run a business, and build a brand that drives loyalty and repeat business. Play your best game. But always watch what the competition is doing. All right, and last of all, enjoy the business and share the love, and I’ll see you next time.

All right, if you’re still listening, I definitely got your attention and you definitely are now really gonna be obsessed with profit versus food cost. I mentioned templates. Again, everything is turnkey and included in the restaurant Rock Stars Academy. It starts with the menu. Profit accelerator.

That’s probably the most important thing that you can do to really dive in and figure out where you might be losing money and how to maximize menu profit. But I talked about inventory. I talked about cost of goods, I talked about all these templates. Everything is a really cool video that you can watch that explains the concepts.

And then we include turnkey automated spreadsheets that teach you what the numbers are. What they mean, where to find them, how to plug them into the template and what the end result should look like without making mistakes. And we also talk about some common mistakes that restaurant owners and operators have made.

So again, everything you’ll find at academy.restaurantrockstars.com and it’s called The Academy. So I hope to see you there. Thanks again for listening, we’ll see you in the next episode.

Thanks for listening to the Restaurant Rock Stars Podcast. For lots of great resources, head over to restaurant rock stars.com. See you next time. I.

Restaurant Tools & Resources:

The Top 3 Restaurant Profit Killers & How To Fix Them Fast (Free Video Training): https://academy.restaurantrockstars.com/profits

Restaurant Profit Maximizer Mini-Masterclass: Learn how just a few tweaks in the way you run your business can hugely impact your profits. https://academy.restaurantrockstars.com/sp/restaurant-profits

Run a Smarter, More Profitable Restaurant. Discover the proven systems that drive sales, train staff, and maximize your margins. Inside the Restaurant Training Academy, you’ll get step-by-step tools to master your finances and multiply your revenue—plus get unlimited staff access and an onboarding coaching call with Roger included. Join the Restaurant Training Academy:  https://academy.restaurantrockstars.com/joinacademy

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