Recipe costing and food cost: high turnover, thin profit, and nobody has looked at the dish
Nextica Law & Tax acts as the outsourced finance director of a restaurant business: recipe costing per dish with its real ingredient cost and its percentage of the selling price, menu engineering to separate what sells from what earns, staff-to-sales ratio by time band and by service, wastage and cellar consumption control, seasonal budgeting, and a weekly —not monthly— cash plan, which is what a daily-cash business actually runs on.
The dish that leaves the kitchen most often is usually the one with the thinnest margin, and without costing nobody knows.
What's included
1. Recipe costing per dish with each ingredient's net quantity, after trimming and cooking losses, and with the current purchase price.
2. Calculating the percentage that ingredient cost represents of the selling price, dish by dish.
4. Staff-to-sales ratio by time band and by service, which is where you see whether the problem is the menu or the rota.
5. Cellar consumption and wastage control, with the gap between theoretical and actual measured rather than assumed.
6. Seasonal budgeting with the order sized and the expected margin by category.
7. A weekly —not monthly— cash plan, with the lowest cash point marked, because this business's cycle runs in days and not in months.
HIGH TURNOVER, THIN PROFIT, AND NOBODY HAS LOOKED AT THE DISH
These three are not regulatory risks: they are what explains why a busy venue closes the year with no margin.
Recipe costing done once and never updated
purchase prices change constantly and a costing ages within weeks. Its value is not the absolute figure but the percentage of the selling price, and ranking the menu by that percentage almost always reveals two or three dishes that sell heavily and earn nothing.
A monthly budget in a weekly-cycle business
a month can close in profit while three of its weeks had no cash to pay the fresh produce supplier. The useful cash plan is weekly, with the lowest point identified.
Unmeasured cellar consumption
the gap between theoretical consumption based on sales and the actual figure only appears on counting, and it is the one that tells you where to look. Without stock counts at a reasonable frequency, the problem is discovered once a year.
Frequently asked questions
What is recipe costing and why does almost nobody keep it up to date?
It is the breakdown of what each dish materially costs: every ingredient at its net quantity —after trimming and cooking losses—, its current purchase price, and the cost of the garnishes and sauces that go with it. Almost nobody keeps it current because purchase prices change constantly and a costing done once ages within weeks. Its value is not in the absolute figure but in the percentage of the selling price: as soon as you sort the menu by that percentage, two or three dishes almost always appear that sell heavily and earn nothing.
Why is a restaurant's cash managed weekly?
Because the business cycle is weekly, not monthly. Takings vary enormously between Monday and Saturday and between seasons, fresh produce is ordered and paid for every few days, payroll and social security fall on fixed dates, and so do rent and the equipment loan. A monthly budget hides exactly the problem: a month can close in profit while three of its weeks had no cash to pay the supplier. A weekly cash plan, with the lowest point marked and the order sized accordingly, is the tool this sector needs.
Content reviewed by
Elena Bosch Prat
Directora · Consultoría Contable y Financiera
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