If you own or manage the operations of a restaurant—whether an independent restaurant or a large chain—then you know the pressures of balancing rising food prices and staying profitable. This is a battle that will continue; the USDA’s projection alludes to continued cost increases.
“The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.5 percent from December 2017 to January 2018 and is 2.1 percent above the January 2017 level. The CPI for all food rose 0.4 percent from December to January, and food prices were 1.7 percent higher than the January 2017 level. “ – Source
Despite this negative news, there is a way that restaurateurs can gain an advantage by evaluating their current food management practices and making improvements.
Track Food Costs on a Recipe Level
Dealing with rising food prices requires correctly evaluating pricing of your menu items. Do this by determining the cost of each ingredient used on the recipe level. A good inventory tracking system can help you break down a meal to each ingredient used and then connect it to a specific vendor.
Knowing the cost of ingredients at this level helps managers make better pricing decisions, vendor evaluations, and portion control, which ultimately leads to menu pricing that results in profits.
Evaluate Inventory Shrinkage
A lot of restaurateurs lose money by not properly tracking and protecting their food inventory. Many of your menu item ingredients have a specific shelf life. An inadequate inventory management system leads to spoilage and waste or food simply thrown away because the portion sizes were too big.
Implementing an automated system is the first step toward managing rising food prices and reducing waste. An inventory management solution that automatically keeps track of all food stock helps you have a clear insight of where potential pitfalls may lie in your kitchen operations. By making adjustments, you will discover that over time, your profit, minus waste and loss, will turn towards the black.
Theoretical vs. Actual Food Cost
Using automated processes to adjust costs for rising food prices is a good first step, but do you know if your theoretical and actual food cost numbers closely match? A wide price gap between the two is a sign that your business may be losing money.
Your inventory management system can help you determine food and supply shrinkage, waste, over or under portioning as well as theft and human error. This, in turn, gives you insight on what your restaurant is actually selling vs. what you should be selling. Instead of yearly price changes for menu items, you can adjust prices more often based on accurate data, and then compensate for the actual cost involved in inventory purchases.
Rising food prices are variable from year to year so it is important for your restaurant to be prepared ahead of time to handle sudden changes in cost of purchase. An inventory management system is your best defense to maintain positive profits and streamline your kitchen operations.