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Why actual vs. theoretical food cost is such a big deal

There are restaurants today adding millions of dollars of revenue to their bottom lines by measuring and controlling their food costs.  Using a restaurant back office system with a strong actual vs. theoretical food cost solution is their key to success.

Restaurant inventory management and food cost control are at the heart of profitability for multi-unit restaurant chains. But often, the methods used to track them are based on incomplete information, which can be extremely costly.

To gauge how well each of your operators are managing food costs, you first must understand what each restaurant’s food costs should be.  Take into account current inventory costs of all ingredients for the meals sold and assume perfect portions, no breakage, waste or shrinkage (theft). This is known as a restaurant’s theoretical food cost. (Inventory always valued correctly? No breakage or theft? Perfect portions? You can see why it’s called “theoretical.”)

Once you know the restaurant’s theoretical food cost, you can then compare it to its actual food cost.  This is simply the actual cost of all the food that the restaurant used for a given period.

Food costs as a performance metric

The mark of truly great food cost control is how closely a restaurant’s actual costs approach their theoretical costs.  An exact match would mean they’re portioning perfectly, and have no breakage, waste or shrinkage.  The difference between the two is the true measure of efficiency in food cost control; it’s called the actual vs. theoretical variance and reducing it to ZERO is the operator’s goal.

Want to learn more?  Go to www.crunchtime.com, follow us onTtwitter at @getcrunchtime or watch more helpful videos at the CrunchTime! TV Channel.
 

This post is sponsored by CrunchTime! Information Systems

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