What is Restaurant Prime Cost?

Food and Labor cost are the two biggest chunks 60% the restaurant financial pie. It is crucial that you monitor and react to higher food and labor cost.
Think about this, how much do you pay each of your employees? What about their benefits? What about payroll tax?

The restaurant prime cost adds up fast. Food and Labor represent the two biggest chunks of the financial pie

Restaurant Prime cost is the cost of sales (food & beverages) plus all payroll related costs, including gross payroll of all management and hourly personnel and payroll taxes, benefits, worker’s compensation, etc. Prime cost usually runs 60% to 65% of total sales in a full service restaurant and 55% to 60% of sales in a quick service restaurant. Knowing and reacting to what your prime cost is will help you effectively manage your restaurant.

Effective ways to manage food cost

Every recipe in your menu contains ingredients, each ingredient cost something. You do the math, every item that is associated with that recipe has a price tag attached to it. That price tag travel path begins when the food is delivered to your restaurant from your food supplier.

Train your restaurant staff in learning the menu, ingredients and the measurements of each ingredient that is connected to that entrée.

Prior to any peak time meal period conduct an alley rally meeting with every staff member on that shift, discuss any menu changes, the focus for the day, inspect uniforms, motivate employees by doing some sort of contest, etc. Never create negativity during an alley rally meeting with your employees, promote the word’s BE POSITIVE, NOT NEGATIVE.

Utilities

Here are a few tips: Always turn off any lighting when a room is not being used, such as:

Walk-in freezer and walk-in refrigerator
Dry storage, prep area, chemical room, manager’s office, etc.
Stagger lighting and kitchen equipment during the off peak times.
Use a second fryer or grill only if the business calls for it, otherwise turn off the equipment that is not being used.
Adjust the AC/Heat thermostat to your desired room temperature. Place a lock box on the thermostat. Hang the key to the lock box in the manager’s office or on the manager’s key ring.
Change the AC/Heat filters regularly.
Inspect the freezer/walk-in unit’s door gaskets. Inspect all freezer/walk-in reach-in door gaskets.
Thermometers in every freezer/walk-in unit. Knowing the proper temperature for any reach-in freezers/walk-in and reacting to temperatures in the danger zone will reduce monetary losses.

Food Cost

Here are a few tips:

Always verify the truck delivery, invoice verses what is actually there.
Make sure all credits are processed immediately, call the vendor’s home office to report the credit. Follow up until you received the credit.
Organize all count rooms for better count accuracy.
Always have a two person inventory method. One person counts the inventory and the other person writes down how many of the product was counted. Having two sets of eyes may catch count mistakes.
If the food cost percent was too high, check the figures that were entered into the computer verses what you actually counted. If there are still issues, then conduct a recount.
Use a waste sheet to determine how much is being wasted. Retrain the cooks or servers if necessary.
Use a recipe manual to train all new hires. You need to determine each plate cost in your menu in order to know your food cost percentage. The cooks need to construct each menu item per the recipe manual in order to make money on that particular menu item.
Create a food action plan after each inventory to focus and correct your food cost issues. http://www.workplacewizards.com/restaurant-action-plan/
During all peak time hours lock all food storage areas. Make sure the cooks and servers restock all areas before peak times hours. Lock the back door at all times, especially at night when robberies can occur.
When employees purchase their employee meals, they should present a receipt when asked by management.

Labor Cost

Here are a few tips:

Cross train all employees. During the off peak times in your restaurant reduce the amount of staff scheduled. A crossed trained employee can perform more than one task. Schedule a second cook or more during peak meal periods. Monitoring labor cost is the biggest opportunity in controlling any possible monetary losses. Losing money adds up fast and can be very expensive.
The key to controlling food and labor cost is to be pro-active.

What is being pro-active?
To head off a problem before it is an issue.

When creating a schedule, include breaks. Schedule the employees based on the amount of business you are doing during any hour of business. Hold your managers accountable in following through on giving employee breaks. A typical break is 30 minutes. If you have a staff of 20 and each employee takes a 30 minute break, then you would have saved 10 hours for that day. In a weeks’ time you would have saved 70 hours. In a months’ time you would have saved 300 hours. In a years’ time you would have saved 3600 hours. Let’s say each employee’s rate of pay is $8.00 an hour, then in a years’ time you would have saved $28,800.00. WOW that’s like writing out a check to you once a year that you could use for a vacation.

During off peak times, especially during slow times all employees should be busy helping to prep food, cleaning projects, restocking, helping out other employees out of their assigned position or section.

Examples are:

Helping out in the dish room.
Helping out the prep person.
Help greet the customers.
Help bus and reset tables.

Forms and checklists play a huge role in maintaining a healthy bottom line. If you use forms and checklists consistently and correctly in your restaurant, then you are on your way to an organized and profitable business. Restaurants that succeed have a solid foundation that promotes success. These restaurant forms and checklists will benefit any restaurant.

Here are a few links to some great resources that restaurants could use: