Tuesday, May 05, 2009

Cost-Cutting Measures Are Still More Profitable Than Advertisements

It is undeniable that successful companies are those that are able to maintain at least 28-35% of their food costs, on the average, where at least 50% to 70% of their total sales are spent on food inventories, consumption as well as labor costs. Because of the impact that food costs has on the overall profitability of a food service company, one must be able to manage it carefully in order to increase profits by avoiding losses.

You are probably thinking: “So how can we control our food cost?” There are many ways to do so but two of the most effective ways are to control your inventory and look into your menu pricing strategy. You may have received a good deal from your suppliers by ordering in bulk, however, think about this: you may be tying in your cash flow or store room for paying and stacking an inventory that may end up just sitting in your stock room for a long period of time. Or inversely, you may have also experienced scrambling and pulling your hair out as you scramble for the delivery of last minute orders which you have to use for a party or event the next day.

Setting up an advanced inventory and recipe management in your company and using it wisely will enable you to define which of your products are fast or slow moving, what right amount of stock levels should be kept and which of your menus you can increase in price, needs promotion or which ones you would need to discontinue. Investing on software solutions such as EGS CALCMENU and EGS F&B Control, to formulate your menu pricing strategies and in controlling your inventories can dramatically decrease your food costs and notably increase your profits.

How can these be done? Let me count the ways:

1. Through time savings – save time in handling inventory stock takes
2. Through precision in inventories, consumption, transfer, etc.
3. Through reducing food pilferage, wastage and spoilage
4. Likewise through reducing over-portioning when serving
5. Through a precise maintenance of par stock levels
6. Through eliminating over-ordering and under-ordering
7. Through the lowest cost supplier sourcing
8. Through a proactive and automated report generations
9. Through lesser costly human errors
10. Through optimized menu selling prices
11. Through optimized Profits
12. Through a consistent product quality

Here is an illustration of the Cost-Benefit Calculation when you invest in buying a software solution, based on the following standard assumptions:

1. Your sales on year 1 is $250,00
2. Current Food Cost Percentage is 35%
3. In order to become a profitable and a “healthy” company, you would like to target a Food Cost Percentage of 30%
4. Minimun decrease in Food Cost using a software solution is 6%
5. Your target Return of Investment (ROI) in investing in a software solution is at least 20%

(click to enlarge)

In this illustration of Payback Period and ROI, you can clearly see that investing in a software solution such as EGS CALCMENU and EGS F&B Control you can easily achieve your target food costs; in fact you can even exceed it, by just making full use of the softwares’ features.

You don’t have to worry about your investments. As the illustration shows, your savings for implementing this system can easily pay-off in one and a half year and can even exceed your target ROI!

The illustration also clearly shows that it is way more cost effective to invest on an Inventory and Back Office Management Software coupled with a Recipe Management Software, more specifically EGS Solutions – CALCMENU and F&B Control – rather than making unwanted cuts in cuisine, restaurant hours and labor expenses or spending more on advertisements and promotional activities.

Truly, investing in a system like the EGS Solutions – F&B Control and CALCMENU (particularly CALCMENU Enterprise 2008)—will make you see drastic improvements in your Food Cost and Sales Mix.

2 comments:

  1. I have the pleasure to be the first to comment,

    I've used other software for costing and printing purposes but it is the best I have ever used.
    although it is a bit difficult to add a recipe, but still the better for more accurancy.

    the support team is too polite and helps me a lot ( as long as I pay the support plan )- joke joke :)

    Even the chair man I do not remember his name but he helped me several times and accept the comments in order to make it better.

    Also it helped my company as a Health Food production on calculating the nutrition facts.

    there is a lot of fetchers and functions that are really helpful for a food operation.

    A lot of thanks for the EGS TEAMWORK,

    Mohammad Hejazy
    Executive Sous Chef

    International Expertise Catering
    Health Company
    Kuwait
    URL: www.hckwt.com

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  2. I am working with marketing in Denmark and is searching for inspiration in the digital world. Thanks for inspiration

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