When I am working with new members, one of the first things we tackle is their budget. From there we establish goals for their desired profitability. It is at this time we can identify the biggest area for improvement and nine times out of ten it is food cost. 

When most people do the ordering for their business they use an inventory/par level system. Even worse, most people use the inventory/par level system by eyeing what is on the shelves rather than taking an actual physical inventory. This type of ordering is solely contingent on the person doing the ordering and in most cases that is the owner because they don’t trust anyone else to do it. Taking on tasks such as this are what add up to the 70- to 100-hour work weeks for said owners. 

When you order by your gut, your orders actually stay pretty close to the same amount all the time. For example, if you have a $20,000 week coming up and order $5,000, it puts your raw food cost at 25 percent. Then next week is a $14,000 week, but because you’re “eyeing it” you will order $4,500, which is a raw food cost of 32.1 percent. 

Using the purchase allotment system and assuming your target is a 27 percent budget, instead of the above scenario, you would have delegated a budget of $5,400 to your kitchen manager for the $20,000 week and $3,780 for the $14,000. You save money and time for yourself. The purchase allotment system will adjust itself so you stay on budget with actual sales, not just forecasts. 

To implement the purchase allotment system, you must have recipe costing cards. These help establish the ideal food cost for the business. Ideal food cost is calculated by multiplying the cost of each item times how many were sold. This formula gives you what your food cost would be with perfect portioning as laid out in the recipe costing card, with no waste and accurate product prices. It’s possible your ideal food cost and your budget won’t match, in which case you tackle your menu’s mix and pricing along with some other food cost lowering strategies. 

Before recipe costing is done you also have to start saving money to lower the bar on the purchase allotment target a little bit at a time. As you hit the target we will lower the bar some more until we finish the recipe cards and establish a target that aligns with ideal food cost and your budget. 

Just by guessing a lower target at the beginning, members start improving their purchasing immediately. Some of those savings are month after month of continual savings and some are the result of depleting a huge inventory. Either way it is more money in your pocket and it can all begin with one coaching call. 

If a 5 percent change in your food cost and more time for yourself are worth putting the purchase allotment system in place, call me to get started.