5 Costly Mistakes to Avoid when Doing Recipe Costing

Management thinker Peter Drucker is often quoted as saying that “you can’t manage what you can’t measure.”

Drucker means that you can’t know whether or not you are successful unless success is defined and tracked. With a clearly established metric for success, you can quantify progress and adjust your process to produce the desired outcome. Without clear objectives, you’re stuck in a constant state of guessing.

Let’s admit it, Recipe Costing can seem daunting. For restaurants and other operators, understanding those costs is essential for determining overall food costs, forecasting, making decisions about menu changes, and calculating impacts on profitability. If your food costs are running out of control…it’s time to take action.

5 Mistakes to Avoid:

1. You’re not taking daily inventory

If you were to imagine all your edible inventory as stacks of cash, you’re guaranteed to watch inventory like a hawk.

This means doing daily inventory and a random spot check during every shift on the 10 costliest items in your inventory. That way, you know almost immediately whether key items are being over-portioned, overcooked or even stolen. Clean up your inventory list by removing unneeded items and fix errors in item pricing with up-to-date vendor pricing.

2. Your recipes aren’t portioned accurately

Managing this takes real diligence, but it’s where better profits are realized. Cut your costs significantly by becoming a portion-control stickler with cooks. Not only does it keep costs in line, it ensures guests enjoy consistent products.

Recipe Costing is essential as it raises several red flags – especially if you are not monitoring your serving portions correctly.

Let’s say you operate a smoothie shop and serve all smoothies in 10-oz cups. But wait a minute… your recipe’s total weight adds up to 14-ozs (4 oz. in excess than can fit in your cup). Where are those extra 4 oz. going? To the garbage? Your barista’s stomach? Well, we know for certain its not adding up to your profits.

3. You’re not converting measurements accurately

Cooking measurements, cooking equivalents and cooking conversions can be REALLY confusing. Whether you’re a newbie cook or even quite seasoned, sometimes measurements just don’t seem to make sense.

You’ve got tablespoons and cups and then there’s fluid ounces…and on top of that, there’s recipes that use metric / imperial… it’s a lot. Cooking measurements and equivalents should be the first step in your costing journey, but it’s easy to get by still not quite understanding it all.

Here are a couple conversions to get you started:

Volume

Weight

Spoons

4. You’re taking ingredient package labels for granted

Sometimes the manufacturers are nice and provide helpful guides for measuring. For most ingredients you’ll need to use the information listed on the ingredient packages to determine the cost of the amount used in the recipe.

Sometimes some of the ingredients are about as complicated as the calculations can get as you’ll have to convert between unit types. Let’s look at an example:

You’re trying to figure out the cost of the amount of parmesan used in your pasta recipe. We see on the label that there are 45 servings of 2 tsp in the whole bottle. We used 1/4 cup in the recipe. So first, calculate the cost per tsp: $2.29 (total bottle price) ÷ 45 ÷ 2 = $0.025 per tsp. We know there are 3 tsp per tablespoon, and 4 tablespoons per 1/4 cup, so we can calculate a little further: $0.025 x 3 x 4 = $0.31 per ¼ cup.

5. You’re making unnecessary expenses related to ingredient costs

If you intend to make a profit, your ingredients need to be cost-effective. Otherwise your profit margins will be too small and your business will be unsustainable. Do your research and shop around because you may be able to get the same ingredient for less through a different source or buying in bulk. Explore all your options before settling on a product in order to increase your profitability.

Some food brands are unique simply because of the high quality or type of ingredients being used, but keep in mind that you can still have organic or high quality ingredients with an awareness of your options. No matter what the product, doing your homework will leave more money in your pocket, so take this step very seriously before investing in costly, more convenient ingredients.

Though restaurants are accurately described as “people businesses,” running them will always be a numbers game. And without paying strict attention to food costs, even the busiest restaurant risks losing money and going out of business.

Ready to invest in tools that make your restaurant more profitable?

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