How to Reduce Food and Beverage Costs

By. (Amy Dunn) Bair 17th Aug 2008

This new hopeful economy is giving hoteliers incentive to innovate. What are they experimenting with? How to reduce waste and overhead without alienating customers. Also, how to affordably differentiate in a manner that makes the property appealing to prospective customers/guests? In a presentation from the 2010 AHLA Fall conference, a VP of Food and Beverage stated “We’ve had a few years to sharpen our pencils, now we have to sharpen our creative pencils, or we’ll be behind the curve.” (1)

In 2009, Cornell produced a downloadable teaching series titled “The Eight-Step Approach to Controlling Food Costs.” This series comes with a self-assessment workbook, participant and trainer guide so you can educate your staff to better control costs in your food and beverage department.

According to J. Bruce Tracey, the author, food costs can take up 40% of your operating budget. Best practices are emphasized in the series.

The first one discussed is ordering. “Order only one what you need.” Over-ordering will cause staff to find methods for using the excess food thus increasing the cost of your recipes. This can also lead to increased employee theft. We know instinctively the repercussions of under-ordering. We have all experienced the frustration of visiting a restaurant only to find out our favorite meal is unavailable because they ran out of an ingredient. Sending an employee to the store to buy said item holds its own additional expenses.

How to solve this? Keep diligent track of inventory. Create an inventory sheet with par amounts. Order your food according to par. Additionally, track purchase orders to ensure your deliveries and invoices are accurate. Remember to include staple items such as coffee, paper and condiments.

Another benefit to tracking inventory is you can forecast supply and demand. Why is this important? How about an example? Every December, you hold a Sunday brunch where you offer $1 mimosas. Last year, you sold 2000 mimosas. You would have sold more but you ran out of orange juice and had to make a store run. This also dipped into your profit as retail price for oj is more than you typically pay. Additionally, a server was pulled off the floor to make the trip which caused a bottleneck in serving and created frustration for your guests.

Make the time to research multiple purveyors to ensure you are getting competitive pricing on non-standard items. Of course, confirm you are comparing apples to apples (pun unintended) by obtaining necessary specs such as product name, grade, product size, etc. It is also critical that you create relationships with these vendors. Loyalty and rapport will go far when you are in need. Mr Tracey also reminds us to reach out to local growers. Doing this will create a competitive advantage for your restaurant. There is an enormous push toward sustainability right now. You will create goodwill in your community by supporting the local growers. Additionally, you are bringing in produce that is potentially higher quality and lower priced. It is a win every way you look at it! The Willard Intercontinental Hotel in Washington D.C. approximates their extensive focus on sustainability has resulted in almost “$800,000 of incremental group volume.”(2) How is that for motivation?

Create customized order sheets. Organize them by food categories such as meat, dairy, etc. This will make it easier for the chef or manager to look at the items, identify the pars and determine what needs to be ordered. A sample inventory and order sheet is available in the training manual.

Create a set of standardized recipes with the cost of ingredients added and the suggested selling price. Do not assume your staff understands how to price a menu item. Take the time to train them. Do not forget to account for the hidden cost items such as paper, waste and accompaniments. There will be occasions where using raw food (versus pre-cooked) will be more economical in terms of cost and labor. Consider this when calculating your recipe cost and taste. Ensure these correct costs get transferred to the daily menu boards as well. To communicate its importance, make that last task part of the daily pre-opening checklist. Additionally, create your menu around seasonal foods. This allows you to take advantage of the seasonal rates, creates a unique menu and gives the chef opportunity for variety.

For consistency and accountability, assign receiving to one person. Train your new Receiver to manually check incoming items for correct count, weight and brand. Decide in advance how you will handle substitutions. Will you refuse items that were substituted without your knowledge? Do not forget quality. How do the bananas look today? Do you see ice crystals on the frozen food? If so, reject them. They have been thawed and refrozen.

What does your storage room look like? Is it well organized? Is the receive date listed on everything? Do you practice the First In First Out (FIFO) philosophy? The Cornell guide I am referencing is detailed enough to offer specific temperatures and even the shelf order of foods in order to conform with US Food and Drug Administration requirements. Naturally, ensure all areas are clean, dry and sanitary. I read a fairly amusing, yet horrifying account in a Hotel News Now article of how food was stocked at a New York hotel. “Soup stored unwrapped in a large container sitting on the floor directly under the cooler’s condenser unit that was dripping water condensation into the soup.” One more. “Two different products were in the same tray: one was uncooked raw chicken breast stored at an angle so the blood was running into unwrapped Canadian bacon.” It was determined these errors were due to a lack of training. Do not let this happen to you.

Take inventory regularly-as much as daily if you are very busy. Why is this important? It allows you to track demand, possible theft, and cost containment. Cornell offers a tip here to use two people to inventory. One for counting and one for writing. Additionally, remember to keep your inventory secure. Lock all freezers, store rooms, etc. For those who operate with multiple shifts, consider issuing only what is needed for that particular shift. It is advisable to hold chefs and shift managers responsible for issuing the food products. This is important as somebody with authority is now held accountable. You can then reward and correct accordingly. This individual should be encouraged to keep a daily stock list in order to track pars. As the manager, you should ensure the list is being filled out properly. This will help when ordering food and tracking waste or theft. Be careful when stocking the front of the house too. If you put extra inventory out, it will get used. Conversely, if you do not then you will save. Naturally, if something runs out you can simply replenish.

When it comes down to choosing menu items and consequently the ingredients be diligent in the planning of this phase. First, create the daily and weekly menus. Make sure standardized recipes are created and followed. Ingredient choices are an excellent area for controlling food costs. Many times, it is more economical to cook from scratch. Additionally, the food quality goes up when items are freshly prepared.

Be careful about overproducing. Diligent tracking of food production can save money in the long run. The intelligent data you are recording today will help you next year. Have you noticed you have a slightly slower month in May but the big drop is in June (which is the month everybody remembers when ordering)? How much money can you save by ordering slightly less in May to account for the drop in demand? Conversely, can you run a promotion to increase interest during that month? For five days in the fall, Kimpton Hotels campaigned for groups to book events during the month of December. Those who took advantage of this offer would receive 50% off the catering bill. This promotion generated $80,000 for their properties. Another Kimpton property in Seattle promoted a new brown bag lunch menu by handing out “1600 free brown bag lunches over two days.” The response was overwhelming and resulted in a long term 15-20% increase in lunch covers. 1 Instead of accepting the drop in demand, be creative and figure out how to reverse that trend! Hold a contest and ask your staff for ideas. Offer the winner(s) 4 hours paid time off.

Another best practice offered by Cornell is to use the correct type and size of bowls, cups and plates. Although you might pay more for the unusually sized dishes, you will save money in the long run with the reduced, properly measured food portions. The guide offers a quantitative example on how this would work.

Correct portion = 4 oz:
• $.28 for veggies + $.04 for bowl = $.32

Incorrect portion, if only 1/2 ounce larger:
• $.315 for veggies + $.04 for bowl = $.355
• Savings: $.035 per portion

It is also important to complement the new plate ware with appropriate serving utensils. For example, the 4-oz bowl will work very nicely with the 4-oz spoon when scooping those vegetables.

Anticipate in advance what your guests will ask when ordering their meal and have prices already established. For example, how much does it cost to add cheese to a sandwich?

I have not forgotten the most crucial part of this initiative! The people. It is critical to involve your staff. Not only will you get more cooperation but they will help ensure your success. Begin by stating your goals for the department. i.e. reduce food costs by 5%. Then discuss your expectations for how these goals can be reached. Offer your ideas and ask for theirs. Write these ideas down somewhere everybody can see them. Do not forget to track progress and communicate it.

The big question is how to get everybody on board and enthusiastic. Incentives can run anywhere from publicly rewarding members for a job well done to sharing in the change in net income. I recently watched a video titled “Surprising Truths about What Motivates Us” by Daniel Pink. Grab a cup of coffee, sit down and watch the 10 minute video. Excellent information!

This Cornell study is an excellent training tool. Education is power and by honoring your staff and educating them you are increasing your retention and reducing your costs in that area as well. Why? You cared enough to take the time to teach them new skills. When the rubber hits the road, this study is recommending you track and record all activity in Food and Beverage. By doing this, you are creating your own business intelligence that can be referred to for years to come. For example, last December you had an enormous group reservation and you recorded and tracked all menus, purchases, sales, etc. In December 2014, another enormous group wants to have a similar activity at your hotel. You can refer back to the intelligence you created from the prior event for pricing, menu items, what worked and what did not work. Did you lose money in alcohol sales because you did not charge enough? This time, it can be different. Were there some glitches in the last event? Now, your memory is refreshed on those glitches and you can plan for them in advance this time and really wow the group with your incredible attention to detail. How will that reflect on a TripAdvisor score?


About (Amy Dunn) Bair

Amy Bair is a Productivity Improvement Specialist focused on the hospitality and senior living industries. Her company Business Process Excellence (BPe) partners with organizations to improve guest service, increase revenue and decrease expenses by examining their daily operations and making recommendations for improvement that will increase efficiency, reduce waste and decrease staff turnover. Her experience ranges from

View Complete Profile