Tags Posts tagged with "Food Cost"

Food Cost

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food truck cogs

In the mobile food industry, the term “COGS” stands for cost of goods sold. The term describes the amount of money a food truck spends on supplies and food ingredients – such as beverages, seasonings, meats, fruits and vegetables – used to prepare the menu items they sell. Your COGS should ideally account for no more than 35 percent of your sales. By following the following steps you will be able to cut your expenses and waste which in turn will increase your profits.

Categorize your food expenses. 

It’s easier to control your COGS when you keep track of how much is spent on each group. For instance, if you allow 11 percent for meats, 10 percent for produce, 6 percent for dairy, 5 percent for baked goods and 3 percent for beverages, you’ll stay within the suggested COGS of 35 percent. Break down your food items into groups and set guidelines that govern how much to spend in each category.

Comparison shop to find better pricing. 

Though most food truck owners prefer to maintain solid, ongoing relationships with food suppliers and distributors, it’s a good policy to stay informed of cost-effective alternatives. Continuously be on the lookout for more economical suppliers and order from those who offer the best deals. Ensure that bargain pricing does not sacrifice quality products.

Measure all ingredients in food-preparation procedures.

Food truck owners are at risk of losing considerable amounts of profit when food-prep staff members don’t properly measure ingredients. For instance, if you or your staff continually uses a full cup of butter for a recipe that only requires 3/4 of a cup, your cost of butter will quickly rise by 25 percent. Enforce strict measurement guidelines for your recipes.

Adjust your menu or prices accordingly when using seasonal ingredients. 

Certain fruits and vegetables increase and decrease in price according to season. Limit the sales of seasonal items to periods when they are plentiful and acquired at minimal price. If you continue to sell such goods during off-season periods, adjust your menu pricing to offset the extra cost.

Design specials that reduce waste and use slow-moving stock. 

Meal specials are typically offered for a limited time at a bargain price to entice customers to buy them. Make use of soon-to-expire foods by including them in specials. For instance, if your sliced breads are about to become stale and your cheese is about to expire, create a grilled-cheese special.

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If you believe your food truck’s portion sizes are too large or that your books tell you that you need to lower your food costs, reducing your protein serving portions can help cut down on costs. The key is remembering that in cutting portion sizes is that you do strategically so as not to look like your “being stingy” with your food truck customers.

food cost cutting

 

Cutting even just an ounce off a portion can save dollars and your customers will hardly notice. At 11 or 12 ounces is it really that big of a difference? Sure this may seem like “nickel and diming”, but ultimately it adds up.

Bumping up the size of your sides can be used to offset the visual of reduced protein portions. Also creative presentation in general can “bulk up” a dish and create a visual appeal.

Try carefully slicing your perfectly prepared meats and serving them over unique vegetables and grains with interesting garnishes, rather than just slapping a hunk of meat into your serving container. Many consumers are eating vegan and vegetarian as of late so meatless dishes using protein-rich grains like quinoa, for example, can also help cut down on meat costs.

Changing container sizes can also do the trick. If you’re used to using a 9″x9″ container, switch to an 8″x8″. A container actually makes the protein and garnish look bigger than it is, and for many customers, that’s more important in terms of creating a value proposition. You can get away with smaller portions if you can back up your brand with higher-quality ingredients, creative cooking and presentation, and a chef-driven approach. By using this strategy you are able to use the less is more philosophy.

You can also build up up your appetizer menu to offer more sharable “small plates” that have smaller portions at prices not horribly far off from your entrees, so as a result, they will provide you with higher profit margins. These dishes can also add up quick when you have groups of four or larger showing up to your food truck’s service window which in turn will lead to higher check averages.

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Cutting your food truck’s food cost can be a tricky proposition. While food costs are always on the minds of food truck owners, most think more about the quality of the food they are serving their adoring customers.

Cut Your Food Truck's Food Cost Without Sacrificing Quality

Since its birth, the food truck industry continues to grow, but at the same time food truck operators cannot risk alienating their existing customers by skimping on their food quality.

The menu of a food truck is the most powerful tool to manage this tedious balancing act. What is sold from your truck is what drives your revenue and costs. Your food truck brand is almost entirely based around your menu. If you don’t have cost-effective, highly profitable signature items on that menu, it needs to be updated.

The key is not to do any price cutting that your customers can see, and never use the words, “cut or reduce” when explaining the changes with your staff. Rather, it should be, “improve, revise, enhance”. It’s a matter of perspective, but it’s hugely important in terms of protecting your brand.

Here are 10 ways to reduce your food truck’s food costs, not quality:

  • Breakdown and analyze costs on every one of your food truck’s menu and be flexible enough to react. It’s one thing to know your costs, but if you’re locked into your menu it’s useless information.
  • If you don’t already have them, create new high-appeal/low-cost signature items.
  • Avoid coupons and discounts. Instead sell combo meals. Mix and match items in a way that makes sense and gives customers great value.
  • Build new revenue streams, such as catering or late-night dining. Generate real growth in your food truck business; don’t just get artificial growth through inflated menu pricing.
  • If at all possible, buy in bulk. While it may be difficult to find proper storage of the extra food items, the food cost savings in the long run could equate to great savings.
  • Consolidate suppliers and negotiate. Instead of spending $150 with each of four distributors, spend $600 with one and increase your leverage on price.
  • Buy seasonal. This is your most cost-effective menu approach for controlling your food truck’s food costs.
  • Try alternative proteins. Value-added beef cuts off the round or shoulder, like hangar and flatiron steaks, can save you as much as 20 to 30 percent.
  • Always use weights and measures to ensure portion control.
  • Talk trash. Let your food truck staff know that you’re watching what gets dumped and follow up by using clear garbage bags, weighing trash and/or restricting dumpster access at your commissary.

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If you are running a food truck business, you understand that the most important costs under your control are food (including beverages) and labor costs. Together these figures are known in the industry as a food truck’s prime costs. Being able to compare these costs ( in a percentage format) against typical scenarios of other foodservice businesses is helpful in the management of your mobile food business.

cutting food truck costs

Costs Vary Widely By Type of Food Truck

Both food and labor costs vary with the type of food service operation. As a rule, food trucks that sell higher quality food products will have higher food and labor cost percentages than the typical taco truck. The product sales mix, quality of food and service, pricing and amount of hours the truck operates will impact your food and labor cost percentages. Furthermore, state minimum wage differentials affect the labor cost percentage. The extent of beverages sales as part of your truck’s food mix also can have a considerable impact on total food cost percentages.

How Food and Labor Costs are Calculated

Food and labor costs are calculated as a percentage of the total volume of revenue (sales). If a food truck does $5,000 per week and the total cost of food and beverages is $1,750 for that week, then the food cost is considered 35 percent. If, at the same food truck, labor (including payroll taxes and benefits) equal $1,250 for the week, then the labor cost is 25 percent. Total prime costs are 60 percent in this example.

prime cost calculation

What Are the Ranges?

Certain hot dog or taco trucks can achieve labor cost as low as 20 percent, while food trucks with menu items with intensive preparation time are more likely to see labor in the 30 percent to 35 percent range. Food costs (including beverages) for the entire food service industry (including table service brick and mortar restaurants) run typically from the 25 percent to 38 percent range, depending upon the service style of establishment and the mix of sales.

Look at Prime Costs to Determine Success

In order to make money in the food truck business, prime costs should generally be in the 60 percent to 65 percent range. How that breaks down between food and labor is less important than achieving a prime cost maximum that produces a satisfactory profit. So if one of the prime costs is in the higher range, the other prime cost must be in the lower range to achieve profitability. Remember it is the combination of food and labor that creates your food truck’s bottom line.

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Portion control is an essential element of food cost and quality control. It reduces food waste, ensures a consistent and quality product, expedites food preparation and service, and has a big impact on a food truck’s food cost.

Any extra food added to the customer’s order is money coming out of a mobile food vendor’s bottom line.

Portion Control Food Cost

 

While an extra ounce of soup or a handful of cheese may seem insignificant, these amounts added up per dish over an extended period of time are costing you thousands per year in additional food cost. Excessive portions also contribute to food waste, both in terms of orders that are thrown out half eaten and over-ordering to stock your truck day to day; that is your profit going into the garbage every day.

The best way to get a handle on food cost is to keep an open dialogue with all of your food truck staff, assess if and where waste is occurring, and have a mechanism in place to ensure that each portion is consistent in every dish that leaves your food truck’s kitchen.

Assessment:

When you create your menu, you should also allocate portions for each menu item and price them accordingly. The general rule of thumb is that each dish on the menu should cost 30 – 40% of the selling price in order to cover expenses and make a profit. Lack of consistent portions makes it impossible to assess the true cost per item. Talk with the staff members who clean up the garbage containers you provide around your truck. They can provide information about what is being thrown away. If certain dishes are constantly being thrown away half-eaten perhaps you need to rethink that particular dish and alter it or eliminate it from the menu altogether, or adjust your portion sizes.

Prevention:

A successful food truck requires a team effort, and it is important that all of your staff are on the same page and have the necessary equipment to ensure product quality.

  • Provide pictures of each plated item illustrating the correct portion sizes and plating.
  • Provide a chart that lists the correct portion of each item in all food preparation areas (truck and prep kitchen).
  • Pre-portion condiments, sides, and sauces.
  • Order pre-portioned stock where practical and make sure that all bulk items are portioned out and appropriately labeled and stored as soon as possible.
  • Have and an adequate amount of the correct sized storage containers, ladles, and scoops for each menu item as well as a variety of measuring cups, spoons, and scales.

These measures not only help to ensure less waste, they also speed food preparation and service, especially at your truck’s busiest times. This makes certain that your customers get what they expect every time they dine: consistently good-looking, tasty food, in fair portions, at a reasonable price.

Love of good food and the ability to share it with others is the main reason you opened your food truck in the first place; proper food portioning practices will help to ensure that it stays open.

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With the mobile food industry continuing to grow we are constantly on the look out to assist both the owner operators as well as the customers of these rolling bistros. From time to time we run polls to gain industry information that truck owners can use to help better their customer service and the options that they provide to the communities that they serve. Other times our polls are set to find out general information “we” want to know.

Chef Produce Shopping

In this poll we are interested to find out where most food truck owners purchase the ingredients for the menu items they sell from their trucks. There are so many options out there and each owner needs to evaluate the risk versus reward of each food supplier.

Does the national chain give you the ingredients you want year round but how good is their quality compared to your local farmer’s market? Does the membership ship store give you the best prices but to get those prices you have to buy such large amounts, you have to rent space at your commissary to store them until they can all be used?

Please Note: This poll allows you to vote for multiple choices if you don’t one stop shop.

Where Do You Purchase Your Food Truck Ingredients?

View Results

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If you shop in a style of shop we have not included, please feel free to let us know in the comment section below.

Let us know where you make your purchases and sure to share this post with all of the other trucks in your area, so we can share the findings with our readers.

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Monthly food costs are like a pulse indicating the health of your food truck and they shouldn’t fluctuate more than 1 percent.

Several culprits for rising food costs included poor portion control, high-cost menu items and poor production planning. It is suggested that food truck owners review at least one of these item a day. Management should also “look at what goes into the garbage” and check in with staff to adjust how much they are serving.

food costs

Poor production planning drives up costs for vendors who run out of product or produce too much. It is recommended pruning menus and factoring in seasons and the weather’s influence on customer tastes. Having too many menu items can slow down service, increases food costs and complicate your mobile food business. You can’t do all things for all people all the time.

Specials are a great way to test new menu items and also offer customers items that are no longer on the menu. Food trucks must also know what their signature items are and play to their strengths.

Accounting errors, theft of product, theft of cash and buying the wrong product for the intended use are also major contributors to food-cost fluctuations.

Be sure to use the smallest countable unit for your inventories. Consistency is very important, so monitoring inventory (if you actually have one) and costs with monthly reports and watching for theft of products, particularly for higher-cost items like meat. By doing inventory, you take the temptation away from people. This is stuff not only they can use, but sell to their neighbor.

Some food truck operators struggle with theft because they don’t want to accuse their employees or believe they are capable of theft. Between product and cash, 3 to 4 percent of your gross sales can go out the back door to employee theft. This doesn’t even include cheating on the time cards, just product and cash.

Most well-run food trucks have profits that are only about 15 to 20 percent of sales. You can have one fifth of your entire bottom line (more if your profits are smaller) wiped out if you don’t get rid of the theft.

Rising food costs and other clues can be indicators that theft is a problem. Overages can be the kiss of death. Ten dollars over is far worse than being short because employees could be overcharging customers and pocketing the extra money later.

A simple to step recommended to mobile food vendors is to limit cash register access to one employee each shift and never allow that employee access to the final receipt of all transactions.

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U.S. beef prices jumped to a 10-year high last week as the arrival of warm, dry weather over much of the country could have food truck chefs looking at alternative menu solutions to keep their menu prices in check.

meatless monday food truck

The wholesale price choice beef, or cutout, on Wednesday jumped $3.10 to $199.49 per 100 lbs, the highest since $200.65 on Oct 20, 2003, according to U.S. Department of Agriculture data.

Consumers already are paying record high prices for beef and the latest surge in the wholesale market may push supermarket prices even higher. At supermarkets the average beef price in March was a record $5.30 per lb, eclipsing the previous record of $5.15 set in November, according to USDA’s Economic Research Service.

Those higher beef costs and reduced consumer discretionary spending may cause some food truck owners to switch from beef to other competitively priced meats or vegetables to fill the void.

We found in a recent poll that 66% of food truck owners have been forced to raise their entree prices (in the past year) due to rises in food costs they’ve seen at retail groceries.

Food Truck Menu Price Increases

 

Many of those who have not raised prices, are worried that if their food costs continue to increase that they will have to buckle and increase their menu items. Another concern is that they may begin using ingredients that do not cost as much as those that have increased in price the most which may require the removal of some of their most popular menu items.

Meatless Monday would be one way food truck owners can shift their food costs at least once a week. If you have interest in learning more or joining the movement? Signing up is fast and easy! Follow them on Twitter.

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A food truck owner has to balance their menu pricing based on a number of factors. Fuel and food are just a couple of these factors however they tend to be the most volatile and over the past year, both have increased dramatically. These changes in their costs affect their bottom line and the more they pay for these items, the smaller the percentage of their menu prices get distributed as profit.

price increase

 

The problem this causes is that these mobile vendors have to re-look at how much they are charging for items that increase in price on the back-end  and how to balance that with what they charge their customers without looking like they are gouging the life-blood of their mobile food businesses.

Because of this juggling requirement in this week’s poll we want to know if food truck owners have had to increase their entree prices based on the increases in fuel and wholesale food costs.

So let us know. Once we have the results, we will be sure to post them and share the data we come up with.

Have You Increased Your Entree Pricing in the Last Year?

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Outside the initial investment for your food truck, food cost is typically the highest reoccurring expense involved in the running of your mobile business. In order to keep food cost percentage at a manageable rate, we have come up with a list of tips you can follow:

 

Keep an eye on your profits and losses: When you know what profits you are bringing in as well as the fixed expenses affecting your food truck, you can better evaluate your options and see where you can cut costs.

Conduct inventory consistently: Regular and thorough inventory counts will help you stay in control of your usage and the costs associated. This is especially important for high-cost items.

Price menu items properly: When you price your menu items reasonably, your customers will continue to pay you and you will make a profit on your products. (Keep an eye out on a future article on this topic)

Portion food correctly: Be sure to serve food in portions that doesn’t become wasted.  If you keep an eye on your trash receptacle, see if your customers are throwing away food they are too full to eat. If there tends to be a lot of food being discarded, you may be over-portioning your meals.

Rethink the garnish: Garnishes often consist of fancy fruits or layers of fresh lettuce which add visual appeal but are rarely eaten. Use less expensive food items or remove garnishes entirely to save on food costs.

Keep a record of all food waste: Use a waste chart to write down any foods that are made incorrectly, thrown away or spilled. Failing to record this “usage” will skew inventory reports and throw off your food cost percentage.

Be consistent with food purchases: Consistency with food purchases comes with time but can help you to anticipate expenses from week to week and keep your food costs steady.

Build a rapport with your suppliers: Once you are in business a while, your suppliers will get to know your regular food orders and you will become familiar with the cost of your purchased goods. Be sure you stay in communication with your suppliers in case of any problems with food quality or any issues with food prices.

We hope you found this article helpful, and if you have any additional suggestion, please feel free to add them in the comment section below.

 

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