Without additional data points, you cannot compare your progress to see if your variance is maintaining or getting better. It’s important to note that your food cost variance should be tracked on a regular basis. Related post: Stop Your Food From Vanishing: Keep a Food Waste Log How to Control Your Food Cost Variance This will allow you to get a standard cost and quantity without having to sort through stacks of invoices. Orderly customers have access to our Restaurant Food Index, which lists price trends for all purchases. (we’ve blurred out supplier names in this example) Standard costs will have to be pulled from your invoice data, whether that’s in an Excel Sheet, your POS, or a restaurant management solution like Orderly. When calculating standard quantity, it’s important to factor in additional quantities for breakage. Standard Quantity is an estimate of the quantity you expect to buy.Gathering historical price data allows you to smooth out any fluctuations in the market price for that ingredient. Standard Price is the average price of a particular ingredient over a chosen period of time.Standard cost relies on historical data that is gathered over a chosen period of time. Actual Quantity is the current amount of the ingredient you’re buying.This will vary based on market trends and seasonality. Actual Price is what you currently pay for your chosen ingredient.Food Cost Variance = (Actual price X Actual quantity) – (Standard Price X Standard quantity)Īs you can see, you’ll take your actual cost minus standard cost to get a variance.The equation for calculating a restaurant’s food cost variance is: It also allows you to calculate a food cost percentage, create sales forecasts, and get a thorough understanding of your supplier and inventory efforts.Īn efficient and profitable restaurant will keep their food cost variance low and can thorough explain why their numbers may deviate from a standard cost. It helps keep your ingredient pricing in check. Measuring your food cost variance is an essential task for all restaurants. So why even measure your variance? What does it accomplish? Why Should You Measure Food Cost Variance? Likewise, if your variance is positive, it means your actual food costs are actually lower than expected. A negative variance can also cause issues with your ability to forecast profits accurately. A significantly negative food cost variance may mean that your purchasing process has underlying issues that need to be resolved. If your food cost variance is negative, that means your actual costs are higher than expected. Can variance be negative? Yes, food cost variance can be both negative and positive. When calculating your variance, which we show you how to do below. Related post: 35 Reasons Why the Restaurant Failure Rate is So High Can Variance be Negative? This difference in actual food cost versus your expected food cost (also called standard food cost), is your food cost variance. So you start reviewing invoices and you notice that the pricing has changed significantly from what you would typically expect. (Restaurant groups and franchises typically have a process laid out for food costing.) If you’re like many of the restaurants we work with here at Orderly, you probably have invoices stacked high on your desk.Īnd if you’re like most of them, you probably only check food cost once a week or once a month. So what is food cost variance and how can you keep it under control? Below we’ve outlined what food cost variance (as called cost variance) is and a few ways you can keep it under control. But unfortunately, that’s not how the supplier industry works. In an ideal world, your food cost would be exactly what you expect every single time. Your supplier didn’t mention any major changes in price, so why should you have to worry? You’re getting a good deal after all, right?īut prices are seasonal, and will often change. How often do you check the prices of your ingredients?Įvery delivery? Once a week? Once a month? You’re expecting your food cost to be around a very specific number.
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