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Posts Tagged ‘Food Costs’

It is almost impossible to compare a restaurant’s operations with industry averages.  Organizations like the CRFA aggregate the smallest mom-and-pop with the largest chains to get their averages.  Not many restaurants are “average”, anyway.  Just about all industry statistics are based on surveys, not actual operating results.  Even though such surveys are anonymous, who wants to put down that their cost of sales is 40% or more?  So, the results are often skewed.

There is another way of compiling restaurant operating results.

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Part I in this series focused on fraud and theft up to the point your inventory becomes available for sale.  As we found out, lots can go wrong during the purchasing, receiving and inventory safeguarding processes.  These frauds and thefts involved uncooked food or unpoured alcohol.  Now, let’s uncork a bottle and turn up the heat.

Today, I want to discuss some of the major thefts that happen during “normal” operations.  These thefts involve cooked food or poured alcohol.  These are the ones that take place “right under your nose”.  Today’s post examines food theft.

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IT NEVER HAD A CHANCE TO BE SOLD

Today’s post covers fraud and theft of stock items before they are sold or used in your establishment.  These types of fraud relate to purchasing, receiving and inventory stock keeping.  Subsequent posts will cover additional types of fraud and theft.  These posts discuss one of the most important issues facing restaurateurs.

Any theft of product for sale can result in significant sales and income tax liabilities.  So significant, in fact, that it could put your restaurant or bar out of business.  My restaurant tax blog, Canadian Restaurant Tax Advisor, has a wealth of information about restaurant tax audits and their dire implications for you.

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The majority of the cost of most entrées comes from the “protein” component – meat or fish.  Chefs try to maintain a consistent portion size, usually based on weight.  Despite consistent portions, the cost will fluctuate depending on the raw purchase cost and the butchering yield.  Even if you don’t have recipes fully documented and costed for every menu item, as a bare minimum, you should know the portion cost of the protein component of every plate.  Also, you need to track the number of portions in inventory at all times.  This will allow you to identify major cost problems that may be occurring.

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Rest assured, today’s post is not about tax evasion.  But, it does have a very important implications.  If your food recipes use any alcohol, it’s important to account for it properly.

Proper Accounting

Your food cost of sales should include all of the costs that are incurred in preparing the food menu items.  Sometimes, restaurants forget to include the costs of liquor, wine and beer that are used in food dishes.  Food costs are understated and alcohol costs are overstated.  No big deal to the bottom-line, but it does affect the margins for each category, which are considered in your decision-making.

But there is a far more important reason.

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