In non-commercial Food Services operations, most Food Services Directors and Managers are responsible for an operating budget. Even if the purpose of the on-site employee cafe or coffee bar is to serve as a benefit or perk to employees, profitability of the operation is still measured, and the finance department wants to know if the operation is in the red, at break even, or in the black.
There are two ways to improve profitability: increase revenue or reduce operating costs. This article explores the reduction of food service operating costs through the use of tighter cost control in Food Services’ purchasing and receiving activities.
As part of inventory management, food and beverage items should be tracked in an inventory file or database, making it possible to monitor purchasing expenditures and to make informed purchasing decisions. Whether ordering inventory by purchase order or non-purchase order, it is vital to enter the received items into inventory accurately to maintain the integrity of on hand inventory count and cost. To ensure that items arrived exactly how they were ordered, verify the quantity and cost of all items being received against the invoice.
Most cafeterias and coffee bars have many inventory items, such as canned soda, bags of chips, and bottled water, which are always in stock and are then re-ordered when inventory levels reach a defined level. When receiving these items that already exist in inventory, compare the current cost to the previous cost. If the actual cost of the item is different that the cost at which you ordered or previously received it, then enter the new cost into the inventory system.
If the cost has increased, you have an informed decision to make; either absorb the price increase by continuing to sell the item at the current price, and thus accept a reduced profit margin on the item, or maintain your current profit margin, and offset the cost increase with a price increase. For example, if bottled water has been received in the past at a unit cost of $1.00 and is sold at a price of $1.35, then the profit margin is 25.93%. Should the unit cost increase to $1.10, you may decide to continue selling each bottle of water at the $1.35 price at a lower margin of 18.52%, or increase the price to $1.48 offset the cost increase. Either way, you have made an informed decision weighing profitability against what you believe customers are willing to pay for a particulate item.
Daily, monthly, and year to date receiving reports will show you all the items you have received on a selected day or month or during a date range. Use additional reports, such as end of day, stock status, inventory analysis, and sales history reports, to view sales and profitability performance by item, meal service, vendor, department, or user sort. These views give you the ability to manage profitability by department and thus offset low margin items with other higher margin items within the same department or category.
To learn more about what inventory control software can do for your cafe or coffee bar visit ARBA Retail Systems at https://arbapro.com/corporate-cafeteria or https://arbapro.com/products/hospital-food-services.
Author: Kathy de la Torre, ARBA Retail Systems