Mark Kelnhofer has spent 20+ years in managerial cost accounting and an additional seven years in restaurant cost management refining his methods. Now as President and CEO of Return on Ingredients, Mark has successfully combined these two methodologies to create an air tight strategy for increasing profits and mitigating loss.
Let’s talk margins: what has changed and why?
“Commodity costs are shifting up and down constantly. In a lot of cases, labor costs are higher and we’re getting hit on the overhead side because electricity costs and other utilities. Businesses today, in order to survive, have to respond quicker than ever. I used to talk about how restaurants usually go through a quarterly menu change for seasonality but I think those days are gone. I think what you’ll see now is that we actually have to engineer the menu constantly because that’s how quick costs are changing.“
Understanding total costs: why should a restaurateur consider labor costs?
“You cannot make methodical decisions unless you actually know your true cost to build the product . . .
. . . Think about the prep time and the staff in the back making the the food. They’re all hourly personnel and so that is not a fixed cost. It’s a variable cost. So the higher the volume the higher the cost.“
What are clues that I might have a problem with my return on ingredients?
“Look at inventory level. Whenever you see Gordon Ramsay’s Kitchen Nightmares, one of the things he always does is walk in the walking cooler and then he yells at staff and throw foods away fro being next to each other. What he’s doing is looking at planning, volume of products, and inventory levels visually. When we see increased inventory levels, that tell us is a couple of things. They have a higher chance of waste, they’re typically over buying or even over producing, because of the fear of running out of food. Nobody wants to run out of food. So they they just order more and ideally, we should only have the food that we need because this is a perishable product.“