President and CEO of Return On Ingredients, author, and educator Mark Kelnhofer is back making his second appearance on Give an Ovation! His first episode was that good. This time he and Zack talk innovative ways of lowering expenses on ingredients, labor and more. Here are some brief takeaways:
1) Drive Profitability Through Analysis
Lowering costs is the best way to respond to the lower revenues caused by COVID-19. While you can raise prices, you can only go so far in a time of high unemployment rates and little disposable income. Mark suggests looking at your income statement (specifically the variable costs) to find areas to be more efficient.
2) Recipe Costing
The first step to effective recipe costing is doing it. You need to know and document how much each item costs you, including ingredients, labor, and overhead. From there, some try adjusting ingredients, proportion size, and finding contracted pricing.
3) Reduce Labor Costs Per Menu Item
Out of all the aspects of a dish, the labor involved is probably the most expensive. Mark recommends looking for vendors who could potentially make certain products for you, or seeing how technology and automation could reduce costs in that department.
4) Start With Quality And Work Backwards
“If we have an opportunity to cut costs, we should do it. As long as it doesn’t affect quality or consistency. That’s the key.” – Mark Kelnhofer.
5) Price Costing Isn’t A One-Time Thing
Volumes can shift up or down significantly at any time, and we need to adjust our costs accordingly every time. It’s not something that happens very often in the industry, but it should be!