FSI

Managing COGS

(Cost Of Goods Sold)

Can you reduce COGS and improve the guest experience? Yes!

 

   Cost of goods sold (COGS) is the direct costs attributable to the production of the foods sold in a restaurant. This amount includes the cost of the raw materials (food and other disposable costs) used in creating the menu item along with the direct labor costs used to produce the good. Excluded from COGS are indirect expenses such as distribution costs and sales force costs.

 

The Following are our TOP THREE TIPS that you can use to lower your food and disposables costs and ensure a consistent guest experience. 

1. Consolidate Distributors:

  Many factors go into how a distributor develops his cost-plus margin above landed cost. One important factor is your drop size. Distributors closely monitor their Gross Profit per Drop. Consolidating distributors—and especially deliveries—will greatly enhance your ability to get lower margins. This also can give you continuity of product most of the time and secure brand equity and guest experience.

2. Contract Direct with Manufacturers:

   Many operators are not aware that a tremendous impact can be made on their COGS (Cost of Goods) if they work with manufacturers to get contract pricing for key items. This is BEFORE the distributor puts its margin on the product, so in essence, you are controlling landed cost. If you are using a GPO today, the savings by contracting directly with manufacturers will  be significant.

3. You’re Entitled to Restitution:

   Contracting directly with manufacturers reduces your COGS, but you must ensure the contract price is adhered to by holding people accountable. There is so much pricing and product complexity in the industry that mistakes are made. If you have a signed manufacturer agreement and a signed distribution agreement and the price isn’t adhered to, you are entitled to restitution on overcharges. Visibility to transactional data will give you the ability to manage the process. 

We hope these tips are helpful… they can save thousands!

4 Ways to Increase Guest Traffic through Guest Experience and Brand Equity


#1 Restaurants Groups are closing units due to lack of traffic. What is driving this?
Your guest traffic has a lot to do with your guest experience and brand equity. How so? Your guest experience, and ultimately, your brand equity, can be diluted by receiving and serving non-spec products at your restaurants. Data shows an 8.5-22% error on distributor invoices. And our experience tells us it is also costing you a lot of money.


#2 You have a multi-unit brand for a reason: brand recognition.
If you are a multi-unit restaurant, your customers expect consistency across your restaurant units and across visits at the same restaurant. Different turkey meat in the turkey sandwich? Your customers will likely be confused and disappointed. Getting different products shipped to you affects your traffic by lack of consistency for your brand and often effects the guest experience. That is why it is so important to actively track what comes in your back door. Can you see that you are getting the correct product from their correct vendor and at the right price? Invoices alone do not tell you that. Also, when you pay more than you should for your contracted product,
 it only detracts from what you are doing by having to cut costs, quality of product or service to make up for those losses.


#3 It’s time to get the details of how your supply chain affects your guest experience, brand equity and guest traffic.Get the details; understand what effect the wrong product, wrong vendor or wrong price is having on your brand and on your guest’s experience. Yes, you need to consistently get recipes, temperatures, service, etc., right, but when you are getting the wrong product from the wrong vendor or continually having to account for products costing you more because of errors, it is affecting your traffic and your ability to be profitable.


#4 Don’t be the next restaurant group to have to close stores.
Get the information you need to be confident you are getting the correct product from the correct vendor at the correct price so you be secure knowing that no money is falling through the cracks and to keep your brand intact with the consistency
 and quality your guests have come to expect from your brand.

Don't Let Produce Be The Black Hole

Produce is one of the most difficult yet most important categories to manage. There are a few produce purchasing groups in the marketplace who contract with produce suppliers; these companies add 3-6.5% to your produce costs for this service. And yet, you can get direct contracts with produce distributors on the produce items you buy, and avoid this fee.

If you’re getting pricing on a daily basis – not weekly, monthly quarterly or annually – it’s costing you a lot of money – 3-7% more than you should pay.

Consult our Produce First division for assistance in managing your produce category.

And, stay tuned each week for our produce report that provides highlights of what’s going on in the produce markets so you can make informed purchasing decisions.

Click for this week’s report... 

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