COST ANALYSIS

What is cost analysis? For businesses searching for answers to questions such as how restaurant cost analysis is done, how restaurant food cost is calculated, how recipe cost is prepared, how portion cost is found, how to understand whether a restaurant is profitable, why menu cost analysis is necessary and how restaurant expenses are analyzed, cost analysis is one of the most important professional studies that reveals the real profit of a restaurant.

 

A full restaurant does not necessarily mean a profitable restaurant. Tables may be full, service may be busy and revenue may look high; however, if product cost, staff expense, rent load, energy cost, waste rate, stock loss, wrong portioning, incorrect pricing and uncontrolled purchasing are not analyzed correctly, the business may lose money without noticing it. Cost analysis enters exactly at this point: it shows reality, not assumptions.

 

Under the consulting of Chef Ahmet Özdemir, restaurant cost analysis, within our service areas, is handled as an applicable, measurable and result-oriented study for investors who want to open a restaurant in Turkey and in different countries around the world, businesses that want to strengthen their existing restaurant, brands that want to renew their menu, restaurants with declining profitability and food and beverage businesses that want to grow. The aim is not only to list expenses, but to clearly show which product makes money, which product causes loss, which expense tires the business and where intervention is needed.

 

WHY IS RESTAURANT COST ANALYSIS NECESSARY?

In restaurant businesses, correct decisions cannot be made without cost analysis. A restaurant's income picture is not only the money entering the cash register. Real profit appears when product cost, recipe cost, portion cost, waste, stock, staff, rent, energy, maintenance, service expenses, general expenses and sales performance are read together.

 

Restaurants without cost analysis often experience the following problems:

 

Products seem to sell well but do not leave profit.

Recipe costs are unknown.

Portion weights are not controlled.

Menu prices are determined by guesswork.

Purchasing price differences are not noticed.

Money is lost in storage.

Waste rates remain invisible.

Stock increases and cash is tied up.

Staff efficiency is not measured.

The effect of general expenses on profit is not calculated.

The restaurant works intensely but profit remains weak.

 

Professional cost analysis shows the truth to the restaurant owner and investor. Which product leaves profit, which product creates crowding on the menu, which expense grows unnecessarily and at which operational point money is being lost are revealed with numbers.

 

COST ANALYSIS AND COST CONTROL ARE NOT THE SAME

 

Cost analysis measures the current condition of the restaurant. Cost control manages the system according to the results of this analysis. In other words, cost analysis is the diagnosis; cost control is the preventive action. First, the real costs of the business are seen, then a system is established to manage those costs.

 

Restaurant cost analysis answers the following questions:

 

Is the restaurant really profitable?

Which products make money for the business?

Which products cause loss?

Which products are priced incorrectly?

Which products have uncontrolled portions?

Which recipes have high cost?

Which supply products have price differences?

Where does waste occur?

Which products tie up cash in storage?

Is staff cost correct according to sales?

What is the share of general expenses within total expenses?

 

Without answering these questions, every price change, menu adjustment or purchasing decision remains incomplete.

 

HOW IS RESTAURANT COST ANALYSIS DONE?

Restaurant cost analysis is not done by guesswork. It is done through real documents, real sales, real purchasing prices, real weights, real stock and real recipes. Restaurant cost cannot be analyzed only from a desk. The kitchen must be seen, storage must be inspected, recipes must be checked, the menu must be analyzed, purchasing files must be read, sales reports must be evaluated and service flow must be observed.

 

In professional restaurant cost analysis, the following headings are examined together:

 

Sales reports

Product-based sales quantities

Food menu structure

Recipe costs

Portion weights

Purchasing prices

Supplier price differences

Storage stocks

Waste rates

Production losses

Cooking losses

Service losses

Staff expenses

Rent and fixed expenses

Energy expenses

Maintenance and repair expenses

Packaging and service side expenses

General expense ratios

 

If these data are not read together, cost analysis remains incomplete. For example, looking only at the purchase price of a product is not enough. After a product is purchased, it may lose weight during cleaning, trimming, cooking, portioning and service. The real cost is not the purchase price; it is the cost of the net portion served to the guest.

 

HOW IS RECIPE COST CALCULATED?

The foundation of restaurant cost analysis is recipe cost established through recipe standardization. A product whose recipe cost is unknown cannot be priced correctly. If the same product is served every day with different weights, different sauce amounts, different garnishes or different portions, cost cannot be controlled.

 

A recipe cost calculation should include the following information:

 

Product name

Ingredients used

Gross weight

Net weight

Preparation loss

Cooking loss

Portion weight

Main product cost

Sauce cost

Garnish cost

Oil, spice and auxiliary product cost

Presentation cost

Packaging cost

Total recipe cost

Selling price

Contribution margin

Target cost percentage

 

The purchase quantity, yield and portion calculation approach in sources such as the USDA Food Buying Guide is also important in restaurant cost analysis. The quantity purchased and the net quantity served to the guest on the plate are not the same. If this difference is not calculated, the restaurant works with the wrong cost.

 

PORTION COST AND WEIGHT CONTROL

Portion cost is one of the most critical data points that determines the real profitability of a restaurant. Using 20 grams more product on a plate may seem small; however, when this mistake is repeated in dozens or hundreds of portions every day, it creates serious loss at the end of the month.

 

The following questions should be asked in portion cost analysis:

 

Is the portion weight standard?

Does the plate come out the same every day?

Is the main product being overused?

Is garnish cost under control?

Is sauce measurement standard?

Is cooking loss calculated?

Does the staff know the portion standard?

Does extra product loss occur during service?

 

For investors who say "I want to open a steak restaurant," meat weight, cooking loss, aging process, waste rate and portion standard are at the center of cost analysis. For those who want to open a seafood restaurant, daily supply, trimming loss, cleaning waste, cold chain and appetizer production costs must be calculated very carefully. For those who want to open a cafe or coffee shop, beverage measurements, milk, coffee, syrups, desserts, display products and takeaway service costs must be monitored separately.

 

MENU COST ANALYSIS

Menu cost analysis shows the effect of every product on the food menu on restaurant profitability. Looking only at the selling price of menu items is not enough. The recipe cost, contribution margin, sales quantity, preparation time, service speed, stock load, waste risk and guest demand of each product must be analyzed together.

 

Menu cost analysis answers the following questions:

 

Which products leave high profit?

Which products sell a lot but provide low profit?

Which products sell less but have high profit potential?

Which products create crowding on the menu?

Which products unnecessarily tire the kitchen?

Which products create supply risk?

Which products should have their prices updated?

Which products should have their recipes corrected?

Which products should be removed from the menu?

 

Cornell University's menu design and menu engineering approach also emphasizes that the menu is not only a product presentation tool, but also a revenue and profitability management tool. In restaurant cost analysis, the menu should also be read as the profit map of the business.

 

SALES MIX AND CONTRIBUTION MARGIN ANALYSIS

Sales mix analysis shows how much the restaurant sells from each product. However, high sales do not always mean high profit. Therefore, sales mix must be evaluated together with contribution margin analysis.

 

Contribution margin can be understood with the following basic logic:

 

Selling price - product cost = contribution margin

 

However, in professional analysis, this calculation alone is not enough. Preparation time, staff labor, energy use, service speed, stock load, waste rate and the strategic value of the product on the menu must also be considered.

 

Sales mix and contribution margin analysis help make the following decisions:

 

Which products should be protected?

Which products should have their prices changed?

Which products need portion adjustment?

Which products require supplier price renegotiation?

Which products should be recommended more by staff?

Which products should be removed from the menu?

 

Without this analysis, the restaurant menu is managed by guesswork. Guesswork is one of the most expensive mistakes in restaurant business.

 

STOCK, STORAGE AND WASTE ANALYSIS

In restaurant cost analysis, storage and stock systems must be examined. Many restaurants lose money not in sales, but in storage. Products are over-purchased, stored incorrectly, expire, are not counted, waste remains invisible and cash is locked in storage.

 

The following headings are checked in stock and storage analysis:

 

Daily stock movement

Weekly counting order

Product entry prices

Product exit quantities

Shelf life tracking

Cold storage order

Dry storage order

First in, first out system

Waste records

Loss and spoilage records

Excess stock products

Slow-moving products

 

Waste analysis reveals the invisible losses of the restaurant. Cleaning waste, cooking waste, portion waste, service waste, returned products, wrong production and over-preparation should be seen separately in cost analysis.

 

PURCHASING AND SUPPLIER PRICE ANALYSIS

 

Restaurant cost analysis is not done only inside the kitchen. Purchasing prices must also be examined carefully. The same product may come from different suppliers at different prices. In some products, quality may decrease while the price remains the same. In some products, seasonal change may increase the cost. In some products, the lack of an alternative supplier within professional supply management may put the business at risk.

 

The following questions are asked in purchasing analysis:

Is the same product purchased at different prices?

Are supplier prices checked regularly?

Is product quality compatible with the price?

Is there an alternative supplier?

How does seasonal change affect prices?

Is delivery frequency correct?

Does over-purchasing create stock load?

Is the cold chain protected?

 

In seafood restaurants, daily product price and cold chain; in steak restaurants, meat quality and waste; in cafe businesses, beverage raw materials and takeaway product cost; and in high-class restaurants, special product supply are important parts of cost analysis.

 

GENERAL EXPENSE ANALYSIS

Restaurant cost analysis is not only about food cost. In some restaurants, product cost may look correct, but general expenses consume the profit of the business. Therefore, the percentage share of all expenses within total expenses must be calculated.

 

The following headings are evaluated in general expense analysis:

 

Rent expense

Staff expense

Energy expense

Water and natural gas expense

Maintenance and repair expense

Cleaning expense

Packaging expense

Marketing expense

Accounting and management expenses

Commission expenses

Loss, spoilage and return expenses

 

The real profitability of a restaurant is understood when product cost and general expenses are analyzed together. Looking only at plate cost is not enough to see the whole business.

 

BREAK-EVEN POINT AND RETURN ANALYSIS

In restaurant cost analysis, the break-even point should also be calculated. The break-even point shows how much sales the restaurant must make in order not to lose money. U.S. Small Business Administration resources also emphasize the importance of startup costs and break-even analysis for profit estimation and investment planning.

 

The following data should be considered when calculating the restaurant break-even point:

 

Fixed expenses

Variable expenses

Average check amount

Daily guest count

Product cost

Staff expense

Rent and energy expenses

Target profit ratio

 

How much sales must the restaurant make to avoid loss? How many guests are needed daily? Is the average check amount sufficient? Do menu prices carry the business? The real condition of the restaurant cannot be understood without answering these questions.

 

AT LEAST 18 PROFESSIONAL RESULTS IN COST ANALYSIS

At the end of professional restaurant cost analysis, the business should not receive only general comments. Measurable, readable and decision-making analysis results should be prepared.

 

At the end of this study, the following headings can be revealed:

 

1. Product-based recipe cost

2. Portion cost

3. Contribution margin analysis

4. Menu cost analysis

5. Sales mix analysis

6. High-profit products

7. Low-profit products

8. Unsold products

9. Products that should be removed from the menu

10. Products that should have their prices updated

11. Waste rate analysis

12. Stock load analysis

13. Supplier price difference analysis

14. Staff cost ratio

15. General expense percentages

16. Energy and fixed expense effect

17. Daily break-even sales target

18. Average check amount analysis

19. Cost per guest analysis

20. Profitability improvement recommendations

 

These results clearly show the business where money comes from, where it goes, which product should be protected, which product should be corrected, which expense should be reduced and which decision should be taken immediately.

 

WHICH RESTAURANTS SHOULD RECEIVE COST ANALYSIS?

Cost analysis is not only for restaurants that are losing money. Profitable restaurants should also receive cost analysis to grow stronger, reduce unnecessary expenses and make investment decisions correctly.

 

Businesses searching for the following should especially receive professional cost analysis consulting:

 

I want restaurant cost analysis.

My restaurant is full but not profitable.

I want to know whether my food menu makes money.

I want to calculate my recipe costs.

I want to calculate my portion costs.

I want to price my menu correctly.

I want to learn which products cause loss.

I want my restaurant expenses analyzed.

I want my purchasing and storage system checked.

I want to recover my struggling restaurant.

I want to see profitability before growing my restaurant.

I want steak restaurant cost analysis.

I want seafood restaurant cost analysis.

I want cafe cost analysis.

I want high-class restaurant cost analysis.

I want cost analysis before opening a restaurant abroad.

 

The main goal in all these searches is the same: to see the real cost of the restaurant, increase profitability and manage the future of the business more strongly.

 

COST ANALYSIS IN STRUGGLING RESTAURANTS

In struggling restaurants, the problem is often not in one place only. The menu is too wide, recipes are missing, stock is confused, purchasing is uncontrolled, staff do not have cost awareness, portions are not standard, service is slow and prices are not determined according to real cost.

 

In such businesses, cost analysis is the beginning of a recovery process. First, the real picture is revealed. Then menu repair is done, recipes are standardized, portions are corrected, the purchasing system is controlled, storage order is renewed, staff training is provided and decisions that increase profitability are implemented.

 

Cost analysis provides the following contributions to struggling restaurants:

 

It reveals hidden loss points.

It shows weak products on the menu.

It identifies unnecessary expenses.

It finds waste sources.

It reduces stock load.

It establishes purchasing discipline.

It strengthens portion standard.

It increases staff cost awareness.

It improves profitability.

 

For businesses that want to recover an existing restaurant, repair their menu, see their expenses or grow their business, cost analysis is a study that should not be delayed.

 

COST ANALYSIS CONSULTING

Professional cost analysis consulting is a comprehensive study that examines the entire income and expense structure of the restaurant on site, through documents, recipes, sales reports and operational observation. This work, supported by efficiency analysis, is not only an accounting report. Kitchen, menu, storage, purchasing, service, staff, pricing and guest experience are evaluated together.

 

Chef Ahmet Özdemir provides consulting in Turkey and in different countries around the world in the fields of restaurant setup, restaurant consulting, restaurant kitchen setup, menu planning, menu engineering, menu design, menu management, cost analysis, recipe standardization, supply management, staff training and opening management. Cost analysis can be applied with a professional system in Ottoman Palace Cuisine, Traditional Turkish Cuisine, Anatolian Cuisine, Mediterranean Cuisine, Levantine Cuisine, Lebanese Cuisine, vegan and vegetarian cuisines, a la carte restaurants, high-class restaurants, cafes, coffee shops, fast food and special concept restaurants.

 

Correct cost analysis gives the restaurant owner reality, not assumptions. Which product makes money, which product causes loss, which expense is inflated, which stock ties up cash, which price is wrong, which portion is uncontrolled and which decision will relieve the business can all be seen clearly.

 

CONCLUSION

Cost analysis is a professional study that reveals the real profit, expenses, product profitability, stock load, waste rates, recipe costs, portion standards and general expense structure of a restaurant. Successful restaurant management is possible not only by producing delicious products, but also by knowing what those products earn for the business.

 

For businesses searching for answers to questions such as how restaurant cost analysis is done, how food cost is calculated, how recipe cost is prepared, why menu cost analysis is necessary, how restaurant expenses are controlled and why my restaurant is full but not profitable, the correct answer is this: Cost analysis must be done professionally. Because unmeasured cost cannot be managed; unmanaged cost silently consumes the profit of the restaurant.

 

Chef Ahmet ÖZDEMİR

International Restaurant Consultant

International Culinary Consultant

International Hotel Kitchen Consultant

International Restaurant Setup Consultant

 

* www.restorankurulumu.com

* www.hasascibasiahmetozdemir.com

* www.gastronomyconsultation.com

 

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