Chapter 03

Managing Food
Costs and Menu
Pricing Strategies
Preparing for
Production

1 HM Program
Standard Recipe

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 Advantages of Standard Recipes
• Consistency in quality, flavour and portion
size
• Efficient purchasing and production
• Correct number of items prepared
• Effective scheduling
• Less supervision required
• Guesswork eliminated
• Written record
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Sample Standard Food Recipe

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Basic Conversion Table

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 Recipe Management Software

• Ingredient file

• Standard recipe file

• Menu item file

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 Ingredient File
• An ingredient file contains important data
about each purchased ingredient, such as:
Purchase unit, Issue unit, Recipe unit
• Some ingredient files may specify more than one
recipe unit (example, bread may have units
expressed in slices and ounces).
• Ingredient files may be accessed by other
management software programs (such as inventory
software / POS), so it is especially important that
the data within the files be accurate.
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HM Program
 Standard Recipe File
• A standard recipe file contains recipes for all
menu items
• Standard recipe conversion software converts
ingredient amounts from purchase units to
production units and can calculate nutrition
data
• Including sub-recipes as ingredients for a
particular standard recipe is called “chaining
recipes” 8
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 Menu Item File
• Contains information related to the menu items
tracked by an integrated POS system
• Stores historical information about the actual
number of items sold
• This data can be shared with other management
system components and used to project future
unit sales, determine the number of ingredient
quantities to purchase, schedule staff and
generate various sales analysis reports for
management 9
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 Steps for Standardising Recipes
• Select time period for development.
• The chef or bartender describes preparation.
• Double-check recipe by observing.
• Record the recipe.
• Share standard recipe draft with staff.
• Test for quality and quantity.
• Train employees in standard recipe use.
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Rating your Recipes

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 Adjusting Standard Recipe Yields
o A recipe yields 100 portions and you want 225 portions of the same size, the
adjustment factor would be calculated as follows:
Desired yield ÷ Original yield = Adjustment factor

o To produce the same number of portions with a different portion size. Assume a
recipe yields 40 12-ounce portions and 40 8-ounce portions are required:
Desired portion ÷ Original portion = Adjustment factor

o A recipe yields 50 4-ounce servings and the desired yield is 75 6-ounce servings,
the adjustment factor would be:
Total volume of desired yield ÷ total volume of original yield =
Adjustment factor 12
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HM Program
 Convert the Recipes

● Convert this to 8 Portion

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 Convert the Recipes

● Convert this to 1/2 Portion

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 Standard Recipe Cost Calculations
• Standard portion cost
Sum of a recipe’s ingredient costs ÷ number of portions
the recipe yields
• Total meal cost
Add the portion costs of all meal components
• Food cost percentage
Food cost ÷ selling price x 100
• Contribution margin
Food revenue - food costs
• Drink cost percentage
Drink cost ÷ selling price x 100
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 Subjective Menu Pricing Methods

• Reasonable

• Highest

• Loss-leader

• Intuitive

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 Competition and Menu Pricing
• One of the most important concerns in menu
pricing decisions is the restaurant’s competitors
• To price menus effectively, managers must know
competitors’ menus, selling prices and guest
preferences
• Managers can respond to competitors by lowering
or raising menu item prices
• Before changing a menu item’s price, managers
should know the elasticity of demand for that item
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Purchasing Process

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 Goals of a Purchasing Program
• Buy the right products
• Obtain the right quantity
• Pay the right price
• Deal with the right supplier

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 Purchasing Considerations
• Purchase specifications
• Convenience foods
• Make-or-buy analysis
• Minimum/maximum ordering system
• Lead-time quantity
• Safety stocks
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 Case Study

● Group Work

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 Reducing Purchasing Costs
• Negotiate
• Determine whether making the product would
cost less
• Discontinue some supplier services
• Combine orders
• Pay cash
• Re-evaluate need for high-cost items
• Take advantage of promotional discounts
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 Factors in Choosing a Supplier
• Location
• Facilities
• Financial stability
• Technical ability
• Honesty and fairness
• Dependability

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 The Receiving Process & Tasks
• Inspect incoming products against;
• Your Purchase Order
• Agreed Purchase Specifications
• The Delivery Note / Invoice
• Accept the products
• Date stamp the incoming products
• Move products to storage
• Complete daily receiving reports or other forms
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 Receiving Tasks & Storing
• Marking products
• Rejecting products
• After items are purchased and received,
they must be stored
• Effective storage procedures must
address security, quality and record-
keeping issues
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 Security Issues in Storage
• Storage security measures include the
following;
- Lockable storage areas
- Precious storage
- Limited access
- Effective inventory control procedures
- Central inventory control
- Secure design
- Lighting and monitoring
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 Quality Control in Storage

• Rotate food stocks (FIFO)

• Store foods at the proper temperatures
• Clean storage areas regularly
• Ensure proper ventilation and air
circulation

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 Record-keeping

• Perpetual inventory system

• Physical inventory system
• Managers at many operations use both
systems to keep track of inventory

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 Reducing Inventory Costs

• Carry a smaller amount of inventory

• Be sure that required inventory levels are
correct
• Carry fewer product types
• Refuse early deliveries

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 Issuing
• Issuing involves distributing food and beverages
from storage areas to authorized individuals who
requisition them
• Large food and beverage operations may have
one or more full-time storeroom employees who
issue products
• Issuing procedures depend in part on the record-
keeping system the operation uses
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 Purchasing Alcoholic Beverages
• In many states, laws and other restrictions regulate
the purchase of alcoholic beverages
• Some states operate state stores from which all
alcoholic beverages must be purchased
• A house brand is a beverage brand served when the
guest requests no special brand; a call brand is a
brand that guests request by name
• Inventory turnover rates are generally lower for
beverages than for foods
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 Receiving Alcoholic Beverages

• Open cases; check bottles against invoice

• After receiving beverages, immediately move
them to secure storage areas
• Purchasing and receiving tasks should be
separated

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 Storing Alcoholic Beverages
• Prevent unauthorized access, keep effective records
and keep storage areas sanitary
• In addition to a central beverage storage area, many
operations have behind-the-bar storage
• Beverage storage areas should be locked when the
food and beverage operation is closed
• Correct bar pars should be established
• Refrigerated alcoholic beverages should be stored
away from food items if possible; if this is not
possible, their storage area should be locked
• It is critical to closely monitor the beverage inventory
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 Issuing Alcoholic Beverages
• Alcoholic beverages should be issued on a
bottle-for-bottle basis to replenish bar pars
• Empty bottles are broken or disposed of in
compliance with local or state ordinances and
the operation’s policies
• Normally, beverages should be issued once each
shift, preferably at the end
• As beverages are issued, bottles should be
marked 35
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 Alcohol Theft

● Case Study

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Chapter 03

Quiz Time

37 HM Program
 QUESTION No. 01

An adjustment factor is determined by:

A) listing the ingredients for a given recipe, then choosing equivalent

substitutes.
B) dividing the desired yield by the original yield.
C) multiplying/dividing a standard recipe by the percentage of
increase/decrease.
D) adding together all of the costs associated with a given menu item.38
HM Program
 QUESTION No. 01

An adjustment factor is determined by:

A) listing the ingredients for a given recipe, then choosing equivalent

substitutes.
B) dividing the desired yield by the original yield.
C) multiplying/dividing a standard recipe by the percentage of
increase/decrease.
D) adding together all of the costs associated with a given menu item.39
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 QUESTION No. 02

The practice of __________ involves including sub-recipes as

ingredients in a standard recipe.

A) preparing an ingredient file

B) menu costing
C) chaining recipes
D) recipe indexing 40
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 QUESTION No. 02

The practice of __________ involves including sub-recipes as

ingredients in a standard recipe.

A) preparing an ingredient file

B) menu costing
C) chaining recipes
D) recipe indexing 41
HM Program
 QUESTION No. 03

A standard recipe file created with recipe management software

typically contains:

A) 3 × 5 cards with recipes written on them.

B) recipes for all menu items.
C) purchasing information for each ingredient.
D) safe food handling guidelines for all menu items. 42
HM Program
 QUESTION No. 03

A standard recipe file created with recipe management software

typically contains:

A) 3 × 5 cards with recipes written on them.

B) recipes for all menu items.
C) purchasing information for each ingredient.
D) safe food handling guidelines for all menu items. 43
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 QUESTION No. 04

For a menu item that has a food cost of $4.00 and sells for $12.00,
which of the following statements is TRUE?

A) The item has a food cost percent of 50.

B) The item is not likely to be a big seller.
C) The item has a food cost percent of 25.
D) The item represents a contribution margin of $8.00. 44
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 QUESTION No. 04

For a menu item that has a food cost of $4.00 and sells for $12.00,
which of the following statements is TRUE?

A) The item has a food cost percent of 50.

B) The item is not likely to be a big seller.
C) The item has a food cost percent of 25.
D) The item represents a contribution margin of $8.00. 45
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 QUESTION No. 05

What is determined by dividing the cost of a drink by its selling price

and multiplying that figure by 100?

A) beverage profit percentage

B) cost per ounce
C) standard drink cost
D) drink cost percentage 46
HM Program
 QUESTION No. 05

What is determined by dividing the cost of a drink by its selling price

and multiplying that figure by 100?

A) beverage profit percentage

B) cost per ounce
C) standard drink cost
D) drink cost percentage 47
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 QUESTION No. 06

Which of the following is a recommended way to reduce inventory

costs?

A) Purchase lower-cost inventory items.

B) Decrease the number of product types the operation carries.
C) Accept early deliveries whenever possible.
D) Carry more inventory. 48
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 QUESTION No. 06

Which of the following is a recommended way to reduce inventory

costs?

A) Purchase lower-cost inventory items.

B) Decrease the number of product types the operation carries.
C) Accept early deliveries whenever possible.
D) Carry more inventory. 49
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 QUESTION No. 07

The goals of a purchasing program include which of the following?

A) Pay the lowest possible price.

B) Decrease the contribution margin of each menu item.
C) Work with the right supplier.
D) Deal with only local suppliers.
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 QUESTION No. 07

The goals of a purchasing program include which of the following?

A) Pay the lowest possible price.

B) Decrease the contribution margin of each menu item.
C) Work with the right supplier.
D) Deal with only local suppliers.
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 QUESTION No. 08

To help to ensure food safety, frozen items should be stored at which

of the following temperatures?

A) between 32°F and 40°F (0°C and 4°C)

B) any temperature below 32°F (0°C)
C) a constant 22°F (-6°C)
D) below 0°F (-18°C) 52
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 QUESTION No. 08

To help to ensure food safety, frozen items should be stored at which

of the following temperatures?

A) between 32°F and 40°F (0°C and 4°C)

B) any temperature below 32°F (0°C)
C) a constant 22°F (-6°C)
D) below 0°F (-18°C) 53
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 QUESTION No. 09

Which of the following are most prone to theft during the receiving
process?

A) frozen meats
B) canned goods
C) vegetables
D) alcoholic beverages 54
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 QUESTION No. 09

Which of the following are most prone to theft during the receiving
process?

A) frozen meats
B) canned goods
C) vegetables
D) alcoholic beverages 55
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 QUESTION No. 10

It is preferable to issue beverages __________ during each shift.

A) once
B) twice
C) three times
D) as many times as necessary

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 QUESTION No. 10

It is preferable to issue beverages __________ during each shift.

A) once
B) twice
C) three times
D) as many times as necessary

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