Cost Controls When Chefs Are Buying

[KatieLoeb]

Thanks Katie

Even if you are not a multi-unit MCO the tracking of product costs still apply

Vendors spend more time analyizing your useage than anything else

And when they need to increase margins they will.

One of my chefs tracked his cost on eggs for two weeks and found the vendor charging one price on Monday...higher price on Weds.....and even higher price on Friday.

And Fridays order had the highest volume...go figure

If the vendor knows your not looking he will take the opportunity to increase his margins.

Yeah - OK. But unless you're a multi-unit operator that's buying a bajillion bags of frozen French Fries and your suppliers have to seek to beat the "other guy" for the business, this is all negligable. As I mentioned, I look at the reports and the invoices on a daily basis. A small to medium-sized client such as myself is not going to have an impact on the bottom line of a supplier nor will they have on me if all remains relatively stable. I might pay $6.45/lb. for Cull (one clawed) Lobsters (from a reliable and excelllent purveyor) on Monday and it might be $6.75/lb. on Thursday, but the fact is that my average order is 10-13 lbs. and that $3.50 will not make or break my restaurant. There really isn't anyone competing with this guy for the "fresh" and "local" business. The real point is, do I have a relationship with the best supplier I can hope for in my small geographical sphere of influence? Am I getting value for what I'm paying? Or am I cutting corners where it makes a real difference and shortchanging the customer in terms of quality of product (as they say "in the biz") at "The Center of the Plate"?

[CFO999]

Venors know your useage weekly

Why raise my price day to day.....they buy weekly the inventory is already there

Their cost didn't change

Edited August 6, 2004 by CFO999 (log)

[CFO999]

I know this seems nickel and dime....but thats the business we are in

$3.50 times how many products= ?

[KatieLoeb]

Venors know your useage weekly

Why raise my price day to day.....they buy weekly the inventory is already there

We obviously purchase from different people.

My weekly purchases of canned San Marzano tomatoes might not vary that much, but my purchases of fresh and local prodce, hopefully will. So will my dailly specials. That's the difference in a nutshell. I realize that my equations for purchasing and serving glorious locally grown Tomatoes and the freshest Bufalo Mozzarella that is available within a 50 mile radius of Philadelphia might vary ever so slightly over the course of a season, but the bottom line is whether the menu is reflective of both the season and what's a value for the customer as well as the restuarant over the seasons.

[Juanito]

Venors know your useage weekly

Why raise my price day to day.....they buy weekly the inventory is already there

Their cost didn't change

Not entirely true. While it is true of bags of sugar, or canned diced tomatoes, it certainly doesn't apply to produce.

We buy in produce five times weekly. Prices CAN change, five times weekly. I've seen head lettuce double overnight. We roll price changes, if they occur, once a week on dry goods, but three times weekly on fresh produce.

As a vendor, I will not arbitrarily raise a margin on someone, if, as you say, I think they aren't looking. The biggest factor I take into account when I set up margins is drop size - if you are killing me with multiple small deliveries, I will have to have a higher margin. Larger deliveries equal more profitable deliveries for my firm - you give me a bigger slice of your purchasing pie, and I'll lock in lower overall margins.

Playing vendors against each other works well enough in the short term, but soon they will figure out if your account is worth it or not. Some won't play the game. Others will screw you in a dropping market - tenderloins dropped $1 a pound last week - my competitor hasn't shown the drop yet - if you bust my chops every week about a nickel on a box of mayo, maybe I only pass along half a dollar of the increase. If you deal with me fairly and honestly, you're getting the whole buck. Since I have long term relationships with my clients, I don't have to play that game. Newer guys on the street do, and they are usually the ones who get stuck with bid type accounts.

The restaurant - purveyor relationship need not be an adversarial one. I was interested in the one post about the guy who was miserable, with hair falling out in clumps. I've known operators like that. It's not worth it.

FWIW, I work for a regional top 50 distributor. I've sold food for over 20 years. I've seen all sorts of people go into, and out of, business.

Success in the restaurant business is doing a lot of little things right. It's smart to concentrate resources on the purchasing side, but I've seen even the most obsessive buyers go under - they were so focused on saving on the buy side, that they didn't notice what was happening in the front of the house. That's where the success or failure really comes.

Oh, and when I worked in a restaurant, a really smart chef taught me:

If you buy it by the pound, weigh it.

If you buy it by the piece, count it.

That's still good advice.

[CFO999]

Hey Jaun

Thank you for being honest

You are right about working with your vendor

If the operator is making you drop 5=10 times a week that could become increasingly expensive. And you will pass on the cost

This condition is usually caused by the delusion of I need to buy fresh daily or I don't have the storage space.

Poor planning

The produce items are the perfect example

Your vendor buys his product on a three day or weekly cycle...items in a terminal market come by truck from CA or FL. They are already in your vendors facility.

So the lettuce you buy Mon. is the same drop you buy Weds. his product cost is the same

Front end controls include working with your vendors.purchase orders tell you before you accept the goods into the house

I wonder if the vendor would drop his price if you took deliveries 3 times a week?

Or request a cost plus program based on DOA market prices

When is the last time your vendor said hey,tomatoes are going up next week, you may want to purchase a liitle more this weekend to soften the market increase next week.

Produce vendors especially know your useage....Let them store your product, they already do

Just tell them in advance that you will take X cases this week. See if the price goes down

My point is if you are just calling up to say 2,4,6,8,10 without any discussion of cost, your food cost is not as low as it could be.

In this exercise no mention of changing your spec or product brand occurs.

[LJC]

It is important to remember that this issue does not exist in a vacuum and there are many factors at play. The size of the operation, the style and the concept of operation will effect the controls and ultimately food cost. A restaurant that serves an a la carte menu vs. a price fixe, a family/value concept vs. a market fresh/artesian concept and a ma and pa vs. an established organization are examples of different operations and each of them has their own challenges.

If the point is that everyone should pay attention to market pricing and delivery quantities then the point is well made.

CFO is you have people working in you organization that are ignoring these principles then you should address them. As Carrot Top mentioned good HR policies and clear job descriptions can be helpful.

Katie are you inferring that only multi outlet operators of poor quality could implement biding and other purchasing controls? or that using such controls limits the quality?

[KatieLoeb]

Katie are you inferring that only multi outlet operators of poor quality could implement biding and other purchasing controls? or that using such controls limits the quality?

Not implying but stating outright that an operation has to be of a certain size (and any quality) to be able to have vendors "bid" for their business. Using those controls is a great idea if one is in the position to avail themselves of the economies of scale and buying power that comes from that. Those controls limit the quality only insomuch as the quality of a company like Sysco will vary from a smaller specialty produce or fish only purveyor would. Doesn't matter much for frozen french fries but matters a whole lot for a case of mesclun mix for example.

[CFO999]

KATIE

Unit cost is just one element of reducing food cost, what about delivery scheduling or an analysis of yeild against the receipes to lower buying quantities

What is your shringage?

Examine your costs against DOA market reports to see how far over market you are paying....you will be surprized.

Being small has its limitations, but the same rules apply.

If your revenue is X work backwards...find your purchasing limit per day and stick with it

[LJC]

Katie, I think that your statement is a bit too general. I would agree that most smaller "boutique" operations can't afford to dedicate an employee (steward or book keeper) to soliciting bids, processing purchase orders and receiving. However that is not to say that there would be no benefit but only that the expense would more than likely exceed the savings.

As far as the quality is concerned, I don't know about Philly but in New York you would not be limited to national (mediocre) vendors like sysco. Even the small farmers and fish mongers are willing to send you their pricing lists that you can use as a "bid" or comparison.

"Doesn't matter much for frozen french fries but matters a whole lot for a case of mesclun mix for example"

There are several farms that grow organic, hydroponics and hothouse produce and the prices can fluctuate from farmer to farmer and from week to week. The benefits that one could realize are not solely from economies of scale but from the laws of competition.

Again I don't know Philly but here in NY there are a many single unit restaurants that gross in excess of $10M/yr operating at the highest levels of quality and have very strict purchasing procedures. They do not limit the scope of vendors that can be used but they require that the person doing the ordering be mindful of pricing and the person doing the receiving be mindful of quantity and quality. One operation that I am familiar with has gone so far as to dedicate a daily budget to food purchases for any given calendar day. They have tracked sales for many years and estimate what their daily sales should be and based on that info they give the Chef a budget for that day.

[beans]

Yeah, that's NYC.

Here in Cleveland there are x number of vendors and various price lists according to who you are. My family just opened a restaurant last January and it is a world of difference in dealing with vendors than the place of my "actual" employ -- the monster machine restaurant with eight bars, Shooters.

Us being so small, negotiation just doesn't happen.

At Shooters, well, that is a wholly different story. Some weeks something is much cheaper, however something else's price just rose x percent. It always almost seems that 'it (generally) all comes out in the wash' so to speak. (I live with our general manager and have much access to all aspects to the management, as well as having managerial responsibilities).

[CFO999]

Hey Jaun

Nice misdirection.

Fact is I too was a vendor for 11 years and the customer as well for over 15 years.

You are absolutley correct about the non adversary relationship, but New York is a terminal market and the vendor doesn't buy daily..The USDA market prices are posted daily..but the vendors inventory cost doesn't change daily...does it.

You are right about too many deliveries per week.....but how many times have you dropped your price for a renegotiated delivery schedule?

If you have, then you would be inventoring for your customers.

By the way PRODUCE is the perfect example of this exersice

Since the vendor is reduced to a delivery/quality service, the question is how come you won't hold your price on a weekly basis.

ATTENION ALL CHEFS....COMPARE YOUR CURRENT COST AGAINST THE USDA MARKET

If you are getting charged $4-7 over market price, you may have a problem.

This approach is the same as weighing and counting.....check your price against market.....not against another vendor.

[Carrot Top]

The restaurant - purveyor relationship need not be an adversarial one. I was interested in the one post about the guy who was miserable, with hair falling out in clumps. I've known operators like that. It's not worth it.

Must put my two cents in and say I agree.

If it is adversarial, there is something wrong with the picture.

One hand washes the other, so to speak...(and I am not talking under the table stuff here, just business as usual)...and there are reasons that vendor prices fluctuate...reasons that the vendors have to work with in order to make their profit and reasons that restauranteurs would be well advised to

avail themselves of understanding in the area.

Although a very tough business, this is still a business filled mostly with honest people who want to provide good service and maintain a good reputation.