Rising food costs, budget cuts, and Medicare/Medicaid cuts make it essential to control food service costs. In 30 years of working with health care facilities, I’ve learned that controlling food service costs is about being smart with your budget and operations so you can control costs without cutting quality. Here are some steps you can take to control food service costs:
1. Track Market Trends. Track price increases so you can make changes as needed. Cost of living increases, increased competition for workers, and union increases will affect labor costs. Adjust food purchases and alter menus as needed based on price changes. The Consumer Price Index (CPI) forecast for 2012 predicts that food prices will be slightly above historical averages for the past two decades. Predictions include: All Food Index up 2.5 - 3.5%, Food Away from Home up 2 - 3%, and Food At Home up 3 - 4%. Predicted price increases in various food categories include:
• Meats, poultry, seafood prices up 3.5% overall, with beef/veal up 4.5%, pork and poultry up 3-4%, and fish/seafood up 4-5%.
• Egg prices up 2.5 - 3.5%.
• Cereal and bakery prices up 4.5 - 5.5%.
• Sugar and sweets prices up 2 - 3%.
• Dairy prices (milk, cheese, ice cream, butter) up 3.5 - 4.5%.
• Fresh produce up 3 - 4% overall, with fresh fruit and processed produce up 3 - 4%, and fresh vegetables up 3.5 - 4.5%.
2. Know Your Numbers. Understand your operation’s budget and profit/loss statements. Analyze statements weekly, monthly and quarterly. Your menu drives decisions related to food purchases, labor/skill level needs, food cost, production schedule, equipment needs, customer satisfaction, nutritional value, service needs, and most importantly, your bottom line. Check prices on all menu items to assure costs are within the desired range, and use software systems to take immediate steps to control costs.
3. Control Labor Costs. Track your meals/labor hour: Total Meals Served/Day ÷ Labor Hours/Day. The average meals/labor hour for hospitals and long term care facilities is 6-12. Track productivity and implement systems to assure efficiencies. Reduce absenteeism, and hold staff turnover to a minimum. For a $20,000/year worker, turnover may cost as much as $10,000 for a turnover rate of 25% (the national average).
4. Avoid Overproduction. The number one cost leak in foodservice operations is over-production! Eliminate as much waste as possible. Ten extra meals a day adds up fast: $3.75 (food/labor/supplies) X 10 = $37.50/day x 365 days/year = $13,687.50/year. Implement controls for preparation, service, and handling leftovers. Adjust recipes for the number of servings actually needed. Use production records to document what and how much food is left, and the plan for use of leftovers. Control portion sizes and use standardized recipes. Train employees on proper portioning and provide the correct measuring utensils and equipment. Conduct a plate waste study to determine which menu items need to be changed, and which portions can be reduced while maintaining customer satisfaction.
5. Reduce The Price You Pay for Food. First, join a group purchasing organization (GPO) to save 5 - 10% or more on your food cost. If you are spending $200,000 per year on food, a 5% savings equals $10,000 annually! Next, take these steps:
a. Assure bills are paid on time. It’s like taking out a loan: the longer it takes to pay the bill, the higher the rates will be.
b. Avoid poor purchasing habits that cause frequent trips to the local store. The average “store run” costs labor time to go to the store, plus the cost of paying someone to do that person’s normal work, and the higher cost of retail goods.
c. Reduce the number of vendors and deliveries so the vendor can pass cost savings to you. Reducing orders also saves money by saving time to place orders, check in deliveries, put stock away, and process paperwork.
d. Check in all incoming orders to assure you receive all items on the invoice, and all are in acceptable condition.
e. Use suitable quality products for each menu/recipe item (Ex. You don’t need Grade A fruit for a fruited gelatin).
f. Evaluate the true cost of scratch versus convenience foods (include labor and waste in the equation).
g. Investigate supplement costs. Have physicians write orders for “supplement per dietitian.” Choose the most appropriately priced and well accepted product for your patients and/or residents.
6. Purchase Based on Yield. Use yield price (“as served” or “edible portion” cost) rather than purchase price per unit as your determining factor in choosing a food item. Lower priced products often actually cost more due to lower yield.
7. Eliminate Theft and Pilferage. If you spend $200,000.00/year on food and have a 5% theft rate, it costs your operation $10,000.00 each year (and 5% is on the low side). Have checks and balances in place to decrease risk of theft.
a. Implement an on-going accurate perpetual and physical inventory system. Keep inventory low and take regular physical inventories. Determine your true food cost: Food cost = Beginning inventory + Purchases- Ending inventory. (Food purchased does not equal usage). Have a supervisor oversee the check-in and storage of all deliveries.
b. Implement “back door policies”: Do not allow employees take food home. Do not allow employees to take breaks or come and go from an outside door near the storeroom/freezer area. Store less tempting items (i.e., thickened juices) by the storeroom door and the more tempting items (coffee packets, cookies) farther away. Use only clear plastic trash bags.
c. Keep storerooms and freezers locked (except when products are being put away or removed). Change locks and keys from time to time and always change them whenever an employee who had access to the keys has left your employment.
8. Assure financial figures are accurate. When determining cost per meal, factor out extras such as staff meals, nutritional supplements, free coffee, special functions and floor stock. These are not part of the meal cost. Include these “extras” as separate line items, and charge costs to the appropriate financial category.
By taking steps to keep your cost in control can save you thousands of dollars each year without sacrificing quality of food or service.
This information was excerpted from Cut Your Foodservice Costs Now! Start saving thousands without sacrificing quality, authored by Becky Dorner, RD, LD, and contributing author, Kim Hofmann, RD, LD.
If you have other tips that are effective for controlling overproduction, please take a moment to share it below!
Becky Dorner, RD, LD