One question that ski area food and beverage operators often ask is: “What should my food cost be?” Because every operation is different, offering a variety of food at differing prices, there is no set figure to be used universally. However, there is a process called “ideal food cost” that can provide the information.
Ideal food cost looks at every item sold over the course of the period being examined. This can be a day, a week, a month or the entire ski season. Most cash registers are capable of keeping track of the number of cheeseburgers, hot chocolates, etc., sold. (If your cash registers do not have pre-set keys, you should consider purchasing cash registers that do. The cost will be quickly paid for in speed and accuracy of transactions.) With the information from the cash register, a chart can be created listing all items sold (down the left hand side of the chart) with a column for the sales price minus sales tax, a column for the number sold, the item cost and total cost (see example).
To determine the cost of each item, break down the item into its ingredients. As an example, most ski areas use concentrated soda, Coke or Pepsi, called post mix. Five gallons of post mix yields 3,200 finished ounces of product (five gallons of syrup mixed one to five with water). At $28.75 per tank, each ounce costs $.0089. A soft drink normally contains 1/3 ice and 2/3 finished product or approximately 12 ounces. Twelve ounces times $.0089 equals a finished cost of $.106. Assuming a sales price of $1.50 minus 8 1/2% sales tax, the actual sales would be $1.37, and $1.37 divided into $1.06 equals a food cost of 7.7%.
Paper goods, such as straws and cups, would not be included in food cost, but rather are included as a line item of food service paper supplies, which normally runs 2 1/2% of food sales.
Using this process, calculating the cost of a cheeseburger would go as follows:
| Ingredient | Cost |
|---|---|
| 4-to-one burger patty ($1.39 per pound) | $.345 |
| slice of cheese (160 count) | .058 |
| 4 1/2″ sesame seed bun | .100 |
| pickle | .010 |
| lettuce (head shredded) | .040 |
| tomato (sliced) | .060 |
| sauce (one ounce) | .050 |
| waste (2 1/2%) | .016 |
| total | $.680 |
Assuming cheeseburgers sell for $3.25 and an 8 1/2% sales tax, the net sale price would be $3.01. The food cost of this item would be 22.5%.
After identifying all items sold, the number of each sold and the cost of each, these numbers are multiplied to get a grand total of food cost. This is divided into total food sales, which is the ideal food cost. Ideal food cost can then be compared to actual food cost. If a variance of more than 2% exists, it is time to look for the source of the problem.
On the accompanying chart there is a line for total amount of discounts. The larger the discount, the higher the food cost, which often reveals what this benefit actually costs. At one ski area, the ideal food cost should have been 24.39%, but with the discounts they offered, the actual food cost was 42%. On the volume they were doing, this represented more than $200,000 in added cost.
| Item | Sales Price | Number Sold | Total Sales | Item Cost | Total Cost | Ideal Food Cost |
|---|---|---|---|---|---|---|
| Hot Dog | $2.08 | 2,873 | $5,976 | $0.68 | $1,954 | 33% |
| Burger | $2.54 | 1,169 | $2,969 | $0.63 | $736 | 25% |
| Sm Fries | $1.39 | 3,922 | $5,452 | $0.42 | $1,647 | 30% |
| Lg Fries | $1.89 | 1,622 | $3,066 | $0.66 | $1,071 | 35% |
| Sm Pop | $0.93 | 1,242 | $1,155 | $0.15 | $186 | 16% |
| Med Pop | $1.16 | 2,311 | $2,681 | $0.19 | $439 | 16% |
| Lg Pop | $1.62 | 1,625 | $2,633 | $0.24 | $390 | 15% |
| Pizza Slice | $1.85 | 2,714 | $5,021 | $0.76 | $2,063 | 41% |
| Discount | 800 | ($850) | ||||
| Totals | $28,103 | $8,486 | 30% |
While this method of calculating ideal food costs shows how much the variance is, it does not indicate where it is. Probably it is made up of a combination of waste, improper purchasing, bad inventory control; improper entry transactions at the cash register and employee theft.
While it may take some time to gather the information on the cost of each item and the number of items sold, the results can be rewarding. The summer season may be a great time to develop your ideal food cost.
