June 2002

Recipe for Cost Control - Software for determining recipe costs is proving its value in hotels.
By Rick Bruns

Tomorrow's dinner special will be a big seller. You are confident, because your executive chef has offered it many times, and the cash register has always rung its praises. You know what each order brings in, but how much does it cost?

Most hotel food and beverage managers don't know, beyond the roughest guesswork. In fact, they don't care, as long as total F&B costs and associated labor are somewhere near revenues. They may have a rule-of-thumb, that total food costs ought to be some percentage of total revenues. As one executive at a leading software company laments, "Food and beverage is not the hotel's main line of business, and often it doesn't make a profit, so they don't try to control costs like a restaurant chain does."

And yet, isn't that attitude self-defeating? Software that has been available for years, and is continually improving its functionality and ease of use, can calculate to the fraction of a cent the food cost, plus labor cost, of a serving of lentil soup, stuffed rainbow trout, key lime pie, and a glass of blush wine..

Find Hidden Losses
Food cost control software is very effective, managers say, at finding the hidden losses that kill profitability-the missing steaks from the freezer and the bottle of scotch that yields too few drinks. The culprits may be wasteful procedures, pilfering employees, or overgenerous bartenders, or just sloppy record-keeping.

Eatec, a leader in this software category, offers the EatecNetX package that puts the entire process together, as an "enterprise system" that can handle multiple locations. The system is designed to be used over the world wide web, or a corporate intranet, even connecting the hotel or chain to its key suppliers for electronic ordering and payment. It can also be used with wireless devices.

For its hotel clients, which include the Waldorf-Astoria and the New York New York casino in Las Vegas, Eatec "provides an automated way to do what is now done manually," says Karyl Toms, who sells to the hotel market. Hotel companies call her, she says, because their purchasing process and financial controls are hobbled by high staff turnover and employees who lack the skills and training to keep track of the operation. "They now have no idea how their inventory is depleted," she says. "Our program can reduce their food cost by 2 percent, and I don't put a dollar amount on management time saving."

Many hotels use a spreadsheet program like Microsoft Excel to calculate the cost of a menu item, based on ingredient costs entered manually, and arrive at a price the restaurant should charge. As soon as the ingredient costs change, which could be the next day, that calculation is out of date. Systems like Eatec's, being electronically linked to the purchasing process, automatically update the costs according to the most recent price paid. As the costs of lentils, trout, key limes, and blush wine rise or fall, the management system stays current, showing that menu prices may need to change. As orders are placed and filled, inventory is depleted, and new orders can be placed.

One of the biggest barriers to fully adopting recipe-creation and costing software is the initial labor of inputting recipes and costs. Hotels, and even some restaurants, tend to wade in gradually, starting with the high-volume production basics. Another place to start with the promise of a quick return is in the bar. There, the recipe for a margarita can be set and costed initially with fairly simple updates; the "recipe" for a bottle of beer is already done. Then costing, pricing and inventory controls can show quickly where and when unaccounted losses are.

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