38.4% Food Cost: Testing the Head Chef's Price-Rise Explanation
Jikoni Bistro is a 120-cover restaurant with monthly food revenue of KES 2,850,000. The owner's target food cost is 32%. Last month's figures are: opening stock KES 210,000, purchases KES 1,180,000, closing stock KES 297,000. Staff meals and complimentary items are not recorded separately anywhere. Three weeks ago the digital scale on the grill section broke and portioning is now done 'by eye'. The wastage sheet has not been completed since the scale broke. The receiving clerk accepted a delivery of beef fillet invoiced as 20 kg without weighing it; the storekeeper later counted 17.5 kg in the store. The head chef argues that the problem is simply that suppliers have raised prices by 'about 8%'. Covers and menu prices have not changed from the previous month.
1. Calculate the food cost percentage and the variance against target in shillings. Show your working and explain what the figure does and does not tell you.
Read the worked answer
Working
- Cost of food used = opening stock + purchases − closing stock = 210,000 + 1,180,000 − 297,000 = KES 1,093,000
- Food cost % = cost of food used ÷ food revenue × 100 = 1,093,000 ÷ 2,850,000 × 100 = 38.35%
- Cost allowed at target = 2,850,000 × 32% = KES 912,000
- Variance = 1,093,000 − 912,000 = KES 181,000 overspent (about 19.8% above the target cost)
What the figure tells you It is a single aggregate: the gap is real and large enough to matter - KES 181,000 is roughly the margin on several hundred covers.
What it does not tell you
- It does not identify the cause. Price, portion size, waste, short delivery, unrecorded staff meals and theft all land in the same number.
- It is distorted by the missing staff meal record: those are a cost with no matching revenue, so they inflate the percentage without being a 'problem' in the kitchen.
- It is distorted by stock accuracy. If the closing count missed stock, cost used is overstated. A single month's figure should be confirmed with a second, independent count before anyone is accused of anything.
2. The head chef blames supplier price increases of about 8%. Test that explanation and identify the other likely causes, describing the evidence you would collect in the next 14 days.
Read the worked answer
Testing the price story 8% on purchases of KES 1,180,000 is about KES 94,000 - roughly half the KES 181,000 gap, and even that assumes the whole purchase figure is consumed, which it is not. Price alone cannot close the gap, so at least one other cause is operating.
Other candidate causes, with the arithmetic that would expose them
- Over-portioning. A 220 g fillet served at 260 g is 18% over. On a 300 g sirloin at KES 1,300/kg, an extra 40 g is KES 52 per cover - across 2,500 covers a month that is KES 130,000. This fits the broken scale precisely.
- Short delivery. 2.5 kg of fillet at roughly KES 1,400/kg is about KES 3,500 in one delivery. Small per event, but systematic short-delivery is theft.
- Waste and trim. No wastage record for three weeks means trim, spoilage and returned plates are invisible; a 2% waste rate on KES 1.1m is KES 22,000.
- Unrecorded staff meals and comps - consumed cost with no revenue attached.
- Stores control - over-issuing, no requisition, or product leaving through the back door.
Evidence to collect in 14 days
- Weigh 10 plated portions per section, unannounced, against the spec, twice a week.
- Reinstate a daily wastage sheet with a named signatory.
- Compare the last three invoices per key item across at least two suppliers.
- Reconcile POS sales mix against issues: if 200 fillets were sold, only 200 portions should have left the store.
- Two-person month-end count, and a stock count of high-value items (beef, cheese, spirits) weekly.
Conclusion to present: the price rise is real but explains about half; the scale, the waste log and receiving are the controllable half.
3. What should be done about the short-delivered fillet invoice, and how should receiving be changed?
Read the worked answer
The invoice
- Do not pay as invoiced. Raise a discrepancy/credit note for 2.5 kg immediately, in writing, and quote the delivery note date and the storekeeper's count.
- Sign delivery notes 'received subject to count' or count before signing - never sign clean for goods that were not weighed.
- Check the previous two or three fillet deliveries against store counts; short delivery is rarely a one-off.
- Discuss with the supplier without accusation first (their scale, their driver), but log it. A repeat means a formal warning and a review of the contract.
Why this matters beyond the KES 3,500: an unchallenged short delivery is a signal to anyone on the loading bay that the count is not checked.
Receiving changes
- Blind receiving - the receiver counts and weighs before seeing the invoice, then compares.
- A calibrated scale at the goods door, checked weekly against a known weight.
- Separation of duties - the person who orders does not receive; the person who receives does not pay the invoice.
- Every delivery logged: time, supplier, item, invoiced quantity, received quantity, temperature for chilled goods, signature.
- Invoices matched three ways - purchase order, delivery note, actual count - before payment.
Follow-through: the broken grill scale should be replaced this week, not next month. It is the cheapest control in the list and it is the one that is missing.