Food cost variance across six hospital cafés
You manage six hospital café sites for an NHS trust, employing 120 staff. Food cost has been 34% of sales for three months against a 30% target. Site 4 has 18% staff turnover, a customer satisfaction score of 3.2 out of 5, and a waste rate of 12%, while the other sites average 5% waste. Two suppliers have increased prices by 8% and given 30 days' notice. The trust wants a price freeze for patients and staff. Site 2's till data is incomplete because of a faulty interface, so its sales mix is estimated. You have a £150,000 capital budget for kitchen equipment, but any spend over £40,000 needs a board paper in 10 days. Staff survey results show 41% of café staff say they do not receive regular feedback.
1. How would you analyse the food cost variance and decide where to act first?
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I would not treat the 4-percentage-point gap as a single problem. I would split it into price, waste, sales mix and control. The 8% supplier increase is a price effect that affects all sites, but it cannot explain site 4's 12% waste against a 5% average. Site 4 is the obvious outlier, but I would check whether its waste is recorded differently before labelling it the worst performer. Site 2's incomplete till data is a control weakness: if sales mix is estimated, its food cost percentage may be unreliable, and any action there could be based on a false number.
My first action would be a two-week data clean-up: fix the site 2 till interface or introduce a manual sales-mix log for the top 20 lines; conduct a waste audit at site 4 by category and shift; and reconcile supplier invoices against contract prices for all six sites to isolate the 8% increase. I would calculate the gap in pounds, not just percentage, because a 4-point gap on a low-sales site may be less material than a 2-point gap on a high-sales site.
I would act first on waste at site 4 because it is the largest controllable variance and the fastest to influence. I would check portion control, over-production at quiet periods, and whether the menu is standardized. I would also check whether the 18% turnover means agency staff are over-portioning or throwing away food because they do not know the re-use rules. I would not spend the £150,000 capital budget yet. Equipment may be part of the answer, but a board paper in 10 days should ask for a smaller diagnostic spend first and a phased proposal later.
2. The trust demands a price freeze. What options would you present, and how would you protect quality and staff morale?
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A price freeze means the 4-point gap must be closed through cost, mix or productivity. I would present three options with trade-offs rather than one recommendation. Option one is a menu engineering approach: renegotiate the top 20 lines, reduce low-margin items, and standardize recipes across sites. This protects prices but may reduce choice and requires supplier cooperation. Option two is a waste and labour productivity programme focused on site 4: standard portion tools, production planning by hour, and a 10-minute daily feedback huddle. This has lower capital cost but depends on management consistency. Option three is a targeted price increase only on non-patient retail lines, with patient meals protected. This is politically sensitive but may be more honest than cutting quality.
I would recommend a combination: immediate waste action at site 4, a supplier renegotiation mandate for the two increases, and a hold on any price rise for six months, with a review. I would not promise the trust a permanent freeze without a funding mechanism.
To protect quality, I would set minimum standards for portion size, nutritional balance and availability, and audit them monthly. To protect morale, I would address the 41% feedback finding directly. I would introduce a weekly 15-minute team huddle at each site with one clear metric, and train site supervisors to give immediate feedback rather than annual appraisal comments. At site 4, I would pair the high turnover with an exit-interview review; if staff are leaving because they feel blamed for waste, a punitive approach will make it worse. I would involve staff in identifying waste causes and recognize one improvement per site. The board paper would include the cost of the price freeze in pounds and the risk of not funding it.