Convenience Store News

JUL 2015

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WWW.CSNEWS.COM | JULY 2015 | Convenience Store News 75 the cost of the cup, lid and the coffee poured into the cup when calculating the true cost of a cup of coffee served. Calculating the cost of the coffee requires determining product yield (how many ounces of coffee the ground coffee used will yield per pot). "All of these items would then be explicitly called out in the menu costing process/system. The Q-factor is a com- mon term that is short for questionable factor, which covers items that are difficult to measure that support the sale of a menu item," Bishop said, noting the Q-factor may represent items whose costs should be spread across the sale of several products. Coffee filters, for example, should be considered in the cost of hot coffee, flavored coffee and brewed iced coffee. The costs of straws and stirrers would also need to be considered across the several items for which they are frequently used, including all cold and frozen beverages, and hot beverages. "While debatable, some operators may even include the costs of all condiments such as PC creamers and sweeteners, but determining which items to include under the Q-factor is a subjective decision, driven by the operation and the approach to managing the menu," Bishop said. "Operators will generally cal- culate the value of the items used over a period of time and then divide it by the unit sales for the menu items that it could support. The allocated cost would then all be grouped under the Q-factor as opposed to breaking it out separately." InVEntORy COntROlS Strong inventory management processes and systems are key to tracking and measuring foodservice. "I would do weekly or, at the very least, twice- monthly inventories so you can manage the actual cost compared to the theoretical cost of menu items, and most importantly notice any issues that can system utilized by most convenience stores for the rest of the store. "Cost accounting, or foodservice accounting, allows each individual ingredient you buy to be used and managed for multiple purposes and menu items. That is why retail accounting simply doesn't work for foodservice," the retailer continued. For example, if you buy a wedge of cheese, you can put it on a ham- burger that carries one retail price, or on a breakfast sandwich or sub sandwich, both of which could carry different retail prices, he explained. The retail accounting mindset runs contrary to the foodservice business, according to another retailer member of the How To Crew. "With retail account- ing, the concern is only on the items that have 'retails' associated. So if you did food that way, for example, a hot dog would be retail and the bun would not," this retailer explained. If someone mishandled, stole or threw away buns, there would be no concern or accounting of those actions in a retail system, but there would be cost for what was missing and more cost to replace it. The hot dog, however, would be monitored and tracked because it had retail attached to it, and that would be the only part audited in a retail system. "In cost accounting, all parts of the sale item are accounted for, which delivers maximum control of the profit and flow of inventory to ensure proper han- dling, ordering, theft and spoilage controls," he said. thE Q-FaCtOR While most members of the How To Crew agree cost accounting is the preferred and more effective method for managing the foodservice business, integrating it into a 24/7 retail operation presents challenges. Cost accounting to some, depending on their experience and business background, can be very confusing, according to David Bishop, managing partner of Balvor LLC and How To Crew expert. "When I started consulting with supermarkets and convenience stores on meal solutions in the '90s, it felt as though we were speaking different languages," Bishop said. "The idea of portion control and food management practices seemed almost foreign, and the topic of knowing your prime cost — or your Q-factor — was met with blank stares. As a result, having an experienced and knowledgeable professional on the team is key, and training and education is paramount to getting off the ground." Foodservice operators should be able to determine Call tO aCtIOn: Foodservice 201 • Do cost inventory and count weekly, or daily for some ingredients that are highly used. • Build a strong cost accounting system and procedures. • If you or your company lack person- nel with a background in foodservice cost accounting, don't go it alone. Identify resources that can assist with the transition such as software providers, vendors and suppliers, or outside experts.

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