It’s Not Just Food, It’s an Investment

Most operators look at their inventory as nothing more than product needed to run the operation, or an expense they already paid. In some cases, depending on your terms with your supplier it may not have been paid for yet. In reality, every item you purchase is an investment in your success, or failure.

The "Yield is Interest" Strategy

In the world of finance, you want the highest return on your principal. In the kitchen, your Yield Percentage is your return.

If you buy a whole salmon, your "investment" is the gross weight. Your "ROI" is the edible portion served to the guest.

Every ounce of "waste" (bones, skin, trim) that isn't repurposed or accounted for in the selling cost of the product is essentially a penalty fee on your investment.

Many kitchens suffer from "leakage" that owners of other businesses wouldn't tolerate.

• Over-Portion: Giving a guest 7oz on a 6oz spec is a 17% loss on that specific investment each time that product is sold.

• Improper Storage: Food that spoils because it wasn't rotated (FIFO) is a total loss of the investment before you even have time to breakeven let alone make a profit.

• Improper Pricing: Not calculating the cost of the trim, bones and fat for a “Fabricated Price Per Pound.”   

  
  

A 7.5 lb. head-on salmon at a cost of $8.99 lb. AP will yield approximately 4.69 lbs. of usable product. Many people never account for the loss of the trim when calculating a selling price or they’ll guess what it should be. 

Metric	As Purchased (AP)	Fabricated (EP)
Weight	7.5 lbs	4.69 lbs (62.5% Yield)
Cost Per Pound	$8.99	$14.39
Cost Per Ounce	$0.56	$0.90

Improperly calculating fabricated cost could be costing you a significant amount of gain on your investment. If you price your menu item based on that $8.99 invoice price, you aren't just losing pennies, you are actively subsidizing your guests' meals out of your own pocket.

• Selling Too Early or Holding on Too Long: Like a stock investment, selling too early or holding on too long leads to a degraded ROI.

  
  

Over ordering can lead to product spoilage or going out of date.  Additionally, too much product also leads to overuse and even theft. On the other hand, I have heard a countless number of times, “Use this to get it out of inventory” or even worse, “I’ll make soup out of this.”  You need to remember; your product is money on the shelf. While you don’t want to hold onto the investment until it’s worthless, taking it out of inventory or your portfolio of investments without a plan to ensure maximum return on investment can also lead to a financial loss.

Profit isn't made when the guest pays the check; profit is protected every time a knife hits a cutting board. When you view your walk-in as a portfolio of investments, you stop 'using' ingredients and start 'managing' assets.

Stop guessing your portfolio's value. You don't need a complex spreadsheet or a grease-stained notebook to protect your margins. Use our free Yield Tracker right now to run a quick butcher's test on your next delivery, pinpoint your exact cost factors, and stop the leakage on your cutting board.