Calculating Food Waste with Key Items

Out of every ounce of food you purchase, it is guaranteed that not all of it will end up on your guests’ plates. Steaks get overcooked, serving trays are dropped, and there’s always an onion or two at the bottom of the box that’s seen better days. Wasting food in and of itself isn’t a cardinal sin (unless you ask our mothers), but the degree of variance between what you use and what you sell can get you in trouble with your bottom line. This blog discusses how to calculate waste, an industry hack to make it easier using key items, and how doing this can positively impact your business’ bottom line.

There are two main ways you can calculate the variance: manually or with a back-office integration tool like a restaurant management system (RMS). As you can probably guess, the manual way takes a lot of time and effort. Both follow the same formula so it’s not the math that’s the hard part, but compiling the information to even get to the math (the “math-en-place,” if you will) that makes this process onerous. If you are already a MarginEdge user, scroll down to the section on how to calculate waste with [me].

To calculate food waste you will need food cost information from your invoices (recent ones), up-to-date inventory counts, recipe ingredient amounts, and up-to-date sales data from your POS. Whether you are doing this analysis manually or even with an RMS, it can be a hefty time investment to calculate food waste for each individual item that makes it onto a plate. Thankfully for you, we have a hack that makes this process muuuuuch easier, and still makes a huge impact on reducing food costs related to waste:

Start by calculating food waste costs from five key items you spend the most on (or however many you determine are impacting profits the most).

How to Make Your Life Easier (at least when it comes to calculating food costs)

Your restaurant may purchase hundreds of ingredients every month, but your top 5 likely account for 20%-30% of your overall food costs. If you’re a burger joint, this is probably going to be ground beef. If you run the Little Shanty Clam Sea Shack on the Shore, it could be crab meat, oysters, and lobster. We’d recommend starting with your proteins and going from there.

The best part of this hack is that anyone can use it no matter where you are in your operations journey, from recently opened to established restaurants. And even better, calculating using this hack means you really only need to take inventory of those five items for it to work. This doesn’t mean you’re off the hook for ever doing full inventories ever again (sorry). We just mean that for the sake of calculating food waste, doing a quick inventory of the top five items is a lot faster than running through everything on the menu. It also means if you’re just getting started on building out recipes in your RMS, you can focus on the main ingredient portions, and leave out the rest for now. Take Little Shanty Clam Sea Shack on the Shore’s crab cakes for example: you only need to include lump crabmeat, and leave out salt, pepper, and other seasonings as they don’t impact your bottom line as much. Below are two ways you can get started depending on your current resources.

Calculating Manually

If you are a lean operation and don’t have an RMS in place already, then the manual way may be the right move for you. With our hack of using key items, all you need is access to each piece of your restaurant’s data that we mentioned in the paragraph above and a little bit of time. Here are the steps it takes to calculate food waste:

Step 1

Determine your 5 key items based on which products you purchase the most of, and determine your time period (weekly, biweekly, monthly, etc.) Whichever period you use doesn’t matter as long as it remains consistent between when you take inventory and the corresponding invoices.

Step 2

Find the amount used of each product during the time period you’re evaluating:

• Starting inventory units + purchased units – ending inventory units.
• PRO TIP: We recommend doing this by weight or volume rather than case or package amount, as recipes will typically be written with these metrics. There may be some extra math involved, but it allows you to be more precise which is important!

Step 3

Find the amount sold of each product.

• First calculate how much of each key item is used in your recipes.
• Then pull data from your POS on how many plates of each recipe have been sold for your determined period.
• Multiply the recipe amounts by the amounts sold so you end up with how much of each product was sold across the entire menu.

Step 4

Subtract the amount used (step 2) from the amount sold (step 3) and you end up with the amount of food wasted.

Step 5

Now that you have the amount wasted in weight or volume, multiply that number by the value of the unit calculated from your last invoice. This gives you the dollar value of food waste in your restaurant for that product.

Calculating with an RMS

With an RMS, this process is a lot faster depending on if your platform(s) digitize invoices, pull POS sales data, incorporate inventory counts, and manage your recipes. Some RMS systems provide a theoretical vs. actuals report for you, which eliminates all manual processes and allows you to see real-time food waste percentages for any period (can we get a hallelujah?). Make sure if you’re investing in an RMS, you’re getting the biggest bang for your buck.

For this route, the most important part is ensuring the data within the RMS is recent and accurate. Invoices need to be up to date to calculate inventory purchased and unit pricing, inventories need to be recent for accurate food usage amounts, recipes need to have correct ingredient amounts, and POS data needs to be up to date for calculating plates/units sold. If you’ve got all that–you’re golden, Ponyboy.

Even though restaurants operate on razor thin margins, just tracking your top five most expensive items will still make a big impact to your bottom line. How is that you ask? Well, seeing as we’re already in a divulgatory mood…

Calculating with [me]

If you are already a MarginEdge user, then the good news is that pretty much all of the math is already done for you. All that you need to be able to figure out food waste can be found in your Theoretical Usage Report.Let’s look at how to get there:

Step 1

Take a look at your Purchasing Report and determine what are your key items. This can be found under the Product Module, and allows you to view your purchases over a given period and you can sort products by total amount spent to find your products with the highest spend.

Step 2

Then (if you haven’t already done so), input your recipes for plates that use your key items. Our hack is especially wonderful here because you don’t need to map out the entire recipe, just your key items.

This also means adding in recipes where your key item is a modifier. For example if guests can add crab cakes to their caesar salads, you should add the recipe for an added single crab cake.

Step 3

Make sure your plates and modifiers are PMIX mapped to your POS so that the sales data pulled is accurate and captures every time that key item is sold.

Step 4

Once everything is mapped, all that’s left is to make sure you are taking inventory of your key items in the Inventory Module.

Step 5

After your 2nd inventory of key items is taken, you can view your Theoretical Usage Report under the Performance Module in MarginEdge to see how much of each item was wasted.

Thanks to MarginEdge’s real-time integration with your invoicing, sales (POS), inventory, and recipe data you can view your Theoretical Usage Report at any time, for any period, and start taking powerful, data-driven actions against food waste in your restaurant.

Do More, Even with Less

One of the best parts of calculating your food waste by comparing theoretical vs. actual usage is being able to then pinpoint where loss is happening in your restaurant, which can make a dramatic difference especially if there are systemic issues. Let’s look at crab cakes again. Is Chef Tony over portioning compared to what the recipe calls for? Did you throw out 10 lbs of crab meat last week because it expired? Does every employee choose crab cakes for their free shift meal because they really are that freaking delicious? Are there a few dozen that “fall off the back” of the bus cart every week, if you know what I mean? The reality of restaurants is that waste happens in a lot of places, and there is a certain amount of it that is expected and necessary. Keep in mind, one of the best outcomes for this analysis might be that you don’t find any red flags, and your food waste is not negatively impacting your business.

On the flip side, if your waste calculations end up in the negative, meaning you have more food on hand than you should according to your POS data, you can still use this data to do something about it. Are you under portioning recipes and potentially disappointing guests? Are your invoices being uploaded correctly? Are servers incorrectly ringing up items and this is a systemic issue that can be addressed with more thorough training? Positive or negative, food waste data will guide you in the right direction to make impactful changes. While the data alone doesn’t solve the problem of waste, it does give you hard numbers that you can use to back up changes to ordering or recipes, or even just to bring hard facts when you confront Chef Tony about his extra lumpy lump crab cakes.

The bottom line: you do not need to calculate actual vs. theoretical food usage for every single product you buy in order to get value out of understanding your food waste. With this hack you can start where you are with what resources you have today, as well as utilize tools like an RMS to help get more out of your inventory and invoicing data.