THE BUSINESS OF FOOD (1)

What it takes to turn your food passion into a successful business

Food. It fuels us. Inspires us. Brings us together. Expresses cultural stories. Reflects history. Nurtures. Can heal you. Can harm you. Evokes memories. Is multisensory. But what is the business of food?

In the past few years, with the explosion of Food TV, bloggers, influencers and foodies, food has become hip, trendy, artistic. Everyone has an opinion about food. Everyone has a relationship with food. Few make food their livelihood, whether through pursuing culinary schools and apprenticeships, or through turning a hobby into a profession. Now more than ever, there are new entrants to the market that don’t come from the industry. Some of this is because of the somewhat lower barriers to entry caused by things like incubator projects and ghost kitchens. This is also caused by the penetration of food into pop culture and its widespread appeal across a variety of audiences. 

From Hobby to Business

In this series of articles (1 to 4), I will discuss the business of food; the difference between a hobby and a business.

Most enter this industry driven by passion. An exception is those new investors who are more tech oriented and concerned with purely the delivery side and digital aspect of the business. I am not saying they all lack passion for the industry. However, I have seen those who don’t enter with a love for food. In my experience, they quickly realise how unflattering the day-to-day operation of the food business is. I have also come across shrewd and clever “outsiders” who invested in the industry, who boast great success stories and from whom we can learn a lot. They see food as pure business. By no means am I promoting the lack of passion. What I am calling for is for those with passion for the industry to open their eyes to the business of food.

Unfortunately, I met many chefs and operators in my time that have a wealth of food experience, passion and knowledge but are missing some key elements of the business of food. The absence of that knowledge puts their businesses at risk despite them producing fabulous food. My advice to everyone entering this business is, get comfortable with numbers. Our industry depends heavily on getting your numbers right, especially with the ever-eroding profit margins we operate under.

In this series of articles, I will cover the following points and lay down what I believe are the important building blocks to turn the passion of food into a profitable business. 

Contents

Article 1 of 4Article 2 of 4
Menu Planning
Menu Execution / Production
Food Cost

Menu Engineering
Zero Waste
Table Turnover Time
Multiple Dayparts
Can it be Delivered ?
Article 3 of 4Article 4 of 4
Value Proposition and Pricing
Know Your Customer
Average Spend and Frequency of Visitation
Eating Experience

Food Safety
Kitchen Equipment
Supply Chain
Ethical Approach

THE BUSINESS OF FOOD ARTICLES 1 to 4, Contents

It all starts here, on the menu. A menu is a reflection of the restaurant concept. It tells the story. Is an expression of the chef’s creativity. Sometimes, it echoes its environment and location. In other instances, adapts to different seasons. Regardless of the story it tells, a menu’s objective needs to be making profits. Otherwise, the only place for it is to be in a person’s home during a fancy dinner party with friends. 

Your menu defines your positioning in the market and vice versa. Some questions you will start off with when coming up with a menu for a new restaurant include: 

Breakfast lunch dinner: 

Will you have separate menus to cater to the various meal periods? 

Categories and sections: 

How many pages or sections will your menu consist of? 

Desserts: 

How much focus and attention will you give the dessert category?

Snacking offers: 

Will you include snacking options that boost your low afternoon periods and complement a beverage offer?

Beverage: 

What is your beverage strategy and how much focus will you place on it? What do you foresee your ratio of food to beverage sales?

Meat versus vegetables: 

Are you going to be a vegetarian restaurant? How will you tackle the question of meat versus vegetables and ensure you do not alienate potential customers?

Fish or no fish: 

Will you be including fish, which is a sensitive raw ingredient on your menu? 

Allergy considerations: 

How much consideration will you give to all the allergies that are present these days from gluten to dairy and more?

Health component: 

How aligned are you with the direction of “healthy” food? What percentage of your food is protein based / carb based? What percentage is raw versus cooked?

Number of items: 

How long will your menu be, and how many items will you have?

Combos promotions and set menu offers: 

Will you include combos and set menus, or will your team on the floor sell those?

Cooking method: 

How is the food prepared and what space and cooking equipment do you require in order to execute the menu?

Adaptability, variability and updates: 

How flexible will your menu be, and how regular will the updates be? Will they be scheduled at preset intervals?

Number of plates per table (sharing or not): 

Is your concept a sharing one? How large will your portion sizes be, and how many plates do you envisage being ordered per table?

Price points: 

What price points will you position yourself at overall and per category? 

Deliveries: 

Will your delivery menu be the same as your inhouse dining offer? 

The more details you consider during the inception of your concept / menu, the more chances you will give yourself to turn a profit from the passion you have for food. 

There will be a separate article that dives into menu design and layout dedicated towards addressing the design elements that help you maximise profits.

menu planning considerations food business design

Just when you thought you asked yourself enough questions, here are some more to consider. 

How replicable is your menu? What is the skill set of the team required to reproduce this menu? Is your concept a standalone outlet or do you envisage an expansion strategy? Does your menu involve long preparation times?  How quick can the dining experience be? Who are you cooking for?

I will start by answering the last question. Who are you cooking for?

Know Who You Are Cooking For

I used to have a favourite café in my neighbourhood which I frequented once or twice a week, did some work, had a delicious meal, great coffee and fantastic service. I used to always order my own made up dish, and the team was nice enough to indulge my request.

On one of my weekend visits, I noticed a big buzz in the café. There was a large table of around 6 to 8 people stirring a lot of commotion. Some were standing on seats and tables. Others rushing to the counter checking on orders and you could sense the panic on the chefs’ faces. Curious as I am, I asked who that table was. “Food bloggers”, was the answer given to me. Chose to visit on the weekend. Ordered the entire menu, causing all the commotion. Bottlenecked the kitchen during peak hours. The list of things wrong in that scene were endless. 

I will not share my opinion on bloggers and influencers in this series of articles. This vast and contentious topic deserves a dedicated piece. I used this example to highlight an important point. Know who you are cooking for and the cost of producing your food versus the amount you can charge. It is easy to get “influenced” to follow certain trends and fads. Smoked, crumbled, dust, foam and all other theatrical components. I am all for theatrics and delivering memorable experiences. As long as the value proposition makes sense. As long as you are doing it for those consuming the food, not those who are “talking” about your food.

The point is to stay focused on who you are cooking for: Your customers, not your influencers or bloggers. Know who your customers are and cook your heart out for them.

Execution

Plan your menu from an execution perspective once you have identified who you are cooking for and the value proposition you want to deliver on the plate. Figure out your preparation (mise en place) time in terms of production hours. Calculate your execution timing (how long it takes to prep each plate). The table turnover time is important to grasp from day one. It is important to identify how many times you need to turn a single table per meal period to make a profit. 

Ingredients

Number of ingredients is another important consideration to keep in mind. Ideally, you want to keep your number of ingredients as low as possible. You want to maximise the use of a single ingredient in multiple applications. You also want to avoid having an ingredient used, where possible, for a single dish. This links to everything from waste management, to storage space, to inventory levels and production management. Try to do more with less is my advice. 

Replicability

Finally, I will bring up replicability and the accuracy in which the entire kitchen team can execute the recipes created in the beginning of a project or during a menu update or seasonal adaptation. Recipe adherence is one of the most important building blocks in managing your highest cost on your P&L, your cost of goods sold (food cost). Make sure your team can accurately reproduce the food day in day out. This also plays into the ever so important element in delivering a memorable experience, consistency. It is key if you are a standalone venue and even more important as a multi-unit brand. 

menu execution considerations food business design

Food Cost

No discussion on the business of food is complete without addressing COGS (cost of goods sold) or, in other words, your food cost. While the topic is vast and deserves its own article with an in-depth coverage, and I must admit is one of my favourite subjects, I will highlight two points in this article to open your eyes to a few important lessons I gained over the years. 

Theoretical Food Cost 

To make sense of the figures being reported in your cost control reports and take informed action you need to and must know what your theoretical food cost is. This is calculated purely from the recipes. Accuracy of recipes is crucial to getting this figure right. Otherwise, you will be left scratching your head staring at large variance figures assuming there are major operational flaws while in essence, you made a calculation error in the recipe cost. Trust me, I’ve scratched my head many times. I go over a few points to watch out for while costing your recipes in the third instalment of this series of articles under the section (Value Proposition and Pricing).

Once you have accurate recipes per menu item, in most cases, your system (POS / Accounting / Inventory Management) can easily calculate the theoretical food cost for you. All it does is takes the number of items sold and multiplies that by the cost per item. This can also be easily done manually. 

Only when you can calculate a theoretical cost, can you compare it with the actual cost deduced through inventory taking and purchasing calculations. You then set an acceptable variance based on your type of operation and hold your team accountable to achieve these set targets. Otherwise, you will shoot in the dark and face many internal finger pointing situations when the question of food cost arises. 

Inventory Management 

I keep emphasising this point to clients I work with, because, in some ways, inventory is your largest investment besides your human capital in a restaurant. It is simple, inventory equals money. My advice is to reduce your inventory levels as much as possible without risking running out of produce to cook. By reducing your inventory, you manage to minimise:

  • the risk of over portioning
  • waste and spoilage
  • the risk of the team using non fresh produce
  • theft
  • spatial requirements for storage 
  • the resources required to manage the inventory

In addition to the above, another benefit from controlling your inventory levels is the ability to release cash and increase your liquidity.

The 80/20 Rule

This brings me to the 80/20 rule. If you are someone like me who loves numbers, then this will mesmerise you and keep you baffled. Yes, it works, and I tested it on multiple occasions. Of course, the figures are not 100% accurate but astonishingly very close. If you are not familiar with it, this rule says that 20% of your inventory items will represent 80% of the total value of the inventory in monetary terms. In other words, you have a few ingredients that are far more expensive and should be looked at with a closer lens than others. Pine nuts versus salt for example, truffles versus rice. The list goes on.

The point of this is efficiency and time / resource management. I am not saying ignore 80% of your items. However, if you pay close attention and manage 20% of the key ingredients, you control 80% of your inventory value. Spend your time wisely and as the saying goes, work smart, not hard. 

Inventory Cycle and Systems

Beyond the above two points, typically, you would break up the sequence of processes from when you order the ingredients to when you serve them and put in place control measures to manage every step of the way. 

  • Purchasing 
  • Receiving 
  • Storage controls 
  • Preparation
  • Service and settlement 

The reporting and checking systems you put in place are also very important in managing and controlling your food cost. Monthly inventories and food cost reporting, in my opinion, are somewhat non effective. Reporting on things after the damage is done does not give you the opportunity to alter, improve or fix. You want to use these systems as management tools. I often say to the teams controlling food cost, “you are not journalists, there is no point in reporting what happened in the past”, “we need this information to take action and implement improvement measures. The higher the frequency of utilisation of these tools, the more equipped you will be to spot any issues and quickly rectify them. 

Food Cost Numbers food business design

Continue reading article 2 of 4


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Links to other related articles 

If your enjoyed this article and found it useful then I would recommend you check out the following : 

RESTAURANT BUSINESS MODEL The building blocks of setting up and operating a successful restaurant 

RESTAURANT DESIGN GUIDE What it takes to design a successful business not only a beautiful space

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I am keen to hear from you. Listen to your stories, challenges and experiences in the industry. I would also like to know if you found this article useful and whether you had a specific question or subject you wanted me to tackle in the future. Get in touch with me

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