By Tracy Morin

With inflation rising sharply post-pandemic and consumers feeling the effects of higher prices, it’s crucial that operators carefully watch their food costs—and try all of the methods possible to keep them down.

But there are other, less obvious reasons for keeping an eye on these necessary expenditures. For Joe Farruggio, president of three restaurants (il Canale, a Modo Mio and 90 Second Pizza) in the Washington, D.C., area, his delivery business is increasing—and with no drivers of his own, he relies on third-party delivery. The substantial fees charged by these companies mean that paying attention to food costs is even more important to maintain profitability while remaining an attractive option for delivery customers. No matter what your reasons, food costs deserve your attention.

4 Steps to Lowering Food Costs

When PMQ asked operators to share some of their top tips on controlling food costs, several key strategies emerged: working with vendors, proper menu pricing, collecting and analyzing sales data, training staff and tracking inventory. 

1) Working With Vendors

For many operators, comparing and contrasting pricing between multiple companies is a must to get the best deals on ingredients. “I have two companies I order from, and I check the prices before ordering to see which company has better pricing on the items I need,” says Betsy Rammos-Tsichlis, owner and operator of Pantry Pizza in Dorchester, Massachusetts. “The salesmen are also very helpful in sending out sale prices or specials on certain items that we use. I recently started buying some paper products from W.B. Mason, since they beat both of my foodservice companies in pricing on some items—and that only came about because their salesman came into the store. However, we have also cut back in giving out paper goods with our orders, especially after COVID, to reduce costs.”

Farruggio, meanwhile, strolls trade show floors seeking good deals on ingredients and making connections. This is also a crucial step in knowing that the quality will suit his operation, which uses high-end Italian imported ingredients, such as organic flour and fresh buffalo mozzarella. “Quality needs to be No. 1, but you hope for better quality and a better price,” Farruggio explains. “I work with multiple vendors—not too many, because then you’re adding more work to your business, but I recommend having a few.”

“Quality needs to be No. 1, but you hope for better quality and a better price. I work with multiple vendors—not too many, because then you’re adding more work to your business, but I recommend having a few.”

—Joe Farruggio, il Canale, a Modo Mio and 90 Second Pizza

2) Menu, Pricing and Sales Tracking

When it comes to proper pricing, Farruggio understands that different items are naturally going to have different margins. Soda, water and beer can fetch 300% to 500% markups, while high-end items like ribeye and salmon won’t reach anywhere near those numbers. Therefore, he maintains a menu mix that allows for an overall attractive food cost percentage. It’s also important to cross-utilize ingredients to minimize waste, and to keep a regular schedule of tracking sales numbers, in case any low performers need to be moved off the menu. “Every month—and you can even do this daily, but for me that takes too much time—I look at the percentage of profits,” Farruggio notes. “That tells you if you need to change anything. At the bottom line, if I have 3% to 4% net profits, I’m happy.”

3) Staff Training

Educating employees and getting them on board with keeping food costs low have been successful strategies at Pantry Pizza. “I always try to be up-front and transparent with my employees, sharing things with them like the cost of food goods, paper goods and utilities, so they can be aware of what the store’s expenses are,” Rammos-Tsichlis says. “This helps them to be aware of waste, which helps avoid overprepping or ordering more goods that will spoil if not used. In terms of portion control, we weigh out a lot of the ingredients, like the shaved steak, and everyone knows the amount of, say, chicken breast that goes onto a salad.”

Farruggio also keeps employees invested in keeping costs down, but he does it through the old-fashioned motivation of cold, hard cash. “I set aside 20% of my profit and give it to my employees, so every quarter they get a check—maybe $300 to $400 for a dishwasher, or a $5,000 to $6,000 bonus for a chef,” he says. “Then they feel pressure to do their jobs and keep costs down. I have all of the recipes written down in the manual, and I eat my food all the time to make sure the recipe is right. I also watch them on portion control. You don’t want them putting on too much cheese, for example—or too little.”

“I always try to be up-front and transparent with my employees, sharing things with them like the cost of food goods, paper goods and utilities, so they can be aware of what the store’s expenses are.”

—Betsy Rammos-Tsichlis, Pantry Pizza

4) Inventory Tracking

When receiving food deliveries, you’ll want to ensure order accuracy and quality of items, while preventing profit destroyers like loss, theft and waste. For example, at Farruggio’s back door, a posted sign says no deliveries are accepted after 11:30 a.m. That way, deliveries arrive early and the manager on staff can check every item against the original order, making sure everything has been received correctly. There’s also a camera at the back door, to prevent items from “disappearing” in transit. In addition, expensive and theft-prone items like alcohol are monitored weekly.

“You also want to pay attention to the pricing—sometimes, the vendor will give you a good price to try something, then three months later it goes up,” Farruggio adds. “Every Monday, the three or four vendors I’m working with fax me the prices of items I buy so I can see them. I think restaurant owners lose a lot by not paying attention!”   

Tracy Morin is PMQ’s associate editor.

Food Price Predictions

What can we expect from food prices in the months ahead? Here are some findings from the U.S. Department of Agriculture (USDA) Economic Research Service’s Food Price Outlook in March 2024:

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, increased 0.6% from January 2024 to February 2024 and was up 3.2% from February 2023. The CPI for all food increased 0.1% from January 2024 to February 2024, and food prices were 2.2% higher than in February 2023.

The food-at-home (grocery store or supermarket food purchases) CPI increased 0.1% from January 2024 to February 2024 and was 1.0% higher than February 2023.

The food-away-from-home (restaurant purchases) CPI increased 0.1% in February 2024 and was 4.5% higher than February 2023.

Food prices are expected to continue to decelerate in 2024 compared to recent years. In 2024, all food prices are predicted to increase 2.5%, with a prediction interval of 0.6% to 4.5%. Food-at-home prices are predicted to increase 1.6%, with a prediction interval of -1.3% to 4.5%, and food-away-from-home prices are predicted to increase 4.1%, with a prediction interval of 2.9% to 5.2%.