The Portion Control Profit Triangle

By Dave Ostrander

Quickly, tell me how much it costs to make a 14" cheese, pepperoni, ham and mushroom pizza in your store. I'm not surprised you couldn't blurt out the answer. In these times of unstable cheese pricing and invoice creep, it's easy to neglect one of the most important building blocks of profitability - food costs. Costing out pizza is not an easy task. It's a lot like making soup. An ounce of this, and ounce of that, a couple ounces of other stuff. It's not uncommon to have a dozen components to keep a handle on. Add in the stress of a rush and it's no wonder we scratch our heads when the accountant questions our food cost percentage on the P & L Statement.

Portion Control Triangle The reason we fail to hit our ideal food cost is fairly simple to identify, but much harder to fix. Making pizza is no different than any manufacturing process. We buy raw goods, assemble them and sell them for a profit. Let us look at, and analyze all three parts of this profit equation.

Part 1: Be a Smart Buyer

The first deals with buying. This is the least important part of the equation. Sure, if your supplier is gouging you on price you will not maximize profitability. This is less common than you may think. Most suppliers are above the board and price their products competitively. If they didn't they wouldn't have any customers for long. An educated buyer will learn how to determine if the pricing is competitive and fair. They will buy cheese on a program that follows the weekly national cheese markets. They will know that tomato sauce will be going up this pack season because there is a 20% shortage on California Growers' yields this year.

Insider information is available for the asking from good suppliers. Don't expect the sales-reps to know all of the answers. They have too many items on their plate to track, but their buyers know. Don't be afraid to ask for their predictions. After all, you're in this together. This is a co-dependant relationship. You win, they win. You lose, they lose. It's that simple. My observations indicate that too many operators exert too much mental energy playing mind games with reps. Get off your power trip and put your expectations in writing, have high expectations and go for it. If a portion of that energy was diverted to the following parts of the profitability triangle, profits would dramatically go up.

How Much Money Are You Tossing Around?

Part 2: Assembly - Being Right on the Money

You own the assembly portion of the profit triangle totally. All too many operators let their employees free throw topping on their pies. This is not the way to get rich and famous. Is there a right way? There is no one right way, but anything other than free throwing will dramatically improve your bottom line. My personal experiences have resulted in a reduction of cheese usage by 20% and protein and veggie toppings by 10 to 15%. So, ways to achieve ideal food cost are using:

  • In-Line Digital Scales
  • Spoodles, (flat bottom ladles)
  • Cups with ounce graduations.

By far, the best, most accurate method if making consistent pizza is utilizing one or more built in digital scales. The ones I used were recessed right into the pizza make table using stainless steel raised rails. The LCD readouts were mounted at eyelevel with the pizza-maker. The zero (tare) switch was a pedal on the floor. This allowed the person to use both hands and not have to reset the scale back to zero with a greasy finger. The ideal scale has a large Stainless Steel platform, capacity to at least 10#, easy to read LCD and overbuilt to withstand the punishment of a pizza operation. My personal favorite costs a little more than normal, but will keep on ticking when the cheaper ones quit. This method is exact, idiot proof and fast.

The next system will use spoodles that are sized by the ounce. These guys are either solid or perforated, depending on the topping and are very handy for veggies. Right along the same thought would be using small plastic soufflé cups. Either one of these systems will make a difference, but are flawed because of over and under filling the cups. If you really want to do it right, invest in a great scale. The payback will be, depending on volume, almost immediate.

Part 3: Pricing for Profitability

I'm embarrassed to share with you how I priced my first menu. To say I plagiarized others would be pretty accurate. At that time, I couldn't even define food cost, but back then things were different. Mozzarella cheese was 42 cents a pound and a 16" six item pizza sold for $ 4.00. Times change. So we must also. I remember when I did my first real food cost analysis. It wasn't a pretty picture.

I'm convinced that a lot of operators don't do them, or do them inaccurately because of the hassle factor. I gathered a dozen recent invoices, a pad of accountant's columnar work sheet paper, a calculator, a scale and a dozen corrugated pizza circles. I then went through the task of making every pizza I had on the menu and weighing out every topping. I recorded that data and converted the price per pound/case to cost per ounce, and finally cost per pizza. I opted to include the cost of the pizza box into the total rather than have it show up somewhere else in my accounting. Since more than half of my sales derived from carryout and delivery, this seemed prudent. I then itemized every pizza and determined how much money it cost to build the pie. Then, I multiplied that number times the food cost percentage I was trying to hit. No one hates number crunching more than me. This was eight hours of drudgery. Yet, it had to be done, it was a management function. The results were frightening.

On paper, I was supposed to be at a certain percentage, but in reality, according to my P & L statements, I was way off. How could this be? The answer was in inconsistent portioning. Some of my cooks had a heavy hand and some light. I needed to provide them the tools they needed to do the job right. Then, wouldn't you know it; prices went up across the board. Instead of re-calculating the entire analysis, I cheated. I simply jacked up the prices by nickels, dimes and quarters until I got back to a profitable food cost.

I lost track of doing it the right way because I didn't want to repeat the whole drill again. Time goes on and, pretty soon I lost control of food cost. Profits suffered and I was forced to do the entire study again. All of the previous data was pretty much outdated, so I started from scratch. Then, along comes my first computer. I transferred all of my data to a crude spreadsheet program and after a couple of days of algebra configuring the spreadsheet, I had done it! From then on, all I had to do was update the new grocery prices once a month and every cell changed. It was magic. Now I had no excuse not to have an iron grip on food cost. Laziness really is the Mother of Invention. Now, if I didn't hit the number on the end of the month statement, it was for another reason other than food portioning and proper pricing. That was a load off my mind. After the advent of the Windows system, specifically Excel, the rough-around-the-edges program I created has been updated to a slick, user friendly, powerful tool.

Employees I enlisted the help of a computer guru to set up the macros and install buttons and drag down menus for speed and ease of use. Besides computing food cost, it suggests a menu price based on whatever percent you want to hit as well as gross profit (contribution margin). I have also analyzed my competitor's menus on this program and asked hundreds of "what if" questions.

Tying up the Profit Triangle

  • The first leg of the triangle is buying the best ingredients at the best price. Work with your distributors to get to this goal.
  • The second leg is assembly. Create a wall chart that tells the pizza makers how much of every item goes on every pizza. The crew members can't possibly eyeball the ingredients as close as a scale. Buy one.
  • The last and most important segment of the triangle is the mathematical part. Create your own computer spreadsheet or contact me for a copy of mine.

If you implement all three of Profit Triangle Segments you'll never again wonder how much does it cost or why didn't I hit the right foodcost.


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