While food costs are typically calculated by dividing net food purchases by net food sales, the formula for calculating food cost in a private club can include additional factors.
Food cost is the total cost of food in an operation’s existing inventory. Maintaining food cost is indicative of any food service operation’s overall profitability. Food cost is one of the biggest expenses of foodservice operations. Maintaining consistent and desirable food costs is imperative to the long-term success of food service establishments. A desirable food cost varies depending upon the budgetary guidelines and financial goals of the overall operation.
The basic formula for calculating food cost is dividing net food purchases by net food sales. Net food purchases can be calculated by taking the beginning inventory (first or previous month’s inventory in dollars), plus the total cost of food purchased for the month less ending inventory (current month’s inventory in dollars). To simplify, this is written out like this: B+P-E/sales.
The formula for calculating food cost in a private club’s food service establishment can include additional factors. Private club and resort operations include budgeted dollars dedicated to fulfilling both member satisfaction and employee retention.
While member satisfaction is gained from the quality of services offered, clubs offer specific items at no additional daily charge to members as a means of providing a perception of value. These items often include complimentary fresh baked goods, candies and signature beverages as well as gourmet bar snacks or even water. These items and the costs associated with them are tracked on a monthly basis so that the total dollar amount is then transferred out of the total net food purchases. It is aptly dubbed: transfers.
Other items that may be included under these kinds of transfers include complimentary breakfast items set up for board and committee meetings, board dinners and complimentary coffee stations.
Transferred items also include budgeted dollars dedicated to employee satisfaction and retention. These are also known as employee meals. Unlike most public restaurants, private clubs and resorts offer employee meals as a proclaimed benefit to the employee in which there is no out of pocket cost from the employee to enjoy a meal during their scheduled shifts. Once again, the total cost of providing employee meals is transferred out of total net food purchases.
In short, items to be transferred generate no revenue; they do not contribute to net food sales. While the basic formula still applies, club and resort chefs have a little more paperwork involved to calculate monthly food costs. To simplify, B+P-E-T/sales.