The straw that breaks the unwary back

Bob Cotton, Non-Executive Director of IndiCater argues that it’s time to go back to basics.

For the last three years caterers and restaurateurs have been enjoying a remarkably benign period of food deflation.
Now, with Brexit on the horizon, new skills are needed to deal with food inflation.

From 2008, when it spiked at some 13 per cent, food inflation has been tumbling to five per cent in 2012 to zero and minus territory in 2014 and ever since. At a time when costs in other areas – wages, pensions, rent and rates, energy – have been continuously on the rise, the cost of food has been a stable component of the business mix.

No longer.
With Brexit has come a lower value pound. Many of the foods and ingredients we use everyday – many imported – are already more expensive than they were before the referendum. Indeed, one buying specialist, Lynx Purchasing, claims that a basket of goods routinely bought by caterers has risen by nine per cent between March 2016 and March this year.

This is a sign of the times. Food manufacturers and suppliers are already raising prices. Items like coffee, sugar, tea, spices, much of our flour and meat, some of our fruits and vegetables will cost more for as long as the pound remains at its present level simply because so many are imported. And the value of the pound is unlikely to rise in the near future.

So those caterers who have been blithely maintaining menus without having to take food price inflation into account, will have to get out their calculators again – or better still utilise intelligent back office software that automatically does the calculations for them. Food inflation is on the rise and is forecast to rise by five to ten per cent within the next twelve months.

Catering is a notoriously low margin business at the best of times. An increase of this magnitude, alongside all the other cost hikes that are piling up, could be the straw that breaks many an unwary caterer’s back.  So wastage has to be cut, buying made smarter (e-procurement software can help), dishes must be changed or made less expensively, prices increased more subtly, savings must be made in other areas if the business is to survive profitably.

What action can be taken now?
It’s back to basics. Food cost increases have to be tackled immediately. With food prices on the rise, caterers have to get back into the practice of weekly – even daily – food costing. The unit cost of all dishes must now be available on a daily basis. A five per cent increase in food cost for a restaurant using £500 worth of food a day will result in an annual cost increase of over £9000; with £170 leeching out of the business every week, immediate remedial action is needed. The busier the business, the bigger the loss and the more regular needs to be the control.

Fortunately, there are control systems available that help maintain the all- important gross food percentage as well as other key ratios – systems which save time and money and provide the kind of accurate information that efficient businesses require. IndiCater’s StORM software module, for example, controls, specifies and manages all food and beverage costs – a tool that can result in a dramatic improvement on the bottom line. Making use of modern technology to help control the business, before the full impact of Brexit is felt, will be the mark of the wise – and successful – caterer of the future.