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It's not talked about much, but retail grocery has a perpetual food-cost advantage over the QSR restaurant industry.
Food Cost Inequity
The disparity is called "Buy-by-the-Pound and Sell-by-the-Pound" (Retail) vs. "Buy-by-the-Pound and Sell-by-the-Piece (QSR)." Since I have worked mainly for chicken QSR chains, we dealt with this inequity continually with bone-in chicken parts, boneless wings, regular wings, Popcorn Chicken, etc. And since pork, seafood and beef products can be impacted, protein products — due to their higher food costs — are particularly problematic to a QSR food-cost Proforma statement.
But the inequity issue is pervasive within the QSR industry. For example, produce products are particularly vulnerable, as are side portions and desserts that are spooned out of the frontline counters. Since I previously worked for Boston Market, they represent this case perfectly. In addition to the QSR chains that sell a lot of chicken, the pizza QSR chains face portion control requirements needed to control against this cost in equity — particularly topping control.
The questions to ask the retail convenience and grocery industries is, "Do you take advantage of this inequity, or ignore it?" I suspect that most retailers go about their daily business without paying much attention to it. That would be unfortunate if they didn't leverage the advantage. So when retailers complain about thin margins and talk about QSR profit margins, I shed few tears for them.
What may seem as a clear retail advantage is a blessing in disguise. QSR executives already understand some of the protein cost inequities, but it is prevalent throughout their menu. So how can QSR executives turn a disadvantage into an advantage?
For more information on "Process Cost Analysis Methodology (PROCAM), Activity Based Costing (ABC), or Cost Engineering, please contact me at firstname.lastname@example.org or 303-471-1443.
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