Control food cost, reap profits, says Ostrander

March 16, 2003

ATLANTIC CITY, N.J. -- Customers of Big Dave's Pizzeria never knew their pizzas were made the wrong way -- nor did they care -- because they tasted great. But Dave Ostrander, the store's founder and former owner, knew well that the pies sold at his Oscoda, Mich., store lacked consistent portion controls, and that was costing him big money.

"Fortunately for me, I didn't run out of money before I ran out of luck," said Ostrander, now an operations consultant to the pizza industry. "All we did was make some simple changes in the way we did things."

Those changes, he told a crowd gathered at the Northeast Pizza Expo in Atlantic City, N.J., super-sized his profits.

During his portion control seminar, consultant Dave Ostrander discussed the use of digital scales.

"Every time you drop your food cost even a percent, it drops right to the bottom line," said Ostrander, speaking during his seminar, "Perfect Portion Control Made Ridiculously Easy." If a $500,000-a-year restaurant has a food cost of 36 percent, he said, dropping it to 31 percent "is like giving yourself a $25,000-a-year raise."

Achieving such gains, Ostrander said, is not only possible for any operator, it's simple -- if he will apply some basic food-cost controls.

"I saw a survey once that tracked a thousand restaurants over 12 years," Ostrander said. "Over that time, 93 percent of their owners had left the business. ... The remaining 7 percent had one thing in common; they all had a total command of their food cost."

Ostrander said that no pizzeria operator will ever gain that total command if, during pizza assembly, employees are allowed to "free throw" pizza ingredients. Using some sort of portion measurement, such as scales, scoops or cups, he said, is a must for consistent and significant profit.

The cheese factor

Ostrander's own portion control epiphany came when a colleague asked if his employees were free-throwers. Ostrander admitted they were, but explained that his store was very busy and his staff was really good at maintaining consistency.

When pressed to prove his own pizza-making consistency, however, the closest Ostrander got to his own cheese specs, after several tries, was an ounce-and-a-half off.

The colleague suggested Ostrander pre-weigh the desired amount of cheese for his most popular-size pie, and then store each unit in washable plastic portion-control cups. As orders came in, pizza makers simply would pour out that measured amount of cheese on each pie. Pies one size larger would get half a cup more, pies one size smaller got half a cup less.

Ostrander saw the value in using the cup system, but knew convincing his staff to cooperate would take some effort. To entice them, he promised the crew he'd give them half the cost savings accumulated in the first two weeks if they followed the procedure.

"To get your employees to do something like this, you've got to get on their radio station ... WII-FM," said Ostrander. Those call letters, he explained, stand for "What's In It For Me?"

The crew played along, and everyone made money.

"I saved 20 percent on my cheese costs in the first week, and went from using 1,000 pounds a week to using 800 pounds," he said. Using the cups, he added, allowed the pizza makers to "cheese a pie in 5 seconds."

Ostrander pointed out that "cupping" cheese is only one part of controlling the cost of the most expensive item on an operation's pizzas. Pricing it wisely is a key factor, as is using diced cheese instead of shredded for faster assembly.

"I believe it goes on faster, it doesn't clump and it doesn't flip over the sides of the pizza and leave burn marks," he said.

He encouraged operators to monitor the price of 40-pound blocks of cheddar (see the middle right side of PizzaMarketplace's home page for updates every business day) at least weekly on the Internet, and then negotiate a consistent price above the block rate with their distributors. The result, he said, is a price that provides a fair margin for distributors and moves predictably in step with the block rate.

"To get a deal like that, you've got to be loyal and buy all your cheese from one source," Ostrander said, adding that operators should expect to pay at least 20 cents more per bag for shredded or diced cheese.

Inventory management also is crucial to lowering food costs, Ostrander said. If mozzarella in particular isn't dated and rotated religiously, it could spoil.

Getting employees to do that, he said, takes regular operator inspections and some tough lessons in accountability. On one occasion, when a shift leader charged with inventory at Big Dave's allowed a case of cheese to go bad, Ostrander asked him for a $20 bill -- and then burned it on the stove in front of the young man.

The point, Ostrander told the employee, was that inventory spoilage cost him money, "and I had to let him feel that same pain." Weeks later, once Ostrander was convinced the shift leader had learned his lesson, he gave the employee his money back.

Pizza geometry

Ostrander said all pizza toppings can be costed out precisely using a little geometry.

"Remember the formula for finding the (area) of a circle?" Ostrander asked the audience. "Pi (3.14) times the radius squared. That works perfectly for pizza because it figures your cost by the square inch."

Once an operator calculates portion controls for one size of pizza, the formula can be used to compute the exact amount of toppings -- more or less -- required for any size pie.

The formula also allows pizza to be value-priced by the square inch, he said. For example, said Ostrander, an operator could sell two, 10-inch, two-topping pizzas for $12, and successfully counter a competitor's offer for a 14-inch two-topping pie for the same price.

While the 14-inch pizza (7 x 7 x 3.14 = 154 square inches) is just three square inches smaller than two 10-inch pies (5 x 5 x 3.14 = 157 square inches), the perceived value is much higher with the two-pie deal.

"Which do you think that customer will buy?" Ostrander asked. "She wants two pizzas for the same cost."

Ostrander advised operators to focus on three key areas to get a good grip on their food costs: buying, math and pizza assembly.

Buying is the simplest area, he said, because distributors largely are fair about prices.

"It doesn't behoove them to gouge you because they'll lose a customer," he said. "Build a relationship in which you both win."

Key to pizza assembly, he said, is the use of digital scales, pizza topping spec sheets posted on the wall above the make table, and the right tools, such as cups for cheese and spoodles for sauces and vegetables.

"Veggies cost money, folks. Maybe not as much as pepperoni or cheese, but you've got labor into them, and they're highly perishable," he said. "The scale works well, but I think it's faster to use a spoodle to measure with."

Analyzing portion control and costs mathematically will help immensely, he said. Operators should use a spreadsheet program that utilizes an easy-to-update database which can calculate cost changes quickly.

Ostrander's own use of spreadsheet programs such as Microsoft Excel saved him a lot of time compared with hand calculations. But operators who aren't computer savvy are sometimes intimidated by such programs, he said.

"I loved Excel when I learned how to use it, but I also saw how easy it was to delete a column and never get that data back," said Ostrander, who recently developed and introduced his own spreadsheet program called FoodCost Pro. The software was developed specifically for pizza operations. "The point is to get the math down pat, no matter how you do it. Don't be eyeballing it, because it'll cost you somewhere along the line.

Topics: Cheese

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