The Pelican Edge
Spring 2021
17
EXPERTISE
HOW TO EFFECTIVELY MANAGE YOUR FOOD GROSS PROFIT
Simon Gurney, Procurement Manager
Knowing your costs and the factors which impact your profit margins is critical - this knowledge ensures that you are in control throughout each financial period, and you know where your margin is heading. In this article, Simon Gurney, Procurement Manager at Pelican with 12 years of experience as a chef, shares his expertise on how to effectively manage food gross profit. Read on for an overview of areas often overlooked, practical tips, simple monitoring tools and opportunities to improve. Importantly, Simon also explains how Pelican’s Pi system cuts manual processes, saving you and your team a huge amount of time. If a chef’s role was to be defined in very few words, it might be said that the job is to provide good, safe food for the establishment at which they are employed. But in recent years it has changed from not simply buying and making good food, but rather it has become about making money from the food that you buy and cook. That difference between cost and nett selling price - gross profit - can be measured in cash margin or as a percentage margin. This is an interesting question because the old adage is that “you can’t bank a percentage”; however, many businesses target a percentage GP as the main KPI each month. It is an area worthy of deeper thought in public catering. After all, is it preferable to sell 100 steaks a week at £20.50 for £12 nett gross profit (cash) each, or to sell 50 at £25 and 76% gross profit margin – because making a percentage is the KPI? In the first example you would make £1,200 gross profit and in the second you would make £750.
However, this cash versus percentage debate is likely to be a corporate decision, so on a local and daily basis what are some key areas to help manage gross profit and more importantly what are the practical steps to take?
As an example, if your monthly revenue is £30,000 then every £300 you spend, or indeed save, is worth one percentage point on the GP. This kind of information can be broken down into chunks which are easier to understand in the operation.
First get your team onboard and tuned in to financial performance. Be aware of the impact of expenditure in your own business. As a quick rule of thumb, whatever your monthly revenue is, divide that by 100 and you will know the effect in £s and %s on your GP.
So, if you wanted to target a twopercentage point increase on the GP this month you could target your team with a £600 saving in the month, broken down into £20 a day and then even further into £7 per service. This way when you see two loaves of bread, a kg of
