Everyone knows the now outdated statistic that 90% of restaurants close within their first year. But the reality behind that old wives’ tale is that pretty close to 25% – 1 in 4 – are shutting down within the first year. I was a partner in a restaurant for five years. During our first six months the restaurant was booming–but we weren’t seeing any of that success translating to our bottom line!
We were watching labor, we knew what our variable and fixed costs were, and we thought we had our food costs under control. Like most chefs and restaurateurs opening up their first place we put pen to paper for quick estimates on costing out each of our recipes and plate costs based off of our invoices from purchases. From there we established initial prices and put our menu together. As we updated our recipe spreadsheets we saw that our food costs were upwards of 40% – how did our food cost get so out of line?! The process was arduous and time consuming – there had to be a better way!
The way we started seemed reasonably efficient and effective but as time goes on, things don’t stay the same. Prices of ingredients fluctuate, you change which vendors you make purchases from, menus change and sometimes so do portion sizes among other things.
Everything in the restaurant world affects the razor-thin margins that we operate on. If you don’t stay on top of every detail, that’s money slipping right out of your hands. There were tools to help us operate at the margins we were aiming for but the only things that fell within our price range were archaic, too rigid, or just flat confusing.
Everything in the restaurant world affects the razor-thin margins that we operate on.
Most of the products out there were geared towards larger operations and restaurant chains who could afford the installation, setup, and monthly fees associated with the software into their annual budget. I watched my business partner–and head chef–spend hours updating spreadsheets to give us a better glimpse of our true margins. A process that had to be repeated endlessly as our costs changed.
As a programmer and a partner in the restaurant, I knew there had to be a better way. I started to work on the side on a program that would allow the restaurant to watch the margins without being bogged down in the paperwork. Something that could track the ingredient costs from all of our vendors, use those costed ingredients to build out standardized recipes, and to track the cost of the finished menu items that we were selling.
Even the first useable version of the program provided immediate benefits! We would get deliveries from our vendors and quickly update the prices of ingredients from the invoices in minutes.
Additionally, we had detailed recipes for all the sub recipes that went into making everything on our menu – so now we had recipes for our new cooks (and our veteran cooks) to go off of when prepping, and now could easily hold them accountable for making every recipe the same way, every time whether it was a final plated item or a Chipotle Aioli from the prep station. We had also combined our sub recipes with raw ingredients to make all of our final menu recipes, which we could plug in the price we were looking to charge and see if it fell within our desired margins. Just with implementing this new program and getting everyone involved, we were able to see where we had made mistakes with pricing our menu, and able to quickly change them, as well as head them off before they were an issue whenever we wanted to add on something new!
I figured “why stop there”, so our bar manager started to use the program for all of the bar costs – the bar’s purchases as well as the syrups, mixes, and infusions we used. ChefHub (un-named at the time) was a game changer – the new data was saving our business!
After our own success using ChefHub, we decided to continue developing it into something that other restaurants could use. That is how ChefHub got started. Our goal from the beginning was to make sure that we have an industry leading product, priced so that any restaurant – small “mom & pop” to the largest chains – could use.
That’s how ChefHub was developed: a need for a reasonably priced recipe costing system that worked well for businesses large and small. It helped us wrangle our costs and turn a profit and it can do the same for you!
– Steve Farrow, ChefHub