FOOD PROFITABILITY, FOOD WASTE AND THE 13.5% VAT INCREASE
It’s absolutely paramount that any food business knows their food gross percentage margin GP% at least once a month. But it’s even more important what action is taken with the result. It’s also very important that the result is calculated by a qualified person. It’s not recommended that a staff member produce this result, why? Because how often will they tell you bad news. Things don’t go right all the time so it’s important to have this correct information at the ready and the right action taken.
What is a good GP%. In my opinion there’s no correct answer to this question. A very good GP% would be 84% and a very poor GP% would be 51% and below. A large five-star hotel in Dublin could potentially achieve an 84% GP% but if a smaller rural business tried to achieve the same margin it would be out of business very quickly. Why?
What a food GP% should be depends on many factors. The style of service, type of business, the type of food, the businesses circumstances, what are the current overheads, competition and the external factors, customer perception etc. An expected high GP% result could be required to cover a high wage bill due to the complexity of service. Rent & rates could be high due to location. So, it’s a delicate balance to get right.
One way to increase the food gross percentage margin is to review the food waste being generated within the business. There is a free online tool available were you can enter your figures and the system will tell you exactly what your position is with regard food waste. This system has been approved by experts in industry including County Councils, the EPA, The Food Waste Charter and StopFoodWaste.ie and is part of the Food Waste Aware Campaign.
By starting to tackle your food waste you can quickly pull back the very short sighted 50% vat increase due to start in January.
Food waste can affect the gross percentage margin by up to 8%
Food Waste Calculator
The food waste calculator is currently hosted here on this website
It gives many types of food business a free online tool to assess their own food waste.
The results it produces are explained below
If your Food Waste Percentage (FW%) is higher than the benchmark 10% then you are generating too much food waste
You can contact us to find out how we can help reduce your food waste. There are large financial and environmental gains by reducing this waste
The Food Waste Percentage FW% figure relates to your net food purchases
This is the overall business impact saving based on the information provided. The Cost To Produce figure (CTP) takes into account all the cost components of running your food business including raw materials, labour and fixed costs
If you reduce your food waste to the target FW% 10%. This will help reduce your carbon footprint. Food waste in hospitality is towards the latter end of the supply chain therefore has a higher carbon footprint
Result shows the annual saving in tonnes Co2 equivalent of greenhouse gas GHG
(Based on the calculation 1kg of food waste = 2.54 kg of GHG)
Food waste ends up in the food bins through preparation waste, plate waste and unserved food. This result shows the percentage you need to reduce these categories by based on the information provided
Oli Gleeson, ProfitWatch