Coffee Shop Strategy 101: How to Control Coffee Shop Inventory & Food Costs

Posted by Julie on 9/28/20 8:48 PM
brooke-cagle-8jp-6SjVibM-unsplash (1)Besides having a great location, well-trained staff and a fabulous menu, the things that will assure your coffee shop remains profitable are optimal management of inventory and food costs, and focusing on quality ingredients for your menu items. Here's how you can ensure you're getting the most out of your inventory.

Manage your inventory so you understand what works.

Maintaining enough supply on-hand to generate sales is only the beginning. Ultimately, your goal is to calculate your inventory usage within a certain period so you can compare it to your sales, and find out:

  • how your coffee shop is performing financially.
  • if you have shrinkage.
  • what inventory minimums you need.
  • food/beverage costs so you can price menu items correct.
  • which items are the best-selling and most profitable.

While there is software that can help with inventory management, you should still take the time to understand the basics of how to do it by hand, so you make better purchasing decisions.

  • Here's the formula to determine your coffee shop inventory usage (the cost of your inventory in dollars):
    starting inventory + received inventory – ending inventory = usage
  • Once you know your usage number, you can divide it by total sales to estimate your food and drink costs with this formula:
    usage ÷ total sales

You can also use your inventory usage number to estimate how much you’ll need to purchase in the following periods. By getting into a regular ordering routine and adjusting it as your sales change, you’ll always be prepared. This prevents food spoilage caused by over-ordering will help avoid running out of product.

Control your cost of goods.

Building cost of goods oversight into your management routine will ensure you can consistently control your...you guessed it...cost of goods. These six tips span every part of cafe management, touching planning and process to keep anything from slipping through the cracks.

Review your menu at least once a year

To keep your food costs in check, review your menu at least once a year to make sure prices are where they should be. Nix items that aren’t selling and make tweaks if you need to. (This doesn’t mean you have to rewrite the whole thing or add a ton of new items! Just make sure everything's working the way you want it to.)

Maintain your markups

Generally, your food cost for any given menu item should be around 35% of what you sell it for. This means that if you pay $1.00 for something (including the cup, lid, condiments, etc.), you need to charge a minimum of $3.35. That may seem like a huge markup for a latte, but remember that you aren't just paying for the latte, you’re paying someone to make the latte, serve the latte, and clean up after the latte is consumed. Plus everything in your café or restaurant, from payroll to the electric bill, needs to be covered by the food you serve.

Standardize portion sizes

One reason chain restaurants are so successful is that they are exacting about portion control. Employees in those establishments know exactly how much of each ingredient to put in every menu item.

To control portions in your own café or restaurant, everything should be measured out, at least until you can safely eyeball ingredients. Portion-control pumps for syrups, scales to weigh coffee, and actual measuring cups for chocolate powders and frappes should always be on hand.

You can also purchase some pre-portioned items, like single-serving cream cheese packets for bagels. They may be more expensive, but can save you money in labor and food waste. This can be especially important in high-volume shops, where less food prep will help you avoid long lines and rushed (poorly-made) menu items.

Create a balanced menu

Food markets fluctuate depending on the season, the weather and the price of gas. At your coffeehouse, the price of milk and coffee are probably the most important to pay attention to. There is little you can do when prices jump, short of changing your entire menu every few weeks, and no one has time for that. However, when you balance expensive items that are prone to price fluctuations with items that have stable prices, you can help maintain workable food costs.

Make items versatile

Throwing away food is throwing away money. Using ingredients in several menu items will keep food spoilage down. It is also a good idea to update your menu periodically and remove items that aren’t selling.

Don’t live and die by your cost of goods

Premium ingredients can lead to pricier menus, but that doesn’t mean you should use the cheapest coffee, milk, syrups, cups, etc. At a coffee shop, quality far outweighs cost if you want return customers and to be considered “specialty.” Quality, consistency and taste will give your customers a sense of value from your products that will bring them back again and again.

Rather than cutting corners on quality, make sure you're avoiding mismanagement of labor costs (too many employees per shift) and food/drink portions (recipes not being followed correctly) that will quickly eat away at your profits. Always keep an eye out for overstaffing, and make recipes as foolproof as possible.

Find a vendor who can help your coffee shop run smoothly.

We think that might be us. If you're looking for a wholesale coffee shop supplies vendor that's more than just a catalog and a customer service line, we're here for you. We can manage your equipment maintenance, forecast your orders and inventory needs, and provide plenty of tips on streamlining your processes.

Our decades of experience in the industry and passionate sales experts (who all come directly from the coffee and restaurant industry themselves) are here to assist you in getting your coffee shop strategy right the first time. Get in touch with us to learn how we can help you take your next step.

Get in touch with our coffee shop strategy experts

Read the other posts in this series:

Coffee Shop Strategy 101: How to Run a Coffee Shop Profitably

Coffee Shop Strategy 101: Targeting Your Concept to Your Customers

Topics: Business Savvy, Expert Advice