‍It’s time to get excited and start paying attention to your actual versus theoretical cost variance! As painful as that last sentence sounded - multi-chain operators have the potential to add thousands, in fact, millions to their bottom line.

Understanding the Difference: Actual vs. Theoretical Costs

Let’s start with what actual versus theoretical cost variance means. Put simply, your theoretical cost is what your food costs should be for a certain time period. It takes into account your ingredients and assumes your store is operating with portion perfection, zero waste and no shrinkage of ingredients.

Your actual cost (or as we call it, “your real-world cost”) considers the fact that you could be understaffed due to illness, your sales and order accuracy is way down due to local COVID-19 restrictions, portion sizes are completely inaccurate (due to a member of staff thinking your customers haven’t eaten for weeks), and to top it off, another team member is stealing all the butternut squash! This is an Armageddon style example… but you get the idea!

Once you understand the difference between the actual and theoretical metrics and have the correct measures in place to accurately track them, you can begin to implement efficiencies, optimise your costs and reduce your variance. This is where you can truly start to ramp up your profits.

The Power of Variance Reporting

Running your variance report daily versus once a month leads to less needless food waste and lost profits. Orderly helps you to break that re-occurring chain before it’s too late and you’re a month down the line identifying the issue on your monthly variance report.

Variance reporting is an amazing tool that can help you to identify bad usage early. Tracking your variance daily sounds painful but it doesn’t have to be.

Orderly: Your Key to Optimizing Food Costs

Orderly’s supply chain management software helps you and your staff to learn, improve and compete in order to stay ahead of your competition and deliver the most economic and sustainable results possible!

Get insight into trends and useful information that can help you to maximise your profits. Having fingertip access to your data allows you to identify when the price of products or ingredient components change, which means you can quickly adjust and solve potential challenges.

Closing the Gap: A Multi-Chain Perspective

Your actual versus theoretical variance is also referred to as your "gap". If you operate multiple locations and you have the ingredients in place to reduce your gap, imagine the positive impact on your businesses bottom line!

Closing the gap is a challenge for many operators and there are plenty of factors to consider measuring, for example — waste, shrinkage, portioning, individual ingredients and much more. It’s also possible that different restaurants in the same chain or brand could have different issues, so standardising metrics across your brand may not harness the best results. This is where Orderly's Digital Assistant leverages AI to understand each of your outlets and the unique challenges being faced.

The Orderly Digital Assistant is designed to help managers improve their individual and restaurant performance and importantly helps organisations identify and eliminate waste, in turn creating a more sustainable environment. Within the Digital Assistant, Orderly provides each location a score, which tells managers:

• Three things they’re doing well
• Two things they need to improve

By focusing on these key areas, your team can effectively reduce waste, increase efficiency, and boost profitability.