QSR is fast and dynamic in its nature  -  and the only way to stay ahead is with data. Inventory management applications like Orderly Inventory can help crunch the numbers and create important reports for QSR chains containing these KPIs, but what if you get quizzed on how they work?

Here’s an explanation of some of the most important.

Actual Food Cost Percentage

The actual food cost (occasionally reported as a percentage of your total sales) is a measure of how much your food actually cost (who’d have thought it).

• Beginning inventory is the cost of inventory at the start of the reporting period. If cost changes during the period, it is standard practice to use the most recent cost per unit.
• New inventory, is the cost of the inventory you received during the reporting period
• Final Inventory is the value of inventory left at the end of the period
• Total Food Sales is the amount you took for that food during the reporting period.

Theoretical Food Cost Percentage

Theoretical Food Cost is what your food cost should have been in an ideal world with perfect portions and no breakage, waste, or shrinkage reported as a percentage of Total Food Sales.

Where:

• SKU Food Cost is the anticipated cost for each menu item — include everything that gets served with it (e.g. napkins and plastic forks — though plastic forks will put you on Santa’s naughty list with us).
• SKU Units Sold for the period for each item.
• Total Food Sales — the amount you took for that food during the reporting period.

Actual Vs. Theoretical Variance

Where:

• Actual food cost is (Beginning Inventory + New Inventory) — Final Inventory)
• Theoretical food cost is ((SKU 1 Anticipated Food Cost × SKU 1 Units Sold ) + ( SKU 2 Anticipated Food Cost × SKU 2 Units Sold )) + [etc]

You should expect variance here — but if you track this week on week you are looking for massive changes to that variance. The most common places to look are increases in loss, theft or waste and checking that any updates to supplies prices or your recipes are listed correctly in the system.

Sell-Through Rate

Your sell-through rate tells you the percentage of your available inventory that actually got sold. If the rate is getting lower over time it could mean you are beginning to overstock and you should start to worry about waste. When the rate is too high, it is a warning signal to get more inventory in.

Due to Boris’s Christmas bubble changes, if you brought the stock for your Christmas table early we’re expecting you to have a low ‘sell-through rate’ as you may have fewer people at your Christmas table.

Menu Item Profitability

Some items on your menu are inherently more profitable than others. With lorries tailing back up the M20 and borders closed, BLT sandwiches are about to get way more expensive than just a bacon one.

Sometimes low-profit items aren’t all that bad, especially if part of the brand and usually paired with a higher value item or to build customer loyalty (here’s to you, McDonald’s saver menu).

Want More?

We’re building a big glossary of these formulas to provide you with a cheat sheet for when you are asked! For now, though, use Orderly Inventory to calculate all your KPIs (no maths needed!)