Recipe Item Modeling - FAQs
Overview:
Recipe Items that are sold are referred to in COGS-Well as Sales Items. If you have added the ingredients (the recipe) for a Sales Item, then you can "model" pricing, cost percentages, and gross profit for a Sales Item. Please see the below example Sales Item:
The above example is for a California Burger and the Targets, Models, and Ingredients have already been set up. Because this recipe is sold, the Recipe is Sold box is checked and the fields for the current Retail Price, Model Price and Theoretical Cost, Targets, and Gross Profit are displayed. The current retail price is imported from your POS system:
Current Retail Price: The retail price is the most recent price for this Sales Item that was imported from your Point of Sale system. In the above example, the Retail Price is $12.50.
Retail Theoretical Cost %: This is the Theoretical Cost divided by the Current Retail Price. In the above example, it is $3.954 divided by $12.50 = 30.41%. This can be considered the Sales Item's theoretical food cost percent.
Model Price: The Model Price for a Sales Item is initially blank. You can enter a model price in this field that you are considering charging for this item (we have entered $13.00 in this example). You can see the impact of different model prices dynamically on this display. There is also an option on most of the Menu Analytics reports to use the Model Price.
Model Theoretical Cost %: The Model Theoretical Cost percent is the Theoretical Cost divided by the Model Price. In the above example, it is $3.954 divided by $13.00 = 30.41%.
Theoretical Cost: This is the cost to make this recipe item based on the ingredient costs and portions. The theoretical cost is perpetually updated based on the most recent invoice cost for each ingredient.
Gross Profit: This is how much money you make when you sell this item. It is the current retail price minus the theoretical cost. In the above example, it is $12.50 minus $3.954 = $8,546.
Target Cost %: Use this field to enter the theoretical cost percentage you are targeting for this Item. For modeling purposes, you can change the target cost % to see what the Target Price should be to achieve the Target Cost %. In the above example, we are targeting a 30% theoretical cost.
Target Price: This is a calculated field that displays the Retail Price you should charge to achieve your target cost %. In the above example, to achieve a Target Cost % of 30%, the Target Price = $13.18.
Modeling:
COGS-Well uses the term "Modeling" for using the fields reviewed above to examine the impact of changing prices, costs, or targets.
Model Your Pricing: We can enter a new model price for the California Burger of $13.95 to see the impact of this new price. Please note that the model theoretical cost for the item drops from 30.41% in the example above to 28.34% in the example below after we increase the model price:
Model Your Target Cost %: We can also use the Target Cost % to determine what price to charge for this item to achieve our target cost %. For example, if we are comfortable with a 35% food cost for the California Burger then we can change the target cost % to 35%. As we can see in the example below, the Target Price drops from $13.18 in the example above, to $11.30 if we increase the targe cost %:
Model Your Ingredients: You can also model the impact of changing ingredients such as butter to margarine. Or adding ingredients such as adding mayonnaise to the California Burger. Or changing portion sizes such as using 1.5 slices of bacon instead of 2 for the California Burger. Below is the current ingredient tab for the California Burger:
In the below example, we changed the portion size for bacon from 2 slices to 1.5. We can then learn from the modeling display shown below that making this change will lower the theoretical cost for this item from $3.954 in the example above to $3.721. We can now charge less ($12.40) to achieve our target cost of 30% and our gross profit for the item has increased to $8.779 at the current price:
Summary:
When you are done modeling, you have the choice to exit a recipe item without saving your changes or to save them.
Please keep in mind that your ingredient costs are based on the last time you received them on an invoice. As the cost for ingredients change, the modeling fields for each sales item change to reflect ingredient cost changes. If you change pricing in your POS for a sales item, the current retail price field will change. In summary, the modeling fields always reflect your most recent price and costs.