Embrace the Waste
How to find your food-waste sweet spot.
You have to spend money to make money, and in the foodservice business that means throwing good food away. Customers need to see a bountiful case of sandwiches, a freshly cooked pizza with still-warm toppings and a still-crisp crust, or a warmer full of freshly fried chicken before they’re enticed to buy any of it. Unfortunately, that means putting out more than you’re likely to sell.
“The restaurant industry did it— look at buffets,” says Ryan White, director of foodservice for Blarney Castle Oil Co., which runs 90 EZ Mart stores in Michigan. “Buffets waste so much food, but they can be very profi table.”
Learning this essential ingredient to foodservice success requires a few steps:
- Track what you toss. By day, day-part, category and item.
- Measure against sales. Compare your waste in relation to customer traffic, overall sales and foodservice sales. What does it tell you?
- Don’t scale down—build up. Increase what food you put out until you fi nd a formula that balances your waste ratio to your sales goals.
Chasing a Benchmark
“Foodservice is not a perfect world; there has to be waste,” says White, whose stores have a mix of three different foodservice programs: Subway, Hot Stuff Foods and the company’s proprietary Lucky Louie’s Pizza. “Too little is bad. If your waste is at 1%, then you’re scared of waste and you’re not putting enough out.”
White aims for 5% to 6% of total sales allocated to waste. He also uses that number to create an accurate food cost percentage for his program (28%). From there, he can forecast how much he needs to sell in a day to reach his goals.
For Scott Zaremba, president of the eight-store Zarco 66 Earth Friendly Fuels, Lawrence, Kan., food waste is still a moving target. Three of his stores have been remodeled over the past year with an extensive foodservice program. “We haven’t hit a pace yet to say, ‘OK, stop here,’ ” he says. “But I know on the days when we don’t have any food waste, it’s because we don’t have any product out.”
So what’s an accurate benchmark for c-store foodservice waste? The traditional foodservice industry tosses 4% to 10% of food, according to waste-tracking systems company LeanPath, Portland, Ore. But how that metric should read in the c-store channel is challenging in light of the industry’s breadth and diverse foodservice models. For example, made-to-order programs will likely have lower food waste but higher labor than a graband- go program. It also depends on price point and cost of goods. What’s right for one chain might be too high or too low for another.
While White is keeping his waste at a tidy 5% to 6%, Jane Hartgrove, vice president of Passport Foods Co., Denver, thinks 20% is manageable given the velocity that an operator can do. “That’s a personal opinion,” she says. “Other people are going to freak.”
Deborah Holand, consulting partner with b2b Solutions LLC, Dallas (foodservice911.com), tells her clients to focus on a goal of 30% direct margin (what she calculates as sales minus cost of goods and labor). This starts with using production schedules to record both quantity counts and outof- stocks, as well as labor. “It will never fail,” she says. “The production schedule drives everything.” Holand says. Aside from that direct margin goal, she suggests retailers track waste for each foodservice category in addition to an aggregate percentage for the entire program. She also suggests the following waste targets:
- Made-to-order: 3%
- Prepackaged: 6% to 10%
- Doughnuts and other bakery items: 15% to 20%
- Dispensed beverages such as coffee: 15% to 20%
- Fountain: 1%
But still, Holand reiterates the importance of overall direct margin over itemized waste percentages: “The key to achieving the goal, whether fullservice or self-service, is to engineer the menu properly—balancing sales price to drive volume and considering recipes for food cost and labor required by item—to have the menu items theoretically achieve that 30% target, factoring in the waste targets. Then, when the profit does not achieve the goal, you know you have either a portioning or waste problem.”
Track The Trash
Each EZ Mart store has a foodservice manager that runs the program and reports daily sales and itemized waste counts, by day-part, to the store manager. The store manager sends those reports to White
White receives those weekly reports every Monday morning. “So now we have a dollar amount for what we’re throwing away and a dollar amount for what we’re selling,” he says. “We also have a total customer count, a customer count of people purchasing food and a customer count by day-part.”
With these numbers, White can see that the day prior, out of, say, 2,000 customers, only 88 of them ordered food—well below his goal. So he’ll dissect the waste sheet to see if waste was too low or too high that day. If it’s too low, then not enough food was put out. If it’s off the charts, then something is wrong with the food itself. Is, for example, a certain kind of soup not selling well compared with other soups? Is your all-day breakfast menu dropping precipitously after 11 a.m.?
White then uses his waste percentage to create sales goals. If a store is selling $2,000 per week in food, and 5% to 6% of that has to be waste, then he knows he’ll bring in $900. “It’s just like paying the electric bill,” he says. “Everyone wants to be in the food business because, yes, there’s a 50% margin on average on a pizza. But you might not get the whole 50%.”
Zaremba of Zarco 66 may still be trying to find his percentage of waste, but he nonetheless keeps counting— hourly, even—so he can adjust his build-to sheets and displays accordingly.
His foodservice program includes both made-to-order and grab-and-go offerings. So far, three of the stores have been remodeled to include options such as sandwiches and wraps; yogurt- and granola-based “power lunches”; Scooters made-to-order coffee program; and Surf Dog, a made-to-order hot dog station. “One day you’re out of everything, and the next day you’re loaded. One day you’re out, the next you’re loaded. Figuring out what day it is, what the weather is like, what events are occurring—there are so many factors,” Zaremba says.
Some fixes he’s made include paying more careful attention to how hot holding cabinets and coolers affect grab-and-go foods through the day. Air-curtain cabinets can dry out cold foods, while humidified holding cabinets can make foods soggy.
Building up, not scaling down
For made-to-order and commissary-based food programs, factoring food waste is a more involved exercise with vari- ous types of waste, labor and inventory that need to be calculated. Retailers selling supplier-branded product simply need to find the perfect balance of sales and food waste.
“Do you want to have net sales of 80 units on 100 that you put out over the week, or do you want to have net sales of 40 units on the 50 that you put out? [It’s the] same waste ratio, but you want the net sales,” says Hartgrove of Passport Foods Co. “And you’ll never know that until you just do the diligence of putting out more food and keeping track.”
Hartgrove, whose company manufactures and distributes 8-ounce grab-and-go burritos under the Tres Picosos brand, tells retailers to fight the urge to scale down how much food they put out daily. Instead, she says, you have to build up.
“I’ve seen it countless times,” she says. “The first day the operator warms up 10 units of the new item and is disappointed to sell eight, which is 20% waste. The next day his instinct is to warm up eight units, since that’s what he sold yesterday and he doesn’t like that waste ratio.” Most likely, he’ll only sell six or seven. No one wants the last lonely burrito.
“Go against your instinct,” Hartgrove says. “Put out 12 units and sell 10. The next day, put out 15 and sell 14. Put out 20 units and sell 16. You don’t know how many you could have sold unless you embrace this process.”
As you’re building up, keep going until the waste ratio spikes, which means you’ve tapped out your potential sales. There, you’ve found your sweet spot. Use the worksheet on p. 63 to build up your units based on waste percentage, cost and price point.
Hartgrove points to a major truckstop chain that automatically accounts for waste. “When they buy one of my 12-count cases, they automatically receive it as 10. That’s how their waste is built in,” she says. “Proprietors have to look at the earnings from food sales in light of the waste. You take dollars to the bank, not percentages.”
Not making the foodservice sales you want? Find the weak spot using this checklist:
- Is your waste percentage extremely low? If yes, then you’re not displaying enough food to induce sales.
- Is your waste percentage within the range you want it to be? If yes, then check certain day-parts/items for weak spots.
- What are people throwing away? Find any extremely high-waste numbers and determine if the item is too expensive, not right for the market, or not rotated out properly.
- Is a specific day-part lagging? Try promoting it with specials and bounceback coupons.
- Was there one day in particular that did really poorly? Check the weather that day: Was there a snowstorm, or bad rain? Start including the weather forecast in your daily production charts. Bad weather forecasts will likely keep folks off the roads and out of your stores.
- Track your daily food waste by item, amount, day-part and reason for disposal.
- Create food production charts to predict how much of each item should be made.
- Determine your food cost percentage goal, the standard against which food cost is judged.
- Determine the waste percentage that works for your operation.
- Create a simple number that store-level managers can meet based on how much food they’ll put out and your food-waste percentage. Emphasize that store managers meet that number, not go above or below it.