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How to track inputs in food businesses to make clear profit

An essential learning model for restaurants looking for excellence in inventory tracking, Financials and profit making

A typical food business overview

Justfresh, a food service expert for more than 5 years, Another typical example is estimating how much it costs to prepare food for the week. Based off sales trend from the previous week and slightly decrease the budget if sales was low or sky rocket the purchase if sales soared higher, because we still have butterflies in our tummies ready to burst forth another week of great sales only to be disappointed for the most part.  For most typical Ghanaian food businesses , purchases are made for the week without looking at the gross profit margin a meal provides. Let us take a look at what a typical trend looks like with backing examples :

  • Starting out  

When Justfresh first began operations, it was not anticipated how sales would look like for you see, Justfresh was borne out of mistake or what you could call an accidental business. While AgriPro (AgriPro is the mother company) was attempting to be an authority is food security and making a name in agribusiness consulting, by organizing Ghana’s first farmers market , Accra Green Market in 2013, Customers began asking for the usual mixing of fruits which at the time was not very common in the Ghanaian market. Smoothies became a forte at the market and soon Justfresh began delivering smoothies and salads along with the fruits and veggies in boxes as the demand increased aside days when the market was held. So yes, the price of a cup of smoothie was speculated, not thought through, just speculated. 

  •  Studying sale consistency 

Sales for Melgee’s Waakye was increasing really fast and he got very excited because of the support he got especially from family and friends, also the referrals kept coming in . and then one day sales for him was increasing, at a diminishing rate. Just like the law of diminishing marginal returns, sales increased initially attained a maximum early in his new food business and then started diminishing… all other things being equal. Sales began on a high on certain days of the week and diminished at other times of the week. Now he began to see a pattern here and he knew something had to be done.

  • Finding a balance on spends or production cost

After a short period of testing and marketing and selling on good and terrible days, you begin to realize there has to be a balance on the production spends. After all, how will i predict when i will have great sales? And if i don’t i run at a loss because my items are perishable? Now let’s see perhaps i could buy based on the trend of sales. Yes! That is the plan. And that is what Justfresh did.  It worked fine in the beginning until the big hits started shooting in, we began having large orders from individual clients at a go, and guess what?  we could not meet the demand ! we lost some good sales and on the worse side, we looked inconsistent in the eyes of our clients, it pissed them off…

  •  Pricing copycats – the “it applies everywhere” principle

Now we had to make it up to our sales, be better ready next time. We spent more on production, anticipating large shoot ins , they trickled in, but we lost we could not sell as much we wondered why the sales were not coming in, Our clients did not want to hear anything we had to say even when we said we had enough to meet their needs. We were puzzled. We fluctuated our prices made combination promos to sell of fast. It took a while before we realized… that just like a child apologizes to win back their parents affection when they do something terrible, we had not hugged out differences with our clients and thought we could just buy them off with nice promos. It did not work.

  • Stay at the same pricing of others and then struggle to make ends meet.

Justfresh’s pricing was based of other beverage pricing, we thought no one will buy our product if we were too expensive. Yes we had reason to believe that because we had clients give feedback even though others did not mind. We stayed at our price where we thought was “middle ground” where it was safe or so we thought. We begun struggling. We sold alright. But we we were not turning over. Justfresh faced a lot of challenges. Logistical issues, poor handling by dispatch riders leading to poor presentation and reduction in the quality of our meals. we needed to expand, pay off salaries , focus on product consistency and be at the top of our game. Be the Justfresh brand that we dreamed of. Unfortunately A smoothie cup at 10 ghc was not cutting it for us. We needed volumes if we wanted to do any more dreaming. But then again clients declined due to other logistical issues and genuine quality… We were stuck…

  •   Losses and discouragement in operating the food business. 

It did lead to some losses for Justfresh and you guessed right we were getting discouraged we actually thought of closing everything down. But there was a turn around and that is what we want to share in our white paper. But we are curious to ask…

What you think the solution is… VIGILANCE?

An aware restaurant manager is a wise restaurant manager, and perhaps some will emphasize that the best tool to use for solving the balance with food costs and spends is a hands-on manager who keeps an eye on the inventory and staff and uses her calculator and brain to make sure the food is priced fairly, prepared accurately and served efficiently. This combination, plus the five troubleshooting tips discussed, will ensure a restaurant’s food costs are always within budget

Did it really solve the problem? … We thought so too

How we tracked our inputs and began making profits?

  • Agripro an agribusiness consultancy developed a sustainable system for food businesses to help business owners clearly see their spends and their profit margins through their financial system software and training .
  • It helped Justfresh estimate how much profit we were making and project how much we needed to do do to reach our targeted profit margin.
  • Justfresh knew exactly how much food they could make out of a product purchased without wasting anything, over buying or under buying
  • Justfresh could instantly see in a day if we made a profit or a loss and knew how much more we had to sell to cover our costs
  • The training alone brought clarity to Justfresh spends and they immediately knew what to cut out and what to maintain without compromising on the quality of their products. 
  • Justfresh got innovative ways to package and improve their food quality at the right cost to still make great profits. 
  • They were winning and reaping profits they never thought possible with Granger. Agripro’s profit tracking system for food businesses  

 

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