Before I created Flambia, Before starting Flambia, I founded two diet caterers. First Black Monkey Cooks, which changed its name to Primate, and then Cebulka Catering. I started the business with a partner who would take care of the food production. My job was to use my 15 years' experience in internet marketing to manage advertising and sales. As you can imagine, life wrote a completely different scenario. Let me share with you what my challenging journey into the world of food service has taught me so far.
I started the business with a partner who was supposed to take care of the operational side. It soon became apparent that this partner had no real control over the company that produced the food (at first we used sub-contractors). The margins were almost non-existent, the packaging was unsealing in transit and, worst of all, the food was simply disgusting. The team behind the scenes called it a prison dish. I split up with my partner and had to take over production, which I knew nothing about.
Despite the change in the external company, I quickly realised that this model would not work in our case. I was concerned with maximising customer satisfaction and keeping them for longer. The manufacturer, on the other hand, was interested in maximising his margin because of the nature of our contract, where we had a fixed price per set of dishes.
I decided that if we were going to grow, we had to have full control over production. The first thing I learned was that you can either have control or convenience. When I used an external company, the crockery was delivered on time. I also didn't have to worry about whether the supplier had brought the goods, whether the quantity was right and whether the quality was right (the supplier didn't always care about that either). But it was only when we had our own team that we could control what happened to the goods. This in turn created a whole new set of challenges, one of which was particularly difficult.
The first, seemingly trivial, problem was where to find product suppliers. Nothing could be easier! You might think. You type "catering supplier" into the search engine and there you are. This is where the first of the pitfalls comes in. The way I see it, suppliers fall into three categories:
● Large companies with a very wide range of products. They cover all or most categories. You can get everything from them. The price of convenience is often a much higher price. Examples are Bid Food Farutex, Makro.
● Specialised companies, leaders in certain categories. They have a wide choice in a selected group of products and often attractive prices. Because of their size and market position, they may not be as flexible or strictly tailored to the needs of your business. Instead, they are more predictable and their leadership status is no accident - they just do a lot of things well. Examples include Bukat, Intermlecz, Gobarto and Chefs Culinar.
● Smaller companies. They fall into two sub-categories. Those that compete for customers and want to increase their market share. Here you can get real gems, because the owners take care of each customer. This will be reflected in the quality, timeliness or flexibility of orders. Among the suppliers I can mention Frutis, Matpol and Ovotzer. There are also companies in this category that are small and unknown. This is due to the fact that they try less. The quality of their service is poor, their prices are unattractive and their assortment is inappropriate. Each of us has come across at least one of these companies.
When answering the question "where to find suppliers", a business owner who has no idea about catering (as I did in the early days of catering development) will most likely choose one of two options:
1. search the internet.
2. ask an expert, such as their chef.
Less than half of active companies have a website, of which less than a quarter inspire confidence. Most are among the largest companies and, as I said, size is not an indicator of successful collaboration.
I also thought: "My chef has worked in Michelin-starred restaurants. Surely he knows the best". This was another of my misconceptions, actually two misconceptions in one. Firstly, I expected someone with a culinary background to be enthusiastic about the supplier market. Secondly, that I didn't need to be concerned or interested, "after all, I have experts for that". My chef had the best of intentions, but it turned out that he simply couldn't compare the prices of dozens of products from all the suppliers every day and, secondly, actively search for them. At the time, I thought the chef was responsible for the product, the suppliers and the price. Now I know that I am responsible because as a business owner I bear the final cost.
I realised that the responsibility for my business is the cost:
- Products,
- people,
- logistics,
- customer acquisition and retention,
is mine, and I have to look at all these aspects.
I began by concluding that my assumptions and simplifications of reality had been working against me. So I decided it was worth challenging the status quo of duplicated platitudes that often obscure real problems and hinder business development:
- "Food costs in catering should be 30%". - At the time of writing, Primate and Onion's average food cost is 24%, or a nominal PLN 14.5 per bag.
- "Our food costs are much higher because we use the best ingredients." - This is a phrase people repeat to themselves to make themselves feel good about throwing money down the drain. At The Onion, the average rating on Google Maps is 4.7, and the rating of the dishes in the internal system is above 4.5/5 month after month.
- "The more expensive the ingredients, the happier the customer". - Can you think of at least one restaurant where, after ordering, you said: "How can people eat this? Do McDonald's, KFC use the most expensive ingredients? They have been on the market for many, many years and the number of locations is only increasing.
- "We have a low-margin product, we sell it cheap, we can't go lower in percentage terms".
- "I don't have time to deal with it. - You don't have time to make more money? Why are you running your business at all?
- "I negotiated with the supplier. This is already the minimum, it won't go any lower. He has the cheapest on the market". - Is this information coming from him or have you compared the whole basket (not just one product on which he has given you a mark-up to reflect the mark-up on others) and are you sure he has the cheapest because you have compared 30 other suppliers? If the answer is "I don't have time", see the point above.
It is said that 60% of catering companies go bankrupt within 2 years and 80% within 5 years. Nobody has told us what it looks like. It seemed that "owning your own food business" was a great thing. Profits on autopilot and you can invite friends. The truth is, I spent hundreds of hours looking for best practices, ways to avoid repeating mistakes and established patterns. I found nothing worth recommending. I spoke to consultants who made it sound very complicated. They suggested "food cost counting and control projects". What's more, to compare the quotations and price lists of all the suppliers, you need a lot of self-denial and time. To put it all together - the right tools. In practice, this means shopping carts containing hundreds of products with different names for each supplier. Knowing basic formulas in Excel is not enough.
So how do you calculate food costs? There are two methods - one easier and one more difficult. We use both, as each has its uses.
The simpler one is that we add up the net value of the monthly invoices from all the suppliers and divide by the total net value of the meals produced - for food cost percentage or by the number of bags for food cost nominal. This method allows us to monitor how the month has gone and whether we are improving in subsequent periods. This is a bird's eye view.
More difficult, because it is more detailed and requires greater regularity and meticulousness, is the ongoing monitoring of the prices of the dishes. Those in charge of menu planning, in our case the chef and the nutritionist, keep track of the current cost of each dish and create a menu from those dishes that are rated the highest and also have the lowest cost. With the Flambia system, they can see both how much the whole dish costs based on current prices and what the change in the price of the dish is due to. They analyse which ingredient has contributed most to the 24% target being exceeded, and based on this they can: change the ingredient in the dish, find a supplier who sells it at the lowest price, or negotiate the price of that product specifically.
Below is a scheme that my team and I have developed ourselves. It has worked well for us and has allowed us to achieve results that are far better than what is considered "average" by the industry. Average means bland, mediocre - by definition neither bad nor good. You don't want your business to be average. You want it to be exceptional. The following actions are ranked from most important to least important.
1. Monitor food prices regularly. Have you put together a tasty menu using inexpensive ingredients? Great. Your prices will be slightly out of date in a week's time and completely different in a month's time. Prices change not only because of seasonality, but also because of the geopolitical situation (look at how much the prices of all products have risen in the last 6 months), transport costs, availability from producers, market demand. If your menu consists of fresh asparagus in winter, beef fillet and shark fin, it doesn't matter how well you negotiate. It will simply cost a lot of money. As I said, cheap doesn't mean unpalatable. Milk bars are cheap and there are queues for them. It doesn't matter what category of food you serve, you can always make the menu at least as tasty and cheaper to produce.
2. Compare suppliers. In the Flambia Market comparison engine, we currently compare 29 different suppliers, and this number is growing all the time. The impact? On price comparison alone, companies using this tool have saved on average up to 15%, in extreme cases up to 30%. There is no one cheapest supplier on every index. This is due to the wholesaler's negotiating position with the manufacturer. One will have a better price for semi-skimmed cottage cheese, another for frozen broccoli.
3. Check actual consumption. At one point we noticed things that I would not have thought could happen, but after a moment's reflection became obvious. When we compared the monthly food costs, the expenses were significantly higher than the planned food costs, i.e. cost of meal * number of meals sold. We made a list of possible reasons for this. We chose two: theft and poor stock management. It turned out there was a third. Theft was quickly dismissed; we checked the plant's cameras and there was no reason to believe anyone was taking anything.
Watching the CCTV footage, I noticed another problem - we, the people, were operating on the lowest line of resistance. We had a poorly designed process for bringing goods into the warehouse and new products were being placed on top of old ones, both in the chillers and the freezers. Every time an item was removed from the store, the one on top was taken. The goods at the bottom were getting stale and ready to be thrown away. We knew the goods were going to waste, but the workers assumed it was the suppliers' fault for bringing in perishable products.
The third reason turned out to be the packing house's failure to follow the weights. The reason was trivial - they had too few scales and an inconvenient way of organising reports, so they sometimes forgot or omitted some dishes. None of them did anything deliberately wrong. It's just that I now know that a person is only as good as the weakest part of the process.
4 Negotiate prices based on monthly expenses. Most of us don't have time to discuss every product on the list. What's more, the supplier isn't going to reduce the price of all the products. So we use the Pareto Principle - we negotiate the prices of 20% of the products we order in the largest quantities, on which we spend 80% of our food costs. Depending on the type of product and your relationship with the supplier, you may be able to get a smaller or larger discount. The biggest margins are on fresh fruit and vegetables and non-standard products such as vegan meat alternatives, and the smallest on repetitive, high-volume, marketable items such as milk and cereals.
Let's summarise. In my experience, the way to reduce food costs and therefore increase profits in a business is through the following steps:
1. the owner taking responsibility for what is happening and understanding the processes.
2. Create processes that minimise errors.
3. implementing tools to control food costs and effectively compare prices, such as Flambia System, where we plan menus and control prices, and Flambia Market, where we compare suppliers.
For our own purposes, we compile a list of the best weekly promotions and compare suppliers' prices. I also occasionally hear from people who want to sell equipment or are looking for a job in the catering industry. I have found that I send out all this information in an email so that as many people as possible can benefit from it.
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