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The Case of the
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A consultant uses detective skills to uncover why expenses are rising
and profits are shrinking.
Part One (Originally printed in Dietary Manager, July/August 2004 and the principles still work today)
As our story opens, our intelligent, resourceful consultant – Connie Clue – sits pondering the piles of papers in front of her. She knows that the answers she is searching for are hidden somewhere in those papers. The more she looks, the more determined she becomes to solve “The Case of the Disappearing Money.”
It all began innocently enough, she reflected. ABC Long-Term Care Facility, a 100-bed nursing home in Everywhere USA, has been operating for over 25 years. According to reports, the foodservice operation has stayed within budget for most of those years, but now an alarming pattern has emerged – each month more and more money seems to be disappearing. Figures don’t lie, so where did all the money go? She picked up her notebook and reviewed what she knew so far…
It all began innocently enough, she reflected. ABC Long-Term Care Facility, a 100-bed nursing home in Everywhere USA, has been operating for over 25 years. According to reports, the foodservice operation has stayed within budget for most of those years, but now an alarming pattern has emerged – each month more and more money seems to be disappearing. Figures don’t lie, so where did all the money go? She picked up her notebook and reviewed what she knew so far…
- The foodservice operation has been under the magnifying glass in recent years with state surveyors holding the dietary department to “closer than close” scrutiny.
- The department has been doing a great job providing meals that the residents are actually consuming. They offer the residents private dining with their families at no extra charge. This has the added benefit of great “PR” in the community.
- In response to previous complaints, the foodservice operation now offers residents numerous selections at each meal.
- To combat labor retention issues, ABC offers free meals to employees during their shift.
- To save money on their food cost, ABC is starting to purchase from several vendors to “keep the prices competitive and keep the vendors honest.” Larry, from “Best Deals Food,” has most of the business because they like him and trust him to determine the best products for their needs. He makes ordering simple – they just need to tell him the product they want and he does all the rest. When comparing prices, Larry always has the best price on their top 10 items (the ones they use for their pricing comparisons). Everyone loves Larry. He is always full of compliments and often brings free samples and gifts.
- Resident mix has been changing over the years and more residents are on restrictive diets. ABC’s physician does not believe in the “new-fangled” way of liberalizing diets.
- In the last two years, ABC home has switched to all scratch cooking to save money. The recipes have come from a variety of sources, but mainly from the cooks’ heads. They all have years of cooking experience.
- ABC facility believes that supplements are a big part of the answer to ensure that residents get the nutrients they need.
- ABC facility is using a menu that they have had for years (in fact no one is quite sure how long the menu has been in use).
- Since they have been using the menu for so long, ABC facility does not believe they need production records.
- When the facility was built, it was designed to have all the storage areas located by the back door where it would be easy to unload and put items away. The storeroom and freezer are locked at night to ensure against theft, but are open during the day for easy access.
- Like many facilities, the resident census at ABC has decreased from 100 to 87 over the past few years. However, the cooks continue to prepare food for 100 residents.
- To insure they don’t run out of food and disappoint the residents, ABC’s practice is to make 10 extra servings of each menu item at every meal.
- Staff is given larger portions to keep them happy (and besides, they need the extra calories).
- To try to increase their census, ABC has been holding monthly parties and events for the staff and community.
- The budget for the foodservice department is determined by the business manager, who tells the foodservice director each month if they are over or under budget. Lately, the food service has been over-budget every month. There have been subtle probes from vendor sales reps lately about payment issues, and the business manager says ABC’s payments are out 80 days. The business manager believes this is a good thing and views it as a “free” loan (the longer they can use someone else’s money the better).
- ABC facility has used the same chemical vendor for years; in fact, the owner of the chemical company sits on the Rotary Club Board with the owner of the facility. They have also used the same coffee company for the past five years. The administrator’s kids play baseball on the same team as the coffee company’s sales representative (actually, the representative is coach of the team).
- The average food cost per day is $6.10 per resident.
- Individually wrapped cookies and soda pop (off-brand instead of name-brand products are used to keep the cost down) are sent to the floors for snacks.
- ABC facility bases their food cost on the amount of food purchased. They do not take an actual food inventory.
Connie leaned back in her chair. She could tell from the throbbing that was starting in her neck that a major headache was coming on. Where to start? She knew from experience that increased food costs were not usually the result of just one issue but instead a mixture of many ingredients (no pun intended). She also knew the typical response of most facilities when faced with higher costs is to first panic, then:
Unfortunately, none of those responses will solve “The Case of the Disappearing Money.” ABC must cut costs, not quality. Food cost control is not cutting corners. It is keeping a tight control on food costs throughout all the levels of food service (purchasing, delivery, inventory, menu planning, preparation, portioning, delivery, etc.).
Connie knew that the most important factors affecting food costs are:
Well, this answered what her first step would be. She needed to review the menu closely and cost it out. She knew from experience that many menus, when priced out, cost far more than what the facility planned. It always troubled Connie that the administrator would come down so hard on the dietary manager for being over budget, when she knew the menus were written at a cost level that could never be achieved within the planned budget. This was right at the top of Connie’s list of “no-win” situations.
The next step would be to develop standardized recipes.
Standardized recipes help the facility:
In a foodservice operation, pennies really add up and Connie knew that each additional penny per resident day spent by increasing ingredients in a recipe equals $365! She was confident that the facility would save considerable money by reviewing and adjusting their menu and implementing pre-costed standardized recipes.
Well, the first hurdle was out of the way, but Connie knew there was still more she could do to help ABC control their food costs. She knew the top reasons for excess food costs are:
What should she do next? Connie went back to the orange folder that held her food cost facts. One of the first facts she noticed was “LTC facilities with about 100 beds serve approximately 109,500 meals per year. If you save 1 cent per meal you can save $1,095.00 per year!”
She again reflected on how it is the seemingly innocent little things that add up to large deficits when it comes to food costs.
Back to the orange fact folder, she then noted that the average meal costs for residents in long-term care facilities are:
Breakfast $0.75
Lunch $1.75 (larger meal)
Dinner $1.50
HS Snack $0.25
TOTAL $4.25
Hmm. Food costs are running around $6.10 per resident, so at first glance ABC is far above the average – but are they really? Is the money that is allocated for residents actually spent on residents?
From what Connie could see, much of the money appears to be spent on special functions, supplements, nourishments, staff meals, free meals, and floor stock. Also, much of the money seems to be disappearing due to many of the reasons she had just reviewed.
What would you do next if you were Connie? How would you next proceed to solve “The Case of the Disappearing Money”? Look for answers in the Case of the Disappearing Money Part 2!
©Kim Hofmann, RDN, LD.
- Use lower quality food
- Change the menu to low cost foods (i.e. macaroni and cheese again)
- Yell at your vendor and start looking for a new food company
- “Cherry pick” with your vendor
Unfortunately, none of those responses will solve “The Case of the Disappearing Money.” ABC must cut costs, not quality. Food cost control is not cutting corners. It is keeping a tight control on food costs throughout all the levels of food service (purchasing, delivery, inventory, menu planning, preparation, portioning, delivery, etc.).
Connie knew that the most important factors affecting food costs are:
- Purchasing
- Portions
- Theft
- Menu
- Waste
- Food you purchase
- Amount of labor you need
- Storage
- Equipment needs
- Resident satisfaction
- Service and clean up
- Nutrition
- Regulation compliance
Well, this answered what her first step would be. She needed to review the menu closely and cost it out. She knew from experience that many menus, when priced out, cost far more than what the facility planned. It always troubled Connie that the administrator would come down so hard on the dietary manager for being over budget, when she knew the menus were written at a cost level that could never be achieved within the planned budget. This was right at the top of Connie’s list of “no-win” situations.
The next step would be to develop standardized recipes.
Standardized recipes help the facility:
- Achieve a consistent product
- Know what their food and labor cost will be
- Know how much time it will take to prepare
- Know the ingredients needed
- Offer a consistent yield
In a foodservice operation, pennies really add up and Connie knew that each additional penny per resident day spent by increasing ingredients in a recipe equals $365! She was confident that the facility would save considerable money by reviewing and adjusting their menu and implementing pre-costed standardized recipes.
Well, the first hurdle was out of the way, but Connie knew there was still more she could do to help ABC control their food costs. She knew the top reasons for excess food costs are:
- Overproduction
- Not following well-planned menus
- Poor purchasing practices
- Failure to check deliveries
- Low yield of purchased food
- Not accounting for food purchased and prepared
- Not following standardized recipes
- Failure to use portion control
- Leftovers
- Excessive waste in preparation
- Poor storage practices
- Theft
- Excessive use of supplements
- Not accounting for “extras” such as banquets, coffees, and special functions
What should she do next? Connie went back to the orange folder that held her food cost facts. One of the first facts she noticed was “LTC facilities with about 100 beds serve approximately 109,500 meals per year. If you save 1 cent per meal you can save $1,095.00 per year!”
She again reflected on how it is the seemingly innocent little things that add up to large deficits when it comes to food costs.
Back to the orange fact folder, she then noted that the average meal costs for residents in long-term care facilities are:
Breakfast $0.75
Lunch $1.75 (larger meal)
Dinner $1.50
HS Snack $0.25
TOTAL $4.25
Hmm. Food costs are running around $6.10 per resident, so at first glance ABC is far above the average – but are they really? Is the money that is allocated for residents actually spent on residents?
From what Connie could see, much of the money appears to be spent on special functions, supplements, nourishments, staff meals, free meals, and floor stock. Also, much of the money seems to be disappearing due to many of the reasons she had just reviewed.
What would you do next if you were Connie? How would you next proceed to solve “The Case of the Disappearing Money”? Look for answers in the Case of the Disappearing Money Part 2!
©Kim Hofmann, RDN, LD.
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