Operational Performance Increases with Food Costing Tool

Case Study


A 150-store chain of coffee shops did not have a full understanding of their cost of individual beverages and sales mix. Although they had a general idea of the cost of goods to account for their book value of inventory, they had not analyzed the profitability of one drink versus another. As the chain was looking to expand, it was vital that the company understand what each of these beverages cost so that they could truly understand their business.

What We Did

We spent time with the operations team to identify all the beverages that the chain had and then worked with them to develop ideal recipes. We then took these recipes to a variety of stores and watched baristas to determine where ideal operational expectations were not being conducted in the stores. We then needed to determine if the best practices should be what the stores were doing or what had previously been determined as ideal. Each significant deviation was discussed between the operations department and the stores to come up with the ideal process.

One unique consideration that had to be considered was for expected waste. With espresso based products, little waste has the probability that the employees are serving poor quality drinks to customers. Espresso needs to be calibrated to the humidity and atmospheric pressure. A certain amount of milk gets thrown away to ensure that employees aren’t re-steaming milk or are foaming milk properly. The customer also wanted to make sure that the employees would re-make a drink that wasn’t quite right for a customer.

Once we determined the recipe, we then took the individual store sales information and determined how much of each ingredient the store should have at the end of a period. As the chain had stores in several regions we rolled the program out one region at a time and then used inventory variance data to determine if different regions were following the protocol. Each significant variance was discussed to determine if there should be regional differences or changes to best practices.


Our actions helped the chain in more ways that they expected. The initial program was developed primarily as an accounting system to better track the inventory and cost of goods sold that were being reported. The company also benefited as this became a training tool for making consistent beverages, a method of tracking theft within the stores, a method of forecasting inventory needs, a negotiating tool on purchasing ingredients and commodities and a validation that the recipes were delivering the best tasting product.