Find out what shrinkage is and how to manage it

In the restaurant world, optimizing product costs is an important factor to determinate whether a business is profitable or whether it generates more losses than profits.

Shrinkage is one of the main reasons why a restaurant spends more money than it earns and ends up in the red. In this article you will learn about the types of shrinkage that exist in the kitchen, the factors that cause them and what steps to take to optimize them.

What is shrinkage?

Shrinkage consists of the loss of food used in the kitchen because it is not in good condition to be used in the preparation of menu items or those left over after cooking.

Food is damaged when it is transported by the supplier to the loading area of the establishment, when it burns during the cooking process or in the cold of the freezers, when there is food left over, when dishes are prepared or stored incorrectly.

Shrinkage is one of the most common problems in the hotel and catering sector, as all food has a shelf life, but not everyone knows how to deal with this situation or how to prevent it.

Types of waste

The loss is divided into two main groups: the natural loss and the operational loss.

Natural shrinkage results from known causes such as meeting the expiration date, changes in appearance or smell, and reductions in food preparation with different cooking techniques.

On the other hand, the operational loss is the one presented by human factor errors such as the bad manipulation of the food, its elaboration or the calculations to carry out a preparation.

Identifying the causes makes it possible to manage the loss. It is necessary to have precise data to really know what your replacement costs are and how to create a plan to avoid expenses.

Benefits of reducing or eliminating shrinkage

Reducing restaurant waste comes with a series of benefits, which must be communicated to the staff so that they are motivated by the good work being done in the kitchen.

By not having to invest money in discarded products, restaurant managers pay attention to the changes required by the establishment and invest in improving it.

New uniforms, hiring of security members, purchase of new furniture, purchase of appliances, investment in new tools for each station in the kitchen, creation of a savings bank, productivity bonuses and payment of courses; these are just some of the benefits.

Causes of the decline

Shrinkage within a restaurant is inevitable because there will always be a factor causing losses of the raw material that is intended for the preparation of the dishes.

Every restaurant must identify the reasons for shrinkage in their kitchen. Here are the most common reasons for shrinkage in a restaurant that will allow you to take action to prevent it:

• Poor quality food purchased from suppliers.
• Purchase of an exaggerated amount of products.
• Lack of review of purchased food.
• Failure to rotate the merchandise from the last purchase with the merchandise that is stored.
• Badly adapted temperature of the refrigerators and freezers.
• Lack of information about the cleaning, preparation and decoration processes of each of the dishes on the menu.
• Deficient cooking facilities or stations.
• Not giving a utility within the dishes to the food cuts.
• High prices that are not related to the characteristics of the dish.
• Lack of promotion in the restaurant’s menu and in the services offered by the restaurant

Importance of shrinkage

If the restaurant management does not keep track of the loss that is generated, food is discarded without any need. This has a negative impact on the restaurant’s economy, as it is money lost and new revenue will be generated and invested in filling the gaps in the shrinkage.

In addition, shrinkage has negative consequences on the environment, since the disposal of shrinkage food produces approximately 3.3 billion tons of greenhouse gases. To avoid falling into negative numbers, you must establish a plan to manage the decline of your business. This plan must detail what activities or methods will be used to manage each food and take advantage of it by reducing the waste generated.

When you know the causes of a restaurant’s loss, you can attack them and calculate the losses they caused so you don’t make the same mistake again.

Creating a baseline to reduce shrinkage

The baseline is a method for measuring the waste your restaurant produces, whether or not actions have been taken to reduce or eliminate it.

This line will contain the reference data to start with management activities on shrinkage and determine if the expected results of reduction are being obtained.

In order to notice reductions or unexpected increases in shrinkage, monitoring measurements should be taken every three months to decide whether to continue applying the method proposed with the creation of the baseline or whether a modification is necessary.

The baseline consists of three steps, which must be perfectly fulfilled in order to reduce the costs caused by the decline.

Identification of areas where shrinkage occurs

The areas where raw material waste occurs must be determined, regardless of whether it occurs to a lesser or greater extent. In each area, the amount of waste per day must be established in order to measure expenses and replacement costs.

These notes should be made during a working week without interruptions due to holidays or public holidays, recording information from the shelves, refrigerators, pantries and freezers.

Collection and sorting

During this week of notes you must discard the raw material from the different areas of the restaurant, classified by color or labels to make the process easier.

You must separate each product into rotten, packaged, meat, dairy, non-food, fruit, vegetables, fish, poultry, beans, rice, salads, tortillas, pasta, bread and tubers.

If you have any other foods that you think should be in the baseline, rank them for a more complete calculation.

Measurement and recording

When you have finished filling the sorted containers with each food, you should weigh them on a scale and write down the values.

In addition, it is important to take a count of the dishes served during the day, to know how much actual waste is generated.

To calculate the loss, you must divide the grams of the waste of the day by the number of dishes that were consumed. With the loss saved from the monitoring week, you have a basis for comparison for the monitoring measurements that should be applied every three months.

Based on the results obtained on shrinkage, you have the information you need to start applying new methods to manage shrinkage.

Tips for managing shrinkage

By following the steps of the baseline you can correct the problems you identify within the restaurant, advise the staff on the faults recorded in the kitchen and meet with the management staff to establish a new purchasing and pricing plan.

Here we will share some recommendations that you can apply in your restaurant to manage the decrease:

• Do not saturate your menu with a wide variety of dishes, this increases the loss and makes it difficult for diners to make decisions about the many options available.
• Determine the portions of each of the dishes on the menu, so as not to discard food.
• Modify the menu frequently to eliminate the dishes that are not ordered from the menu.
• Serve dishes with seasonal products, this way you will avoid overpricing by suppliers.
• Have a control of the inventory of the products in the refrigerator and the warehouses, to know when to replace them.
• Teach your kitchen staff how to use every part of the raw material.
• Cooking some foods under vacuum to preserve them longer.

In this way, you will not generate loss in your restaurant and you will manage the purchase of the food more efficiently.

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