Controlling Food Costs of Your New Pho Restaurant

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Pho restaurant food deliveryUpdated 11-25-15. So what are some of the most important aspects of running your own pho restaurant?

Good customer service and high food quality are both important. Telling the public that your pho restaurant exists to serve them and how they can find you is important. Having happy, caring and well-trained employees is also important. How about efficient operation and clean, safe facility and equipment? Yeah those are all important too.

In this article, however, I'll discuss another very important aspect of running your pho restaurant: controlling your food costs. Food costs, if not managed correctly, can easily make or break your pho restaurant.

What Ingredients Do You Need For Your Pho Restaurant

Beef pho meat ingredientsRegardless of your the pho recipes you use, getting ingredients for pho is straightforward if you are located in large metro areas. It is even easier if your area has large Vietnamese or just Asian communities. You can get supplies from any of the large Asian supermarkets or better yet from Asian restaurant food suppliers.

In general, if you are in a more "remote" area where you don't have a large Asian market, then the following items may be harder to get, or much more expensive if you can get them:

  • Beef bones
  • Tendons and tripe
  • Pho noodle
  • Brisket (with the correct cut)
  • Pho spices
  • Nuoc mam fish sauce
  • Fresh Thai basil
  • Culantro

Most pho restaurants do not serve just pho though. Nowadays a "pho restaurant" also serves all  kinds of other Viet dishes as well. By the way I only know of ONE pho restaurant that serves just pho, plus a list of beverages, and they do brisk business all day. Here's a review I did of Pho Hoa in San Diego back in 2009, but amazingly everything is still true today except for the price of course. It's still very affordable pho and the dining room is almost always full.

But I digress, so back to my point about pho restaurants serving other Viet dishes. Those dishes will require harder-to-get ingredients. For example, if you decide to serve banh mi sandwiches on your menu, then you'd better be ready to bake the banh mi baguettes yourself, or have a local bakery bake them for you. In the end, your recipes will determine if you can actually open a pho restaurant in the area that you want, or how practical it may be. So you need to concentrate on your menu items and what is possible for your business.

Which Vendors Will You Do Business With

Most anywhere you open in the U.S., you can get national distributors like the Syscos and the FSAs and the US Foodservices, or you can search out the smaller local distributors. If you can, take advantage of the large services as much as possible since they give you the convenience sometime not matched by a smaller supplier, such as online ordering and payment centers, larger quantities if you need them, and better service in many cases.

On the other hand, if available, your Asian suppliers and supermarkets can give you exact ingredients that you need instead of a substituted brand, they also have better prices on specialized items, and they speak your language. Whatever you do, quality, price and dependability are some of the things you need to compare among the suppliers. Below is a table comparing the pros and cons of the two types of suppliers. This is a simple list, but if used correctly, it can save you thousands of dollars.

Pho Restaurant Supplier Attribute Comparison

Table comparing the two types of suppliers for pho restaurant.
Attributes/FeaturesNational/Large SuppliersLocal/Ethnic Suppliers
Ordering, PaymentsOnline, any time of day, automated
Credit terms available
Manual phone, emails, and fax orders
Cash/checks only
Order History, Quick ReorderLots of past or historical information
Accessible anytime of day
Nonexistent, or need to send a previous order
Ingredients StockedNot all Viet items available
Substitutes may be available
Special order or minimum quantity required
Exact items/brands available
Freshness of Produce and ProteinsMostly above average
Storage temperature up to codes
Average to above average
Should check specific supplier's storage to meet codes
Delivery to DoorMultiple days per week
No weekends
Multiple days per week
Some deliver on weekends
Delivery Mistakes and Problem ResolutionMistakes do happen
Quick and convenient resolution
Mistakes do happen
Less than quick resolution depending on supplier
Less convenient
Refunds and CreditsQuick, convenient and fairLess than quick and fair depending on supplier
Less convenient
PriceCompetitive for common items
Negotiable after good track record
Competitive for specialized items
Usually not negotiable

The above table is not by any means an exhaustive comparison. It will be updated over time.

I strongly suggest you keep more than one supplier at all times so that you can buy at the best prices available and you always have a backup. By the way, I'm sure you or your manager will make plenty of trips to the Costcos and other local suppliers, and a few online suppliers as well. This is normal for a small business, but be mindful of the actual total costs of running for supplies yourself on a regular basis.

Finally, another important point. If you speak Vietnamese or are familiar with the "Asian" way of doing business, then you'll be better off in dealing with and building relationship with your Asian suppliers. This is of course true anywhere you go or with any ethnic food ingredients you buy, so be mindful and learn how things are done before you jump into it too aggressively.

How Much and How Often Do You Purchase

Dry storage of riceIt is very easy for your pho restaurant to over-purchase from your suppliers. For new pho restaurants, when you do not have a track record of how much your daily sales are, it is even harder to know how much you should stock up.

Stocking up for pho is a tricky business. Because of the amount of time involved in making the broth, and the potential quantity of broth you sell per day, you must be ready to make quick and regular adjustments to get what you need. If you run out of broth due to poor planning or unexpected high sales, and even if you can get ingredients immediately, you're still hours away from serving new broths. That's the reality of it.

Here are a few things for consideration:

  1. There is no hard and fast rule, and you must stock ingredients according to the way most suitable to your operation and procedures. For example, it makes a big difference if you prepare certain amounts of fresh broth everyday to meet customer demand, versus making much larger amounts but with fewer times per week. Either method requires certain storage that must meet health codes for restaurants. Depending on your concept, you'll choose one way or the other or something in between. Even in many pho shops in present-day North Vietnam, only certain amount of broth is made every morning, and the owners close shop when they run out of broth even at mid morning. Of course this doesn't happen in pho restaurants in the U.S. When you open a pho restaurant, you must have pho to serve.
  2. With modern equipment and prepping techniques, you are forced to make pho in new ways. Here's an important dichotomy between the old and the new: you want authentic pho but you are running a modern pho restaurant in a modern society with strict health codes. Think about it, even if you learn making pho the old "authentic" way from your grandmother, you may not be able to do (or you should not) continue such method in a restaurant in Los Angeles because you'd be breaking all kinds of codes. All of this impact what you purchase, and how much and how often.
  3. Regardless of demands, your storage space is the limiting factor in how much and how often you can purchase supplies, for obvious reasons. For a given storage configuration (cooler space, freezer space, and prep area space) you can store and prep only so much at a time. Of course if you break health codes then you don't have any problem, or you choose not to care.
  4. Purchasing bulk versus smaller amounts will influence your purchase schedule. Common logic says that you buy in bulk to save money. But for limited storage space, you'll come out paying less if you buy smaller amounts at a time; of course you still have to buy enough to meet your minimum demands. So here are a few things to keep in mind:
    • Buying large quantities gives you lowest per unit cost. But if you have limited storage space and still want to buy bulk, then you'll paying your crew's labor to keep moving things around to make room for other things,
    • If you buy less at a time and more often, you can ensure freshness of your products; just make sure you meet your daily minimum demand.

All of this leads to the next topic: storage, portion and inventory control.

Storage Control, Portion Control and Inventory Control

Boxes of limesFood cost is one of your biggest expenses in your new pho restaurants. It is critical that you have a good storage, portion and inventory system in place. Many restaurants don't do this, which means they have no control of their food costs, or even know what their foods are costing them. Here are some reasons that cause you to have runaway food costs:

  • Improper record and inspection from deliveries,
  • Employee theft,
  • Food waste during prep,
  • Food spoilage in storage,
  • Over-portioning,
  • etc.

Your control system must involve both proper training of your crew and their proper implementation of the tools provided to them. Here are some specific things to pay attention to in each area:

  1. Storage control means proper receiving, storage, movement, and labeling of your foods as they are moved around within your facility by your crew from the receiving doors to the customer's tables. If you don't control this at every touch point, you don't know what you initially have, what you use, what you throw away, and what you end up with. It's very easy to forget something in storage and they spoil, or over-trim or over-cut something in prep that results in your having smaller yield than you should have.
  2. Portion control is the final stage when specific amounts of prepared foods go on a plate to the customer. This is called the ready-to-serve food, and it has the highest dollar per unit cost because it has gone through many prep steps and associated labor. For this reason, over-portioning can cost you more per pound than in any previous stage of your food. Think about it, a 1 ounce of sliced cooked beef flank that's ready to go into a bowl of pho actually costs more than 1 ounce of raw un-prepped beef flank that's just been delivered. You should do this calculation yourself.
  3. Inventory control is the accounting of what you have at any time. With a system in place and proper, regular use of inventory control, you can identify problems and fix them early. Late identification of problem and slow implementation of fixes both contribute to higher food costs.

The Bottom Line: You Should Know What Your Ingredients Really Cost You

No one says opening and running a pho restaurant is easy. Among many things an owner has to deal with everyday, controlling food costs should be at the forefront of your attention.

Of course it's not easy, otherwise everyone would be doing it successfully. But with some attention to details and a tough stand on implementing a system and following through with it throughout your restaurant, you can do it and it will actually get easier over time.

Just remember, design your operation and train your crew to follow established procedures to protect your ingredients. Your customers will love the freshness in your pho, and you and your accountant will love your bottom line.

Please leave a comment or share your ideas below.

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