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Food Inventory 101: Tips, Terms, and Why it Matters

Posted by AJ Beltis on 10/10/16 9:00 AM in Restaurant Management, Restaurant Metrics

5 minute read Print

restaurant food inventory

Inventory is the hardwiring of your restaurant. Your food inventory plan keeps everything in place, organized, and connected - and one tiny oversight can result in a drastic change for your business.

Keeping track of your kitchen inventory leads to more informed planning and decision-making. If you don't track inventory effectively, your forecasting could be off, causing your supply orders to be inaccurate, which will waste a great deal of time, resources, and money.
The long answer to the question of how to do inventory in your restaurant gives a bit more insight on why inventory tracking is so important. It plays a part in all aspects of your restaurant - from the supply orders that you make to the customer orders that you take. Because this is ever-present in your job, dedicating the time to understand how to do inventory and adopting inventory management software is an investment that is well-worth it for your restaurant.

Let's start with restaurant food inventory 101 - what it is, what terms are important, and some quick tips to help you easily track inventory in your restaurant.

What Is Food Inventory Management?

inventory management software

At its core, restaurant inventory tracking is a loss prevention tool and a measure of profitability for your restaurant.

Here is the fact about tracking your restaurant's inventory: If you don't know what you lose, you don't know what you earn. 

Inventory tracking means knowing exactly (a.) what supplies come into your restaurant, (b.) what goes out of your kitchen, and (c.) what's left over in the back of the house. Without knowing these exact numbers, you won't be able to firmly understand where your supplies are going.

It's one thing to notice that your recent shipment of cheese depleted quite quickly, but it's another thing know exactly why. Was all of this sold to satisfied customers? If so, great! You should easily be able to attribute every ounce to a price point. However, did you take into account areas of loss like spillage, employee mistakes, remedying customer complaints, staff meals, theft, or anything else that could cause product to go into the trash can or onto someone's plate for no charge?

All of these are areas of loss for your business - loss of inventory and profit. Knowing about these areas of loss and accounting for them in your planning are part of owning and managing a restaurant. Accidents happen, customers complain, and not every ounce of food makes it onto a plate. As you know by now, these are inevitable truths of the restaurant world.

However, not knowing what supplies have been wasted - for whatever reason - means you don't know exactly how much inventory (or how many dollars worth of inventory) has been unused, and that means you cannot determine your true earnings for a shift, day, week, month, or year.

Words To Live By: Restaurant Inventory Terminology

inventory management

If you want to become a master of inventory, you can't just walk the walk - you have to talk the talk. Here are four inventory terms you should be familiar with.

1) Sitting Inventory

The amount of product (or dollars worth of product) in-house. Depending on your business, you should refer to sitting inventory as either dollars worth or amount - but make sure to consistently stick to one.

2) Depletion

The amount of product (or dollars worth of product) used in a set period of time. Depletion can based on daily, weekly, or monthly sales and is often calculated using the sales reporting data from your POS.

3) Usage

The amount (or dollars worth) of sitting inventory divided by the average depletion in a set period. For example, if you have 4 gallons of mayo - and you plan to use 1 gallon a week - you have 4 weeks of usage

4) Variance

The difference between your product cost and the usage amount cost. For example, let's say your inventory is down $100 worth of chicken at the end of the day, but your POS says you only sold $95 worth of chicken. This makes your variance -$5, meaning $5 worth of chicken is unaccounted for. Variance can also be a percentage to help you make easier comparisons. In this scenario, -$5 (the variance amount)/$100 (the usage amount cost) = -5% variance. 

Now that you know why inventory tracking is important and understand the fundamentals of the practice, here are some inventory best practices you can implement in your restaurant.

Quick Tips for Managing Your Restaurant Food Inventory

restaurant inventory

1) Train Your Staff on Inventory

Inventory management cannot fall entirely on one person - especially in enterprise restaurants or businesses with multiple locations. Managers and shift leaders should be delivering detailed inventory reports whenever they clock out and alerting the team of any major outage or issues.

This responsibility also falls on your line cooks and back-of-house staff, who should be making notes of spillage, errors, and rotten food whenever they come across it. Teaching your staff to become inventory experts or dedicated mathematicians might be tough, but it's easier if you incorporate an easy-to-use inventory system for your employees.

2) Track Your Sales DailyNew Call-to-action

Even if it's just a daily five-minute review leading up to a weekly deep dive into your data, the best practice is to track restaurant sales every day. When you check sales daily instead of weekly, bi-weekly, or monthly, you stay in tune with the immediate changes in your restaurant so you can make quick and timely adjustments to your restaurant's inventory planning and your provision deliveries.

For example, if you have a seasonal item that you plan on removing from your menu, you can easily see when it's phasing out in the eyes of your customers day-by-day instead of taking it off your menu too early or too soon. 

We won't lie - sales tracking and data analysis can be a huge pain if you don't have the right technology. Instead of computing everything yourself by hand from an inventory sheet or shrugging your shoulders and guessing by intuition, make sure you can access data right from your point of sale system. This way, you can pick up on variances and try to figure out the source of loss.  

3) Carry Some "Just In Case" Inventory

A few years ago, while I was working at a local pizzeria and sub shop, a huge snowstorm took out the power across our state. Because of this, our bread supplier was not able to meet the needs of the pizzeria. That day, we had to tell all of our customers looking for a sandwich that we were out of sub rolls, and could only give them something on a wrap or in a pocket. This might not have happened if we were carrying "just in case" inventory.

Your restaurant should keep an extra supply of provisions that tend to go fast. In the event of an emergency, you can use these extra provisions to fulfill orders and satisfy customers. Just be sure to switch out this just in case inventory regularly so that it hasn't gone bad by the time you get around to using it.

Want to become a restaurant inventory expert?


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Written by: AJ Beltis

AJ Beltis is a Content Marketing Specialist at Toast. After working at a pizzeria throughout high school and college, AJ now manages the Toast Blog and hosts The Garnish Podcast. When he's not writing, he's probably watching one of his favorite movies for the 30th time or recording the next episode of The A to Z Movie Show. He loves to travel and experience all the different kinds of toast the world has to offer.

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