What are PAR Levels in a Restaurant & How to Determine Them

As you know, the biggest expense for most restaurants is usually food costs. You strive to give your clients a delicious meal, which involves spending money on quality ingredients.

But, if you want to run a profitable business, you need to find a way to lower food costs without affecting customer satisfaction. The key to doing so is proper inventory management. If you want to know exactly when and how to reorder ingredients, you need to calculate PAR levels in the restaurant.

Check out this complete guide on PAR level inventory:

What is PAR level in inventory?

PAR stands for Periodic Automatic Replacement. So, what does PAR mean in inventory? PAR is the process of calculating the optimal level of inventory items that your restaurant must stock to ensure you don’t run out of essential items or produce food waste.

The PAR levels in a restaurant measure the ideal quantity for an ingredient, which includes a safety stock in case you must serve more clients than expected. By calculating the PAR stock, you can decide on the best time to reorder the prime material.

For example, if you have a PAR level of 100 blocks of butter and you only have 54 blocks left in inventory, you know you have to order 46 more.

Furthermore, PAR levels can vary according to certain factors, such as:

• Ingredient seasonality
• Events
• Slow or busy days

Why you must determine the PAR stock for your restaurant

If you successfully monitor and calculate PAR levels in a restaurant, you will enjoy the following benefits:

• Less food waste: some parts of ingredients are unusable, and they inevitably become food waste. But, if you have too much stock that doesn’t get used until it goes bad, you are practically throwing money away;
• Lower food costs: when you can accurately determine your inventory PAR levels, you are no longer spending money on food that you don’t get to use. Therefore, your food costs get lower, and your profit gets higher;
• Increase client satisfaction: if a customer wants to order something from the menu and the server has to let them know that the dish is no longer available because you ran out of ingredients, you risk creating an unpleasant experience for your visitors. Prevent this from happening by staying on top of your PAR levels.

How to calculate PAR levels in a Restaurant

You can identify the PAR stock for your restaurant using a simple formula that we provide below. But first, you must calculate the metrics used for it. We’ll show you how to do it by taking advantage of helpful technology.

1. Gather relevant restaurant data

The PAR levels are calculated for each ingredient, so you must find out how much of each material you have used. You can’t do this by simply looking in the pantry and taking a guess. You need access to data.

Here is how to easily obtain valuable restaurant analytics:

• Use a POS system: by choosing an efficient POS system with in-store reporting, you can see exactly the amount you sold for each specific menu item. Moreover, you also acquire useful data for inventory management such as best-selling dishes, number of sales by category, and order types.

• Install an online ordering system: selling your products online is a must if you want more profit. But, if you want complete control over the online ordering process and free access to sales data, you need to install an in-house online ordering system on your website. The free one from GloriaFood will help you make data-driven decisions and attract more new and return clients.

On top of knowing the specific amount of menu items you have sold during a selected period, it will be helpful to have standardized recipes. This way, you will know exactly what quantity of ingredients was used during a day, week, or month.

To determine the PAR levels in a restaurant, you will have to calculate the average daily usage (ADU). Use this formula:

For example, let’s say you have started the month with 200 kg of pasta and have ended it with 100 kg. Then your ADU for 30 days will be:

ADU = (200-100)/ 30 = 100/30 = 3.33

You are using 3.33 kg of pasta daily.

2. Determine the lead time for each ingredient

The lead time refers to the amount of time it will take for each ingredient to be delivered. It will be different for each ingredient, depending on where you are buying it from. For example, seasonal local produce may arrive in one day, but coffee imported from Italy can take weeks.

Build a strong relationship with your suppliers so that you can rely on them to deliver the products fast. The more accurate the lead time, the better you can calculate your restaurant’s PAR levels and enjoy improved operations.

Read more: How to Choose the Best Restaurant Suppliers for Your Business

3. Estimate a safety stock

While you are doing your best and relying on data to manage your inventory system, there will always be surprises in the restaurant industry. For example, your business could go viral, and you can suddenly receive a lot more orders.

That’s why it is important to have a safety stock that you can rely on for every eventuality. Here is a simple formula you can use to calculate it:

Going back to our pasta example, let’s say the maximum amount you used in a day is 10 kg and the maximum lead time was 5 days.

Safety Stock = (10 – 3.33) x 5 = 6.67 x 5 = 33.35

4. Calculate PAR levels for your restaurant

Now that you have identified all the necessary metrics, it is time to use the PAR level formula:

Let’s go back to our example to make it easier to visualize. We will suppose there is a usual lead time of 3 days.

PAR Level = (3.3 x 3) + 33.35 = 9.9 + 33.35 = 43.25

Therefore, to ensure you always have pasta on hand and don’t produce food waste, you should strive to always have 43.25 kg of pasta in stock.

Restaurant inventory best practices

Efficiently managing your restaurant’s inventory is a big part of keeping your business profitable. And, calculating the PAR levels for your restaurant is an essential part of it. Check out these extra tips that will help you improve operations:

Review your PAR level calculations periodically

As previously mentioned, PAR levels can change according to a variety of reasons. For example, hot chocolate may be popular in the wintertime, but you won’t get many orders for it during summer.

Or an ingredient could become very hard to get and it will have a considerably increased lead time. Therefore, ensure you review your PAR calculations often so you can be sure they are correct.

Use PAR Levels to determine the reorder amount

PAR levels in a restaurant represent the ideal stock for each ingredient, thus they are not the amount you must reorder each time. But calculating them will help you identify the order size for your next reorder. Use this formula:

Therefore, if you determined that the PAR level for pasta is 43.25 kg and you still have 30 kg left in inventory, your reorder amount will be:

Reorder amount = 42.25 – 30 = 10.25 kg

Thus, you must place an order of 10.25 kg to your pasta supplier.

Look into technology for help

In the beginning stages, a spreadsheet will be enough for you to make PAR level calculations for your restaurant. If you have a small menu, it will be even easier to monitor. But there is a risk of human error.

You can make this job easier for you by marking food quantities in your POS system and update it as you sell out. Once the quantity reaches zero, your online menu will be automatically updated to display the item as out of stock. This way, clients are notified in advance and won’t be disappointed when they go to place an order.

Final words

If you want to lower costs while increasing client satisfaction, start calculating PAR levels for your restaurant. Embrace the help of technology to make the process easier and more efficient so you can enjoy the results faster.