Restaurant accounting for fine dining

PROFITABILITY, FOOD COSTING

How to Improve the Profitability of Your Menu in Just 30 Minutes!

If you haven’t looked at menu pricing vs. supply costs in a few months, you might be losing money.

Restaurant accounting for fine dining

PROFITABILITY, FOOD COSTING

How to Improve the Profitability of Your Menu in Just 30 Minutes!

If you haven’t looked at menu pricing vs. supply costs in a few months, you might be losing money.

Making Sure That Your Menu is Always Profitable

In a post-pandemic world where supply chains were heavily disrupted, it is critical to assess your menu-costing to ensure that your menu is still profitable. This is especially true if it’s been more than a few months since you last checked your supply prices vs. plate costing and menu pricing. Changes in transportation costs, consumer preferences, labor availability, etc… might have caused some of your top menu items to pull down your profits. The good news is that you are likely just a few small tweaks from turning them back into profit drivers.

This is a really common problem, especially post-pandemic, that has snuck up on even the most seasoned operators. This blog post will help you assess and improve the profitability of your menu. The best part is that it should only take about 30 minutes to have a measurable positive impact on your profits. We provide a simple spreadsheet-based calculator to help you get the job done, no special software needed. You will not need to weigh spices and salt so don’t panic! Let’s cover the basics before we jump in.

Is this blog post for me? If you haven’t costed out your top menu items in over a month, this is for you. If you don’t track prices of your top purchased ingredients and then make adjustments, this is definitely for you.

But menu costing is sooooo painful! You are super busy and don’t have time to count salt & pepper so we take a realistic approach that will still get you 80% of the benefit WITHOUT weighing salt. Our approach will get you substantial value without the need for specialized software, which can be helpful but often makes the job overly complex.

Keep it simple Samantha! This blog post is about helping you start small with the biggest levers. If we compare this to training for a marathon, our goal is to get you to mile 3. After that you can choose to keep adding miles or just be someone who runs 3 miles, 5 days a week and is always in good shape!

Why should I believe your approach? Our team has used these approaches to run restaurants for decades at upto and beyond 20% profit.

To start, let’s talk about a plate-cost targets. The generally accepted target for overall food cost as a % of food sales is 30%. We recommend targeting closer to 25% for plate-costing so that you have some buffer for comps, mistakes, portioning etc… Here is an example to illustrate the value of correctly costing out your top menu items. The calculator that follows will walk you through each step in doing this calculation.

Fried Chicken Plate:

  • Menu Price: $12
  • Food Cost to make 1 plate: $4.00 = 33%
  • Target 25%: Possible strategy is lower food cost to $3.50 and raise the price to $14
  • Assuming you change nothing else, that scenario adds $2.50 per plate to the bottom line, which is huge!

Depending on the size of the adjustment that you need to make, there are several strategies that can be employed. Here are a few suggestions:

  • Raise prices: If you can, this is the easiest path
  • Adjust sides: Maybe change a pricey side for something slightly less expensive
  • Introduce highly profitable specials: These can pull folks away from top sellers towards menu items with better margins
  • Offer combos/dessert deals: to improve your overall food cost %
  • Adjust portions/recipe on desserts: If you have a popular dessert, you can offset high entree prices by making a less noticeable adjustment elsewhere
  • Portion control: Is waste an issue? Consider shrinking portions or consider offering smaller-sized portions with better margins.

Let’s talk about why this happens and how you can better manage the profitability of your menu items. In general, ingredient prices are going to vary for a range of factors as I mentioned above. As a result, you could be a $4M restaurant with delicious food and a hard working team that makes little to no profit! Concurrently a few tweaks in pricing, recipes or use of in-season product for specials and you could add a lot to the bottom line!

Recipe (30 minute prep +cook time):

  • Open up the Google Sheets calculator and make a copy or download as an Excel Spreadsheet
  • Review POS reports for the top 5 items that you sold last week or month.
  • Grab last week’s invoices to help with ingredient prices.
  • Complete the 2 steps in the calculator
  • For any items that are not profitable, consider the strategies above and make adjustments
  • Advanced maneuver: If you have a menu item that cannot be repriced; maybe it is a popular item in the neighborhood and others charge a similar price. Leave that item alone but think of ways to draw customers to other more profitable items. Sell against that less-profitable item. Maybe add a seasonal item that has a lower plate cost?

Need help improving your profit margins? Contact Hone for a free consultation. We will walk you through the menu pricing calculator and also talk about other ways that we help our restaurants improve their profit margins.

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ROHIT SHENOY

ROHIT SHENOY

Rohit led product strategy at Toast for it's Online Ordering, Self-Ordering Kiosk and Inventory Products. As one of Toast's earliest product managers in 2015, he worked closely with small operators and restaurant groups to understand how technology could help them increase profitability and operational efficiency.

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Accounting for restaurants