Boost Restaurant Profits With Theoretical Food Costing & Menu Engineering

Boost Restaurant Profits With Theoretical Food Costing & Menu Engineering
Boost Restaurant Profits With Theoretical Food Costing & Menu Engineering
Greg Staley

by Greg Staley, CEO of SynergySuite

Boost Restaurant Profits With Theoretical Food Costing & Menu EngineeringAs inflation soars and food costs remain high, restaurants need to be more intentional with their menus to maximize profits.

In a recent survey, 90% of restaurant operators say their food costs are higher now than they were before the COVID-19 pandemic, and only 25% of operators believe their restaurant will be more profitable this year versus last.

As inflation soars and food costs remain high, restaurants need to be more intentional with their menus to maximize profits. Operators should implement theoretical food costing and menu engineering to drive down costs and increase profits.

Menu engineering, the study of the profitability and popularity of menu items, aims to increase profitability per guest. As part of this effort, operators determine which of their menu items drive the most sales and profits. Then, they spotlight the items with the highest profit margins, work to improve (or eliminate) underperforming items, and replace costly items with less expensive options.

Now that every penny counts, operators would be wise to:

  • Ditch manual processes. Manual processes are time consuming, inaccurate, and error prone. It’s extremely challenging to notice price changes in real time when using spreadsheets or paper systems. And, if you do happen to notice a price increase on even one ingredient, you’ll need to manually go through and adjust your calculations for every recipe that uses that ingredient. Who has time for that? Bottom line: it’s unwise to make financial decisions based on gut instinct or rely on scratch-paper estimates that may not be accurate or up-to-date.
  • Use tech for more transparency. It’s much easier, quicker, and more accurate to use tech tools to organize, track, and manage food costs and profitability. Theoretical recipe tools let you adjust amounts or ingredients to determine how these changes affect your product margins. They offer accurate information about all purchases, prices, inventory, and food waste, allowing you to see and consider more precise data. Tech tools are instrumental in tracking food costs, changes, and trends so you can make better purchasing decisions.
  • Consider actual vs. theoretical food costs. Increasingly, operators are pivoting from basic food cost calculations to more complex reporting, such as actual versus theoretical food costs (AvT). This effort examines the difference between what costs should have been in a specific period with what they actually were. There will be a variance between these two numbers for a variety of reasons, including inconsistent portion sizes, kitchen waste, or employee theft. Tracking the difference between your actual vs. theoretical food costs allows you to determine where you’re wasting money so you can adjust accordingly.
  • Measure profitability and popularity. Restaurant tech makes it simple to assess and refine your menu. Reporting and dashboards provide real-time data about your best and worst sellers, plate costs, etc., allowing you to make data-based decisions about which items should be kept, replaced, or eliminated to reduce costs and boost profits. Digital tools can automate your food cost calculations, invoices, pricing fluctuation reports, and more so you can keep your best – and most profitable – items front and center.
  • Determine plate costs. Operators can use digital tools to review their recipes, inventory, and prices, and then generate the final cost of each recipe. While recipe costing can be done using a spreadsheet, this manual approach is difficult to maintain since prices are continuously fluctuating and recipes often evolve over time. It’s much more efficient to use a digital system that automatically updates ingredient costs based on most recent supplier price and other factors for more accurate calculations.
  • Improve inefficiencies. Use the data gleaned through digital tools to identify – and improve – inefficiencies. Perhaps your data shows that over portioning is an issue. In that case, use a recipe management system to maintain smaller portions and minimize waste. If food spoilage is a problem, revamp your inventory management process and examine historical sales data so you’re ordering exactly what you need for any given shift.
  • Elevate your inventory management. Pen and paper inventory management is time-intensive and inaccurate. Instead, use digital tools to monitor what ingredients you have on hand, what you’ve used, what you’ve ordered, and what’s left over to use for the next day’s specials. Using tech tools to manage your inventory helps you better utilize every ingredient, so you’ll save money and boost profit margins. Inventory tracking also helps reduce waste. One of the most effective ways to reduce food cost (and unnecessary spending) is to avoid purchasing items that you don’t need. Use historical and forecasted sales and inventory data to determine what to order (and what ingredients you have on hand) for smarter spending and waste reduction.
  • Redesign your menu. Menu psychology strategies help convince your guests to order certain items. Use specific menu placement, appealing descriptions, and strategic pricing (like $9.95 vs. $10) to elevate sales and promote certain dishes. Strategically spotlighting and promoting high-profit items can help encourage guests to order your most profitable dishes. Also, write compelling menu descriptions to inspire guests to order certain meals. Describe the dish using tantalizing words like rich, creamy, fresh, and delicious. Make a concentrated effort to push items that are high margin but lower in popularity. Replace costly items with less expensive substitutions to boost profit margins, and track how the newly adjusted dish performs.
  • Forecast sales. Conduct regular forecasting efforts, examining historical data and sales patterns to predict upcoming trends. When operators have a better sense of what’s ahead, they can make better decisions about proper quantities to order, prep, and cook. This effort also helps them make smarter scheduling decisions to ensure plenty of staff for busier shifts, and fewer employees working during anticipated slower times. Armed with this knowledge, operators can save significant money on both food and labor costs.
  • Educate employees about reducing food costs. Fold financial health into your corporate culture. Operators can use all the right tech tools to make smarter decisions, but if the entire staff isn’t aligned in this effort, you won’t maximize successes. Be sure all staff works proactively to reduce food waste by portioning correctly, utilizing first in/first out efforts, repurposing leftovers, ordering properly, etc. Conduct ongoing training sessions throughout the year – this is not just a “one and done” effort.
  • Track the impact of your efforts. Use digital tools to monitor your sales data so you can see how your efforts are moving the needle. Did your lower performing dishes become more popular after you promoted them? Are customers still ordering items even after you swapped in lower-cost ingredients? Continue to track your sales, profitability, and food costs and adjust your tactics, as needed.

Working to control spending and maximize profits should be an ongoing effort. Rely on digital solutions to get critical insights into food costs, price fluctuations, and other variables so you can minimize food costs and maximize your restaurant’s profitability.

Greg Staley is the CEO of SynergySuite, a back-of-house restaurant management platform. Greg focuses on facilitating better visibility and increased profitability for restaurant chains through the use of intelligent, integrated back-of-house technology. For more information or to discuss SynergySuite’s solutions, please contact Greg at greg@synergysuite.com.

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