Four Ways to Keep Menu Costs Down
Restaurant Menu and Profit Margins
It’s estimated that the restaurant industry makes $782 billion in sales.* However, for every dollar earned, more than half is spent on labor, supplies, repairs, licenses and insurance. One way that restaurants can increase their profit margin is through lowered menu costs. Carefully monitoring food cost, portion sizes, and kitchen waste offer restaurants significant savings over time.
Understand How Food Cost Works.
Food cost refers to how much a restaurant pays for food, before any additional costs of preparing and serving are added to the final price.
For example, a single egg may cost five cents, but that doesn’t mean a restaurant would sell an egg for five cents. In order to make a profit the cost of that egg needs to cover not just its food cost, but also the cost of preparing it ( the cooks wages), serving it (the server’s wages) and cleaning up after it (the busser and/or dishwasher wages). All of these costs need to be covered through each restaurant sale, which is why food cost is so important. Some items, like eggs and potatoes have great food cost; that is they cost very little to purchase and can be sold for a much higher price. Others, like beef or fresh seafood have much higher food cost, so your profit margin shrinks. The general rule is that food cost should not exceed 30% of a menu price. So, if a restaurant is serving a beef filet with mashed potatoes and a side salad and it cost $6 for all the ingredients, the minimal menu price should be $20.
Keep Portion Sizes Under Control
Another area that restaurants can save money is through portion control. Ensuring each meal served has a consistent portion size will help keep your food cost in line. Chain restaurants have portion size down – that is how they are able to offer a consistent product over multiple locations.
Premeasuring ingredients, like cheeses and meats will help standardize your portions, no matter who is in the kitchen. Using uniform sized plates for each menu item can also help portions stay consistent. If you are opening a new restaurant, creating a kitchen manual with details about menu portions will help train staff.
Minimize Kitchen Waste
Waste not, want not is true for restaurants, as it is for households. Avoid having any stand-alone menu items. Each ingredient in a restaurant kitchen should be used in at least two or three menu items. By cross utilizing food on your menu, you are less likely to waste it. For example, if you offer a California burger with fresh avocado, you should incorporate avocados in other menu dishes. Otherwise, you risk a case of avocados spoiling in your walk in. Offer fresh guacamole or top a turkey sandwich with it.
Update Your Menu
At my first restaurant, in a (bad) attempt to offer a vegetarian/healthy item, we added a dish with granola and cantaloupe to the breakfast menu (not surprisingly, it didn’t sell, like, at all) and we were stuck with a case of cantaloupe each week, which was hard to incorporate into other meals. There is only so much fresh fruit people are willing to order.
We ended up using the cantaloupe mainly for garnish (lame, I know). Finally, when we updated our menu we nixed the dish altogether. Examining a menu a few times a year can help identify menu wasters. It is also an opportunity to check food cost and update prices, if needed.