Restaurant accounting for fine dining

PROFITABILITY, FOOD COSTING

How to Improve the Profitability of Your Menu in Just 30 Minutes with Plate-Cost Analysis

If you haven’t looked at menu pricing vs. supply costs in a few months, you might be losing money. Here’s how to analyze Cost of Goods Sold (COGS) from your restaurant bookkeeping down to plate-costs—including a free Google Sheets template.

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.

How to Make Sure That Your Menu is Always Profitable

How profitable is your menu today? In a post-pandemic world where restaurant supply chains are still heavily disrupted, it’s critical to regularly assess your menu-costing to ensure that you’re still making money on every dish that goes out the door. 

Restaurant bookkeeping normally results in a Profit & Loss (P&L) report that breaks down your Cost of Goods Sold, or COGS—but this isn’t enough! Plate cost changes are a really common problem, especially in a post-pandemic economy, sneaking up on even the most seasoned operators. 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, and more can easily cause 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. Keep reading to learn more, and get access to a free Google Sheets template to get insights in 30 minutes or less on how to improve your plate costs and restaurant profitability. We provide a simple spreadsheet-based calculator to help you get the job done, no special software needed. You won’t need to weigh spices or salt, so don’t panic! Let’s cover the basics before we jump in.

When should I cost out my menu?

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. If you’re interested in getting more insight into what your restaurant bookkeeping can tell you, this article is also for you.

But menu costing is sooooo painful!

Yes, it can be—but it doesn’t have to be! As a restaurant owner or chef, you’re super busy and don’t have time to count every ounce of salt and pepper so we wanted to share a realistic approach that will still get you 80% of the benefit WITHOUT weighing salt. This blog post is about helping you start small with the biggest levers.

What does Hone know about restaurant finances?

Our team has used these approaches to run multiple restaurants for decades at up to—and beyond—20% profit

How to determine your plate-cost targets

To start, let’s talk about 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’s 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 Cost Example:

Let’s look at an example of how this works for a fried chicken plate.

  • Menu price: $12
  • Food cost for one plate: $4.00 = 33%
  • Target 25%: One possible strategy is to lower the food cost to $3.50 and raise the price to $14, which gives you a 25% food cost. Assuming you change nothing else, this scenario adds $2.50 per plate to the bottom line, which is huge!

Strategies for getting to a 25% food cost

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, raising prices is the easiest way to improve your menu profitability—and you wouldn’t be alone.
  • Adjust sides: Can you change a pricey side for something slightly less expensive and boost your profitability in the process?
  • Introduce highly profitable specials: These can pull folks away from top sellers towards menu items with better margins.
  • Offer combos/dessert deals: Strategic combos or add-ons can 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.

Your recipe for menu profitability (30 minute prep and cook time)

Ready to review your menu for profitability? Simply follow this recipe—gather up your recipes, your recent invoices from your restaurant bookkeeping, and use our free calculator to see where your menu is losing (or making) the most profit:

  1. Open up the Google Sheets calculator and make a copy or download as an Excel Spreadsheet.
  2. Review POS reports for the top 5 items that you sold last week or month.
  3. Grab last week’s invoices to help with ingredient prices.
  4. Complete the 2 steps in the calculator.
  5. For any items that are not profitable, consider the strategies above and make adjustments.
  6. Advanced maneuver: If you have a menu item that cannot be repriced, such as 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. For example, consider a limited quantity daily special or seasonal dessert that encourages customers to try it now while it’s available.

Need help improving your profit margins? Contact Hone below 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 through our restaurant bookkeeping software designed specifically with your needs in mind.

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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