A Note About This Blog:
The following short blog is
written to explain the benefits of a new, comprehensive Excel
spreadsheet that we just made available for download. This program
uses the collection of key data to automatically generate actual food
costs, ideal food costs, recipe card price changes and product order
guides. On Monday, we will be posting a more general blog that once
again returns to our food cost control focus. In the meantime, if you
are an independent or regional food service operator that is not
currently able to execute these critical cost control practices, you
may find this free restaurant spreadsheet program and article useful.
In
the past two months, Food Buyers Network has published whitepapers
about various restaurant food cost control topics, such as yield
management, recipe costing, menu engineering, product specification
development, product usage variances and ideal food costs. While
executing these restaurant cost control practices takes focus and
commitment, they also require the processing and management of
operational data.
While all of the data required to execute food
cost control practices is readily available, many operators often
access this data during specific food cost control tasks, rather than
systematically processing it in a manner that makes it
available for multiple food cost control reports. One example of this
is the often neglected practice of recipe costing through the use of
standardized recipe cards that are updated frequently to ensure the
most current pricing. While most operators update their product prices
prior to executing a food inventory, as this is a critical best
practice to ensure the proper valuation of inventory, they do not
manage this process in a manner that enables them to simultaneously
update both their inventory product prices and their recipe card
prices. Rather, mangers spend twice the time necessary by updating prices in two
separate areas or, more likely, the practice of updating menu item
recipe prices gets forgotten.
Quite frankly, getting access to
many of the powerful food cost control reports can be achieved
relatively easy, if key data is entered in a single location. To help
independent and regional food service operators achieve this, we have
developed a free Excel program that you can download from our site. By
creating a series of spreadsheets that collect key operationaldata,
such as product prices, menu item recipes, menu item prices, on-hand
inventory figures and the menu item sales mix, restaurant managers are
then able to easily generate ideal food costs, actual food costs, order
guides and recipe cards in a systematic fashion. Of course, executing
this process still requires a time commitment, but by utilizing a single
program to process key operational data, it will become much easier and
more efficient to generate these reports.
You can download this restaurant spreadsheet on our site. There are instructions, but this program is still in BETA, so there may be some glitches. If so, please shoot us an email or give us a call so we can fix them and get out a new version. As always, we hope you find these tools helpful.
Download Spreadsheet Here
While the kitchen may be the heart of the operation, the heart of the
business is undoubtedly the menu. Most of us realize that the money
invested in an operation is expected to return a profit through the
sale of products or services. For restaurant owners, this return is
realized by the revenue generated through the sale of menu items. It
naturally follows, therefore, that staying on top of menu development
and analysis is critical to a restaurant’s success. While most
operators understand this truth, many will also often admit that the
hectic nature of the business has resulted in reduced attention given
to this important function. I have included a few of the basics in this
article when examining the profitability and effectiveness of a menu.
Question 1: Has there been a shift in market trends? A menu that was in
demand ten years ago may no longer reflect the current market trends,
resulting in lower sales due to decreasing customer demand. Of course,
to keep a menu current with market trends, an operator must first be
aware of what these trends are. These days, doing so is relatively easy
by reading the many magazines and publications available in both print
and through the internet. Reading these publications may take a little
time, but the information gleaned will pay off in the long run. Market
research is also critical when staying on top of market trends. One of
the easiest ways to achieve this is through eating out often and at new
places. Of course, you could also hire a company to perform this
research for you, but this is often unnecessary. A contemporary example
of market trends would be the shift in customer demand towards
healthier food options. There are also many more subtle trends and
sub-trends that should be reflected in menu selections and ingredient
choices. Some of these trends, like the health trend, are
industry-wide, while others may be specific to a particular industry
segment. The rise of the breakfast burrito in the Mexican segment is an
example of one such trend. Other trends include bottled water,
low-carbohydrate options, ingredients using sustainable resources,
alternative coffee beverages, flavored and enhanced water products,
wine sales, bistro-style salads, artisan breads and sandwiches, etc.
The list is endless, but you get the idea. If a menu hasn’t been
updated recently, then it probably is not capitalizing on current
trends that may result in increased revenue.
Question 2: Has the competition changed? As competition in the market
changes, so does the need to adjust menu options and pricing. Even if
competition is not directly designing menu offerings and pricing to
attack your business, which may be the case, the pricing and menu
structure of other restaurants in a given market may have significant
negative impacts for an operator if their menu is not adjusted for
these factors. For example, a Mexican concept that has always served
traditional 'sloppy' burritos may want to consider adding a new style
burrito to their carry-out menu to answer the challenge of a Chipotle
or Baja Fresh entering into their market. Examples of this are common
throughout the industry. Take coffee, for instance. McDonald's and
Dunkin Donuts are flooding the market with advertising to increase
their share of coffee sales through lattes and the like—sales that have
been under attack by Starbucks and similar companies. The converse can
also true. If direct competition has thinned, an operator should
consider pricing opportunities that may have become available, as well
as reviewing menu offerings to ensure that their operation doesn't
follow the failures of the former competition. When a competitor leaves
the market, there are often opportunities left behind that can be
capitalized on by those that react quickly. Further, looking at what
the competition is charging for similar items may not only instruct
operators on lowering prices to stay competitive, but may reveal price
increase opportunities for operators that are significantly under
priced.
Question 3: Is the menu overly complex and large? Many operators have
tried to address competitive threats and market trends by adding items
to the menu. While in theory this strategy is correct, over the years
menus can become overly complex and large if items are not removed
during this process. This is especially true for operators who don't
like to remove old items for fear of losing long-time customers. As the
number of menu items increases, however, so does the cost of operating.
More menu items result in increased inventory costs, more opportunities
for server and cook errors, reduced product consistency, increased
spoilage, the need for more intensive and costly training and the
inability to focus the menu around high-profit, key items. It is highly
recommended that operators frequently review a product mix report that
will highlight how particular menu selections are selling and eliminate
underperformers. It is worth noting that this process should be done
frequently and with a good bit of attention and detail. Further, it is
highly recommended that operators frequently utilize menu analysis
methods or menu engineering to determine stars and slugs, and react
accordingly.
Question 4: Have menu item costs increased? I recently assisted an
operator with some menu issues by completing a menu analysis of the
menu. While the owner thought that he had done a good job controlling
the cost of goods, he was shocked to see that the cost of several key
menu items had increased significantly without his knowledge. Even a
modest increase in the menu item cost of one key item can have a
substantial negative impact on the bottom line. I always recommend that
operators utilize and update recipe cards as a part of their routine
operation and that they utilize the menu analysis or engineering that I
described in Question three. Adjusting pricing structures that reflect
increasing cost of goods will help operators maintain their menu item
profit margins, but doing this requires vigilance.
Question 5: Does the menu increase revenue by raising check and per
person averages? This principle is well-known and there are common
methods for achieving this goal—I have included several of the most
common in this section. One of the more effective ways of increasing
averages is through the promotion of alcoholic beverages, such as by
suggesting a specific wine with key menu items. An additional method
includes creating add-on options for particular menu items, such as
adding chicken, steak shrimp, mushrooms, etc to a specific menu item.
Packaging menu items together has also been a highly effective way of
increasing check averages. This option is most often utilized in quick
service operations and is better known as the “combo meal.” Full
service operations also have their version of the packaged meals, known
as the price fixed, tasting or table d’hote menu. While these have been
traditionally reserved for fine-dining operations, even TGI Fridays and
Applebee's have recently gotten into this game by creating limited 3
course meal specials that package a choice of an appetizer, entrée and
dessert for one fixed price. Another common packaging strategy for full
service restaurants has been the option of adding a side salad to an
entrée for a reduced price. The three options I have listed, alcohol
sales, add-ons and packaging, have always been utilized by operators to
increase revenue. Often times operators focus on these goals through
staff training and suggestive salesmanship. In addition to these
efforts, I suggest that operators examine their menu and look for ways
that they can better achieve these goals using menu design, rather than
relying solely on salesmanship. During the process, it is common for
operators to develop unique solutions for achieving this objective.
Question 6: Does the menu layout and design reflect current trends and
marketing principles? Every menu layout has "sweet spots" that
customers will automatically gravitate towards. These areas on the menu
should contain the high-profit items that you want to sell the most. In
addition, high-profit items should be highlighted through boxes,
pictures or other means. Also, operators should examine the font, color
scheme, construction and theme of the menu to ensure that it has kept
up with trends. Using a menu that was contemporary ten years ago will
now give your customers the perception that your operation has become
dated.
These above six questions were designed to help operators perform a
little ‘menu introspection’ during these difficult times. It should be
noted that while there are basic principles of menu strategy, no
operation is alike and, therefore, must apply such strategies
differently. Further, there are many other aspects of menu design and
strategy that might help an operator improve profitability. Please feel
free to forward on questions or comments if you should need further
assistance or have additional questions. Good Luck!
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