Successful Menus Require More than High Profit Margin Foods
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Restaurants have always looked for the highest profit margin foods to offset plate costs across their menus. Those foods are few and far between these days as the cost of goods continue to rise.
A new study showcases 43 percent of restaurant operators list the cost of goods as one of their top three concerns. Proteins, produce, even packaging—we’re seeing cost increases across the board.
That’s why xtraCHEF is designed to help you be dynamic in pricing and monitoring profitable menus. Our operational and financial tools provide important insights that can help you pivot between dishes and ingredients as individual ingredient costs fluctuate.
Continue reading to learn about some of the highest profit margin foods you can serve. See how to set systems in place that provide tangible restaurant accounting insights and profit-focused recommendations.
What’s in a high-margin menu?
Crafting successful restaurant menus takes creativity. It’s not as easy as determining which dishes have cheap ingredients and loading your menu with them. You can’t rely solely on popular dishes, because they may be too costly. Then you have your expensive dishes, which probably bring in revenue but require more skill and labor to prepare.
The goal is to strike a balance between popular, profitable items, and high-cost items—between high-labor dishes and quicker snacks/sides that your kitchen can send out in no time. This balance requires you to take a holistic look at your menu.
Four categories of menu items
When you take a look at each item on your menu, you can put them into these four categories:
STARS: High Profitability, High Popularity
PUZZLES: High Profitability, Low Popularity
PLOWHORSES: Low Profitability, High Popularity
DOGS: Low Profitability, Low Popularity
Your Stars are both popular and have a high profit margin—think fancy mac-and-cheese. The ingredients don’t cost much. It’s popular. And if you make it delicious, you can sell it for $15 or $20.
Your Puzzles are less popular, but they are profitable—think of vegan cauliflower tacos. These are dishes that you want to work on selling more of by highlighting them visually on your menu, jazzing up their description, souping up their presentation, and urging waiters to sell these tacos.
Your Plowhorses are less profitable, but they are very popular. They’re the kinds of dishes that diners come back for, but you’ll want to supplement them with higher-margin dishes. One example is fried calamari. While calamari is a relatively expensive input, you don’t want to eliminate it.
Your Dogs are troublemakers. They’re not popular nor profitable. But that doesn’t mean they necessarily have to go. You could try rebranding them (Broiled Oysters can be Oysters Rockefeller) or offer them as a limited time, one-day-per-week special to make them seem exclusive and avoid the high daily labor cost of making them. If none of that works, it may be time to give your dogs the axe.
To dig a little deeper into how to craft your menu, head to the free Menu Engineering Course by Toast featuring insights from xtraCHEF’s John Enny.
You can’t master your menu without tracking food costs
Restaurant prices (food-away-from-home) are up 2.8% and are expected to be up between 3-4% YoY through 2021 and another 3-4% through 2022.
Supply chain disruptions, factory shutdowns, and increased demands are contributing to highly volatile food costs. You can’t control vendor prices (unless you’ve negotiated set rates), but you can control what you spend.
xtraCHEF provides that spend management foundation with our invoice processing, approvals, and price fluctuation alerts. Our operational and financial automations make it easy to manage your spend—from invoice line-items to recipe costs to individual ingredient prices.
Along with using our platform, here are a few key strategies to keep track of food costs and ensure menu profitability, saving your bottom line:
- Know your plate cost. The only way to know how profitable your menu is is to build out the cost of each plate. You could do this manually. Here’s our step-by-step guide to calculating plate cost. Or you can use xtraCHEF’s recipe management capabilities to see cost and margins of every recipe, with automatic updates every time you scan a new invoice with ingredient price changes.
- Act ahead of time. Alexia Fimmano, xtraCHEF’s Financial Services Manager, tells the story of a nationwide lime shortage, affecting a group of Mexican restaurants she worked with. Luckily, the restaurateur saw it coming and acted decisively. Although a Mexican restaurant can’t stop serving margaritas, it can cut back on limes — by removing them as garnishes and selling margaritas featuring other fruits.
- Take inventory each week. Taking inventory is time-consuming but absolutely essential, as operators who take inventory every week add 2 to 10 percent more profit to their bottom line. You don’t use all the food you bought that week, so without doing weekly inventory you are getting a distorted view of your COGS and profits. By doing hands-on weekly inventory backed up by xtraCHEF’s inventory management tools, you can get a true view of what you used and how much money you made from it.
If you want to dig more into each of these points above, check out our webinar, “Five Food Cost Management Fails.”
Here are some high-margin foods to sprinkle into your menu
Being intentional about what items you feature on your menu will go a long way towards upping your profits. As mentioned earlier, one key principle in crafting a menu is balance. You want to mix in some of your high-ticket / high-cost items with some low-cost / low-ticket items. Don’t shy away from either.
Let’s take a look at some of the highest margin foods that you could add to your menu:
- Dry-aged Ribeye Steak. Beef costs are high right now, making it a struggle to be a steakhouse, but that doesn’t mean you shy away from selling these prime cuts. A dry-aged ribeye steak may cost you $70 but if you can sell it for $140, that’s a super profitable item.
- Sides. If you know your patrons come for the steak, which can be a little rough on your COGS ratio, supplement by featuring sides on your menu. A side like rice or a crispy vegetable are a great, low-cost item that you can sell at a big profit.
- Zucchini Fries. Zucchini’s cheap, and restaurants with bomb zucchini fries have offered them for upwards of $15.
- Soup. Because you can use vegetable scraps from prepping other menu items and bones from your meat dishes that you otherwise would throw away, soups are a low-cost item that make a lot of sense.
- Dessert. The ingredients that go into a decadent dessert can be cheap. Not only will your customers enjoy that final heavenly tiramisu or cheesecake, but your accountant(s) will too.
Where do you go from here?
The starting point to building a more profitable menu is more closely tracking your costs. That’s the only way to know which of your plates is a “dog” and which is a “star.”
Once you figure that out and keep track of ever-changing prices with the help of xtraCHEF, you can sit down with your chefs to dream up how to build even more profitable and balanced menus. We can’t wait to see what you come up with, so reach out to schedule a demo today!