Business and Operations
Effective menu can add 2-4% to bottom line: Restaurants Canada webinar
By Canadian Pizza
By Canadian Pizza
An effective menu can add two to four per cent to your bottom line, said David Hopkins, president of consulting company The Fifteen Group, during an hour-long session during which he shared useful techniques and strategies to build a profitable menu.
Hopkins has 30 years of experience in restaurant management and has held senior management positions within Oliver-Bonacini group, and SIR Corp., which owns Al Frisco’s, Alice Fazooli’s! and other successful concepts. The session, “Engineering Your Menu for Profits,” was one in a comprehensive slate of webinars, the Rapid Recovery series, aimed at giving restaurants information they need to succeed.
Many operators are striving for “a mythical” 30 per cent food costs or better, but to focus only on food costs is to miss the point and miss out on potential profits, Hopkins said.
He advised getting your menu costed. Hire a professional or hire chefs to go through your menu to understand the costs involved. “You need to understand the cost of what you’re selling,” he said.
Hopkins emphasizes that margin menu costing is very important. You can have three menu items with different food costs and different pricing. But they all may have the same profit margin. That’s the key number, he said. Low food cost isn’t everything: the best option for the customer may be the one with better-quality ingredients and the highest food costs.
‘The food cost is irrelevant – it’s the profit we care about.’ –David Hopkins
“The food cost is irrelevant – it’s the profit we care about,” he said.
His company uses a quantity margin graph to compare similar menu items. They divide menu items in a category (such as pizzas or main dishes) into four groups: stars that are performing well, opportunities that could do better, puzzlers they are not sure how to improve and “dogs” that under-perform and often, but not always, are best dropped from the menu.
If you keep an under-performing item, make it the best you can be with the best profit margin, Hopkins said. “Let’s charge for it,” he said, adding that sometimes dishes are so under-priced that they become popular for that reason (fish and chips is a typical example).
In his experience, most people go to a restaurant for the overall experience. So you won’t necessarily lose a customer by dropping an item. You can actually improve the value for your customer by lowering the price and still make a good profit.
Food costs matter only when it comes to doing inventory. Per cent costs become a tool only after you have your menu engineered for maximum profit. Food costs should be whatever would make sense for your restaurant, assuming you’ve got sufficient profit margins built in, Hopkins said.