Are You Maximizing Your Profits?
As a restaurant owner, you have a lot on your plate. It’s heaped high with managing ingredients, portion control, food safety, customer service, marketing and, last but not least, maximizing profitability.
With these challenges in mind, we at Burke have created a series of online calculators to help with the analysis of some of your most important business decisions—ingredient selection, menu promotions and pricing. Our “profitability calculator” specifically addresses maximizing profits as it shows how the positioning and pricing of a specialty menu item can affect your bottom line.
The profitability calculator is based on a simple three-step strategy:
- Identify an item on your menu that could potentially move from standard to specialty status.
- Tweak the recipe and the name of the item to position it as a higher value specialty item.
- Apply a lower food cost percentage (or higher mark-up) to achieve a higher profit margin.
Sometimes, this is as easy as identifying a customer favorite from the design-your-own pizza section of the menu that can receive specialty status. It simply needs a new name and a move to the top of the menu. Other times, it may require transforming a basic recipe with a few upscale ingredients. For example, if sausage mushroom is a favorite combination, try adding a second sausage (such as spicy, or sliced, or Andouille), switching to a Portobello mushroom, and topping it off with a little Pecorino Romano cheese. Then give it a new name based on a local attraction or landmark.
To see how this can impact your bottom line, simply input basic ingredient costs into Burke’s Profitability Calculator, and then compare the profitability using your standard food cost percentage versus one that is typical of an upscale item. For example, for a standard menu item with an ingredient cost of $4.00, a typical food cost percentage of 35% yields a $7.43 margin. If those same ingredients can be positioned as a specialty item, they could yield a profit of $9.33 (based on a lower food cost % of 30%), or an additional $1.90. (See example below.)
| PROFIT POTENTIAL FOR YOUR RECIPE |
| Total ingredient cost: |
$4.00 |
| STANDARD MENU ITEM |
|
| Food cost %: |
35% |
| Suggested menu price: |
$11.43 |
| Profit margin: |
$7.43 |
| SPECIALTY MENU ITEM |
|
| Food cost %: |
30% |
| Suggested menu price: |
$13.33 |
| Profit margin: |
$9.33 |
| By positioning as a specialty menu item, your additional profit margin would be: |
$1.9 |
If you would like to learn more about increasing your profits with specialty menu items, please contact us. And be sure to check out our other profitability calculators at www.BurkeCorp.com/Tools
To continue this conversation, please leave us a comment at the bottom of this post or email us at BurkeBlog@BurkeCorp.com.
Amy Thielking is the marketing specialist of Burke Corporation.