How often do you review your menu prices?
Wednesday 03 May 2017
As a business owner, it is common sense that you know what your menu items cost before you can set the selling prices. I suggest you should increases prices at least three time per year. If you haven’t increased your prices for at least 3 months then the chances are you are either losing money or missing the opportunity to make more money.
Wage increases, overtime and rising material costs can quickly turn your best seller from a cash cow to a white elephant. Knowing your ingredient costs and the production time (costs) will help you identify how profitable an item is. But there are other ways of beating food inflation costs:
Recipe changes. One of the quickest and easiest ways to combat rising prices is to adjust your recipes. This could involve changing to lower cost ingredients, or replacing the menu item completely. Either way you must know the costs of the existing production and new production method.
Competitive and strategic pricing. If you are in a price sensitive market with or have a fixed, printed menu with limited scope for changing your menu content, raising prices may not be an option at all. You could look at changing the accompaniments or adjusting the portion size. Many coffee shops get around price sensitivity by offering 3 cup sizes – offering what looks better value for money. All the customer is paying for when ordering the super-size product is more water.
Suppliers. Many suppliers will offer extremely competitive prices as an incentive for you to choose them, and over time the slowly increase these prices. Try and avoid sweetheart deals when selecting a supplier, use a standard buying list with estimated quantities and get comparative prices from several suppliers. Once agreed fix the term of the agreement, along with the prices. Don’t be afraid to look at other suppliers, remember it’s your profit that’s at risk.
Products and product sourcing. Do you need to use vine-ripened tomatoes in your salsa or organic coffee beans? Switching to a less expensive ingredients that don’t affect the quality or taste of your recipes could be the answer.
Promotional opportunities. Linked in part to “competitive pricing” this approach looks at how, when and where you can maximise your prices/profit. Think summer holidays; holiday firms increase their prices with demand, could you?
Promotional opportunities (2). Knowing your costs and profit margin is key to maximising your profits. By utilising this knowledge and analysing your sales mix you could use menu engineering to maximise your profit. Menu engineering is an art that uses menu placement techniques to steer guests to menu items that are more profitable to the business.
Keeping your recipe costings up to date can be extremely time consuming. We use a cloud-based management system that will help you to keep these up to date. Our team will be more than happy to assist by setting up a database for you, monitor data records and send you weekly reports. If you are a multi-site operator then you will love the head office/area reports and shadow P & L’s.
To discuss your needs just give me a call, or drop me an email, or complete the enquiry form on our contacts page of the website and we will help you transform your business.