In the complex equation of analyzing profit margin for your restaurant(s), there are always new ideas and trends that emerge worth replicating by both finance and operation restaurant executives. So far in the first quarter of 2014, one hot trend is menu engineering. While the basic objective of menu engineering is to become more profitable, some constants (outside of the menu) will always remain – to view them, click here.
Finding new ways to maximize the overall profitability of a company, aside from customer satisfaction, is the Holy Grail of the restaurant industry. Especially with the uncertainty surrounding the Affordable Care Act (ACA) and the affects it could potentially have on the bottom line. Fact is, when more money is being made, everybody is happy and more investments can be made into the business.
For this post specifically, we’re going to delve into 3 of the top strategies to maximize profitability simply by reengineering your menu offerings on a few products. And, maybe a little upselling of those products along the way.
Tip #1:
Find ways to sell more soft drinks
Did you know that beverages are the most profitable item on your menu? Whether you sell Coke or Pepsi products, that $1.99 soft drink you’re selling is yielding positive margins well over 80%. Hence why McDonalds is able to offer any size soft drink at a $1 price point. If you are a QSR concept, you already have combo meals pairing up top performing menu items with a beverage. For fast casual or dine-in concepts, consider offering something similar that makes sense for your brand. One example is what Pizza Hut did with Pepsi: as a strategy to push 2 liters, they offered a $5 deal which included a single order of breadsticks and a 2 liter.
Tip #2:
Upsell alcoholic beverages
Sticking in the beverage category, if you’re a restaurant company with a liquor license, encouraging guests to have beer, wine, or a cocktail with their meal also yields a nice profit margin. Some servers even go as far as suggesting certain wines or beers to pair with an appetizer or entree - which is a great upselling strategy worth mimicking. What’s even better about upselling alcoholic beverages is that there are no free refills! Of course, servers must use discretion and not over-serve guests during their dining experience. If it makes sense for your concept, everybody loves a good after work happy hour!
Tip #3:
Pasta pronto
This might not apply to everyone reading this post but if pasta is on your menu, make a point to push it on customers more than any other item. Maybe even word-smith the copy on the menu to suggest how incredibly delicious it is! The beauty of pastas is not only its low food cost but also it can be cooked early and reheated very easily. This saves on food waste which can be a profit margin killer.
Bonus tip:
Maximizing restaurant profitability is a perpetual riddle. So what’s the bonus secret? The people you hire to run your restaurants. A restaurant can fail or succeed based on who is running it. Profitability is ultimately in the hands of the manager. Above store leaders have the ability to spot negative trends and can make suggestions but it all rides on how the manager controls the store.
Something to keep in mind
Setting the right price points to maximize profitability on all menu items is crucial. Furthermore, deciding what products to promote at a discount is also crucial. Discounting can adversely affect margins but increase traffic. It's a gamble so make sure and choose the right promotions that will drive return customers willing to pay full menu price! In an industry where margins are always so tight, mispricing menu items will most certainly come back to haunt you on the P&L at the end of each month. Having all departments work together on menu strategy will be your best bet for success. While collaborating, be sure to reference historical data to thoroughly analyze the menu. If you’re having difficultly interpreting the data, perhaps you need new reporting software.
