The pandemic, supply chain challenges and inflation have left restaurant operators stretched in ways they haven’t experienced before. If your margins have seen better days, you’re far from alone. “Most operations I see are running flat or, at best, at around 3-5 percent,” according to Russ Spencer, senior director of restaurant success for the hospitality management platform Craftable. But it doesn’t necessarily have to be that way. Spencer says too many operators are “cowboying up” when it comes to understanding profits. While their lack of systems and strategy are often due to a lack of resources rather than the absence of a desire to be more proactive, the result is the same: money left on the table. While overhead and common-area maintenance costs are more straightforward, or more apt to rise and fall predictably with sales, Spencer says he sees restaurants losing the most money as a result of how they are managing their prime costs. They can better understand how to get these costs under control if they treat them like cash in the drawer at the end of a shift – keeping track of them on a daily basis. There is often a lot of money lurking on the menu, for example. Spencer recommends operators understand each menu item’s “contribution of profit” to best determine how to steer guests to their most profitable items. That involves calculating the profit of an item times the number sold, then dividing that by the number of customers served to get a handle on your average gross profits. At a time when menu prices have been increasing, you may see that at a certain point you have increased the price so much that people have stopped ordering dessert. So how can you stop the bleeding? It may be by adjusting portion size or boosting prices elsewhere. Or perhaps you have added another item to the menu without a clear understanding of its cost, and this more exciting (yet less profitable) item is enticing people more effectively than the one you really want to sell. Perhaps guests perceive this item as too expensive in relation to the other items in the menu category, so you need to give yourself some room to adjust prices across the group. That’s why regular checkups are critical. Just as you might return to your doctor after your physical if you have an ailment that needs monitoring, you need to review how things are going and make changes as needed. As Spencer says, “You may only change your menu every year, but you have to look at your contribution of profit and average gross profit per customer every 90 days.”
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