Menu Costing
You Must Know the Cost of Each Menu Item and Recipe
Most experts agree that you need to update your menu seasonally, about four times every year. You should do this to account for trends, and varying costs of your ingredients, among other reasons. Once you know the food cost percentage of your menu items you can add your sales data, and compare to industry averages. This is a process known as menu costing, food costing, or recipe costing.
Current industry standards for food costs vary depending on the type of restaurant you own but are between 25%-30% for quick service restaurants (QSR) and 30%-35% for table service restaurants (TSR). Although many variables come into play, unmonitored food costs are one of the top reasons that restaurants go out of business. Food costs above these average percentages can make it difficult, even impossible, for your restaurant to stay open, let alone make profit.
Most restaurateurs find that menu costing can be very time consuming and complicated, but that is where our Menu Costing Calculator comes in. Updating your menu is a process with many steps, but our Calculator makes this lengthy and complicated task extremely fast.
Once menu items are costed out, they will fall into one of four categories:
- Primes: Popular and profitable
- Standards: Popular, but not very profitable
- Sleepers: Not popular, but profitable
- Problems: Nor popular nor profitable
Now that you know what categories your menu items fall into; you will take this knowledge one step further and come up with a plan to improve your menu and your bottom line. Prime recipes are what you need to focus your sales and advertising on. For Standard items, find ways to make the recipes cheaper, and consider increasing the price. Customers are more likely to accept a price increase if the dish changes. If you decide to change the price, remember to also reinvent the dish.
Sleepers are usually great ideas that need a little something extra to give them the attention they deserve. Consider current trends in the restaurant industry. Is there a new sauce everyone seems to have? Maybe become your own local trend-setter and add something totally unique to your creation. Customers want to be excited about your food, so give them a reason. Finally, for the Problem menu items, it's either time to make some major changes or just let them go entirely.
Menu costing is only the first step in updating your menu, but menu costing alone will have a huge impact on your bottom line. If you really want to go the extra distance that's necessary in this highly-competitive industry, you'll need to do research of your own on many different topics, some of which include how to effectively price your menu items against your competitors, the art of menu design both online and offline, and effective advertising strategies.