Stop throwing money away: Cost your Menu

In all likelihood, your most immediate opportunity to improve your restaurant’s financial performance is to better control your Cost of Goods Sold (“COGS” – the cost of all your menu’s ingredients).  Time after time, we see well run restaurants literally leave money on the table when it comes to COGS.

It’s time to stop throwing your money in the garbage

The implications are huge.  We estimate that restaurants operating without costed menus are losing 5-8% of Revenue.  All of it could hit your bottom line!  That’s a staggering number for an industry that averages about 6% overall profitability.

And yes, we know, to have a real costing system is challenging.  We usually hear one or more of these responses when someone resists the idea:

  • We change our menu too frequently to be bean counters
  • I have a good gut feel for what everything costs
  • I’m never going to be a spreadsheet person
  • We have such massive amounts of ingredients, recipes and sub-recipes, there’s all these different units of measure, plus what we pay for a lot of our ingredients changes seasonally
  • Seriously, who has time for this?

These challenges are real.  But with this much at stake, the challenges must not deter you!

Here are three things you can do, today:

  1. Run an informal Gap Analysis:  Facing the gap between your planned COGS and the actual results is a wake-up call.  Even if you don’t have the source data (e.g. inventories and costed recipes) you should have a sense of where you expect COGS to be.  Review your most recent P&L and compare the actual number to your plan.  An acceptable Gap is about 2-2.5%.  Anything higher than that should get your attention.
  2. Audit a sample of some high cost ingredients:  Do you go through a lot of cheese?  proteins?  Do some back of the envelope math using your sales mix.  Have you used 1,000 pounds of cheese or chicken or etc. where your sales history tells you it should have been more like 900?  Those extra 100 pounds are likely the result of mis-portioning, waste or misunderstanding yields.
  3. Join the Rethink Team in February to grow your Costing skills:  One of the major reasons we see resistance to menu costing is the tedium of actually doing it.  Unit conversions are a huge headache.  But having the right approach, system and tools can make the process so much easier.  To help, the Rethink team will be offering a 90-minute seminar in March at our offices in Somerville.  Register and get a live demonstration using the Rethink Plate Cost Book along with an overview of our Seven Paths to Profit:  How to Take Control of Your COGS.

Invest 90 minutes.  The return could be enormous.

Registration is limited and available here.