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Menu Costing Basics 9/28/2016
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Menu and Recipe Costing Basics
The Key to Making Better Decisions & More Profit in Your Restaurant
YOUR QUESTIONSYOUR QUESTIONS
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UPCOMING EVENTSUPCOMING EVENTS
This is the first of several training webinars we’ll
conduct every few weeks
Menu Costing Basics 9/28/2016
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YOUR MENU IS YOUR PRODUCTYOUR MENU IS YOUR PRODUCT
Your menu IS the product you sell
Menus define a restaurant
Everything you do centers around menu
Every business needs to know what their product costs them.
YOUR MENU IS YOUR PRODUCTYOUR MENU IS YOUR PRODUCT
YOUR PRODUCT IS YOUR BUSINESS
Menu Costing Basics 9/28/2016
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YOUR PRODUCT IS YOUR BUSINESS
What business can survive without knowing how much the products they
sell costs them?
YOUR MENU IS YOUR BUSINESS
YOUR MENU IS YOUR BUSINESS
Menu Costing Basics 9/28/2016
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WHY YOU NEED A MENU COSTING SYSTEM
What differentiates restaurants from other retailers?
Answer: We are also manufacturers
WHY A MENU COST SYSTEM?
WHY A MENU COST SYSTEM?
1. Consistency & Predictability
2. Competitive pricing
3. Higher profit potential
4. Better staff performance
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WHAT DRIVES THE GUEST EXPERIENCE?WHAT DRIVES THE GUEST EXPERIENCE?
Guest Experience
What’s the MOST important part of the Guest Experience?
ANSWER: Consistency
WHAT DRIVES THE GUEST EXPERIENCE?WHAT DRIVES THE GUEST EXPERIENCE?
Guest Experience
How do restaurants create CONSISTENT Guest Experiences?
WHAT DRIVES THE GUEST EXPERIENCE?WHAT DRIVES THE GUEST EXPERIENCE?
Guest Experience
Good People
Checklists
Recipes
Procedures
FormsStandards
Manuals
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WHY A MENU COST SYSTEM?
1. Consistency & Predictability
2. Competitive pricing
3. Higher profit potential
4. Better staff performance
COMPETITIVE PRICING
Two factors:
• Market value
• Your cost
COMPETITIVE PRICING
Value Perception Factors• Service style
• Ambiance
• Location
• Type of food
• Your staff
• Quantity
• Quality
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COMPETITIVE PRICING
Cost Factors• Availability
• Seasonal fluctuation
• Shelf life
• Prep labor
• Profit margin
COMPETITIVE PRICING
Pricing Strategy
• Avoid setting by desired food cost %
• Target market value
• Confirm by profit contribution
• Adjust or omit
WHY A MENU COST SYSTEM?
1. Consistency & Predictability
2. Competitive pricing
3. Higher profit potential
4. Better staff performance
Menu Costing Basics 9/28/2016
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HIGHER PROFIT POTENTIAL
Frequency
Periodic
Never
Perpetual
HIGHER PROFIT POTENTIAL
Menu Engineering
The art and science of how and where to place items on the menu.
3 Basic Principles
HIGHER PROFIT POTENTIAL
Menu Engineering
Placement
Graphics
Profit analytics
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MENU ENGINEERING
Placement
Single Page Menu
2
3
1
Double Fold Menu
1
23
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5
6
7
Triple Fold Menu
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23
4
7 5
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MENU ENGINEERING
Graphics
MENU ENGINEERING
Profit Analytics
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WHY A MENU COST SYSTEM?
1. Consistency & Predictability
2. Competitive pricing
3. Higher profit potential
4. Better staff performance
BETTER STAFF PERFORMANCE
Realistic ExpectationsDo you have a target food cost percentage or budget?
How did you arrive at that number?
NRA Operations Report Industry Averages Menu Pricing Historical trend
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BETTER STAFF PERFORMANCE
Ideal Cost
The projected cost for a given sales mix over a period of time, assuming proper portioning and normal waste and yields.
For every menu item there is a recipe Each recipe is comprised of specific
ingredients and portions Each ingredient has an exact cost
IDEAL COST
Ideal cost =
the number of menu items sold
x the menu item cost
IDEAL COST
Realistic food cost target
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Waste or spoilage
Improper portion control
Receiving problems at the back door
Theft
Unrecorded sales
Accounting errors
Outdated menu cost
Variances between ideal and actual cost can normally be attributed to:
IDEAL COST
HOW TO IMPLEMENT A MENU COSTING SYSTEM
MENU COST SYSTEM
Dozens of Software Solutions
• Chef Tec
• Cost Guard
• Crunchtime
• Ctuit
• Ezchef
• Optimum
• Cost Genie
• IPro
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MENU COST SYSTEM
• You don’t have to buy expensive inventory control software
• Or pay $100’s a month for an online app
• Members can download our template for free
• You do need to commit 40 – 100 hours to set up
• Don’t make your management do double duty
• Once set up – only 1 hour a week to keep up to date
Overcoming Resistance
MENU COST SYSTEM
3 Primary Components
Inventory Master
Batch Recipe Cost Cards
Menu Item Cost Cards
MENU COST SYSTEM
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MENU COST SYSTEM
Inventory Master
MENU COST SYSTEM
Start with your menu and your order guide
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INVENTORY MASTER
• List all ingredients you purchase
• Include pack and size
• List purchase unit
• Price (as listed on invoice)
MENU COST SYSTEM
MENU COST SYSTEM
Recipes are expressed in one of three ways:
Weight (oz., lb. kilo, grams, etc.)Measure (fl. oz., tsp, Tbsn, cup, liter, etc.)Each (can, piece, etc.)
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MENU COST SYSTEM
MENU COST SYSTEM
INVENTORY MASTER
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INVENTORY MASTER
Weight vs. Measure
Conversion Examples
1 cup (8 fl. oz.) of dried thyme leaves weighs only 1.6 oz.
1 cup of crumbled bleu cheese weighs 4.75 oz.
1 cup of barbeque sauce weighs about 10 oz.
MENU COST SYSTEM
Batch Recipe
Lookup list
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BATCH RECIPES
Recipe units that reflect common measures make it easier to calculate # of RU
BATCH RECIPES
The completed batch becomes another ingredient for menu items or other batch recipes
BATCH RECIPES
Recipe units for batches are expressed in the same way as ingredients.
Use the RU that best reflects how this will be shown on menu and recipe cards.
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BATCH RECIPES
Batch recipes provide the best method for reflecting the yield.
The yielded units reflect cost differences for shrinkage, trim and waste.
BATCH RECIPES
MENU COST SYSTEM
Menu Item Cost Card
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Lookup list
MENU COST CARDS
All the information you need for:
• Competitive Pricing
• Menu Engineering
• Ideal Cost
MENU COST CARDS
Cost and gross profit are updated automatically when ingredient prices on the Inventory Master
are changed
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MENU COST CARDS
A single menu item may require several batch recipes
MENU COST CARDS
Most restaurants have giveaways
Condiments
Chips and salsa
Bread and butter
MENU COST ALLOCATION
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MENU COST ALLOCATION
MENU COST ALLOCATION
MENU COST SYSTEM
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MENU COST SYSTEM
MENU COST SYSTEM
Key Take Aways
Promotes consistency
Competitive pricing
Increased profit potential
Better staff performance ‐ accountability
Cornerstone for other kitchen management systems
All of these impact the guest experience