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Menu Costing Basics 9/28/2016 Copyright © 2016 RestaurantOwner.com 1 Menu and Recipe Costing Basics The Key to Making Better Decisions & More Profit in Your Restaurant YOUR QUESTIONS YOUR QUESTIONS Show/Hide Control Panel Type your questions UPCOMING EVENTS UPCOMING EVENTS This is the first of several training webinars we’ll conduct every few weeks

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Page 1: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

Menu Costing Basics 9/28/2016

Copyright © 2016 RestaurantOwner.com 1

Menu and Recipe Costing Basics

The Key to Making Better Decisions & More Profit in Your Restaurant

YOUR QUESTIONSYOUR QUESTIONS

Show/Hide Control Panel

Type your questions

UPCOMING EVENTSUPCOMING EVENTS

This is the first of several training webinars we’ll 

conduct every few weeks

Page 2: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

Menu Costing Basics 9/28/2016

Copyright © 2016 RestaurantOwner.com 2

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

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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

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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

Page 5: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

Menu Costing Basics 9/28/2016

Copyright © 2016 RestaurantOwner.com 5

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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Menu Costing Basics 9/28/2016

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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

Page 7: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

Menu Costing Basics 9/28/2016

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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

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Menu Costing Basics 9/28/2016

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P

R

O

F

I

T

P

O

T

E

N

T

I

A

L

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

Page 9: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

Menu Costing Basics 9/28/2016

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MENU ENGINEERING

Placement

Single Page Menu

2

3

1

Double Fold Menu

1

23

4

5

6

7

Triple Fold Menu

1

23

4

7 5

6

MENU ENGINEERING

Graphics

MENU ENGINEERING

Profit Analytics

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Menu Costing Basics 9/28/2016

Copyright © 2016 RestaurantOwner.com 10

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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Menu Costing Basics 9/28/2016

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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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Copyright © 2016 RestaurantOwner.com 19

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

Page 22: Menu Costing Basics - Restaurant Business Plans, …restaurantowner.com/public/Webcast-Menu-Costing-Basics.pdf · Recipe units that reflect ... Microsoft PowerPoint - Menu Costing

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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