Article on Menu Costing for Restaurants

Introduction

Menu costing, a seemingly simple yet vitally important aspect of restaurant management, is often overlooked by many restaurant owners. The common response from owners, when asked about the last time they costed their menu, ranges from the opening day to a vague "the chef handles that." However, proper menu costing goes beyond basic arithmetic. It involves considering usable yields, plate costs, and accounting for losses like prep shrinkage, waste, and returns.

The Pitfalls of Overlooking Menu Costing

Consider a simple example: mashed potatoes. Say you buy potatoes at $10 for 10 pounds, intending to use 5 pounds per your recipe. Simple division might suggest a cost of $1 per pound, but this doesn't account for the weight lost during peeling, boiling, straining, and serving. If you consider only a usable yield of 90%, the actual cost of goods sold (COGS) per pound rises to about $1.11. Overlooking such details can lead to significant revenue loss. For instance, underestimating the cost of mashed potatoes alone could result in a yearly loss of over $1,300, assuming you sell 50 sides per day.

Broadening the Scope

Beyond individual dishes, every element that contributes to the production of a menu item needs to be costed. This includes not just the primary ingredients but also secondary elements like the usage of fryer oil, the cost of condiments, and even packaging for takeout orders. Even small items like beverage napkins and stirrer straws in a gin and tonic should be accounted for, as these can subtly affect the overall cost and profitability.

Benefits of Accurate Menu Costing

Accurate menu costing is crucial for several reasons:

• Profitability: Correct pricing ensures that all costs are covered and a profit is made on each item sold.
• Perceived Value: Customers are sensitive to pricing. Items priced too low may lead people to question their quality, while excessively high prices might deter customers.
• Competitive Positioning: Your pricing strategy affects how your offerings compare with those of your competitors. It’s crucial to strike the right balance to remain competitive without sacrificing profitability.
• Menu Engineering: Strategic pricing is a key component of menu engineering, where the design of the menu can influence customer choices towards more profitable items.
• Revenue Management: Effective pricing can help manage demand and maximize revenue through techniques like dynamic pricing based on time of day, demand, or seasonality.
• Customer Satisfaction: Fair and reasonable pricing contributes to customer satisfaction, encouraging repeat business.

Conclusion

Proper menu costing is an essential practice for the successful management of a restaurant. It requires regular updates and adjustments based on varying costs, competition, and customer feedback. Understanding the true cost of each menu item enables better pricing strategies, which in turn secure the restaurant’s profitability and longevity.

For restaurant owners or managers looking to delve deeper into the science of menu costing or seeking help with implementing effective costing systems, resources and expert guidance are available. Feel free to reach out for specialized coaching or join a community of professionals dedicated to refining operational practices within the hospitality industry.

If you're interested in learning more about effective menu costing or need assistance with your restaurant's operations, contact us at 833-HIVEVOC, send an email to [email protected] , or visit our website at www.hivevoc.com . Join the Hive community and be part of a network that’s enhancing hospitality management through informed and strategic practices.