The Board: July 2024
This month we look at: avocado prices, when is the right time to update menu prices, how to boost lunch service revenue, inflation and national restaurant sales trends from June.
Well, folks, we've made it past the halfway point of the year. And I can think of no better way to celebrate than binge-watching the latest season of The Bear. I recently traveled to Michigan for the 4th of July and spent the airtime doing just that. Note to all - crying on an airplane is just as awkward as it sounds, but (in my opinion) it was worth it for season 3. Those little cocktail napkins are surprisingly absorbent.
I was sharing my thoughts with a friend who's worked in the industry, particularly about the final episode and all the cameos (spoiler warning), and while we both enjoyed the warm fuzzies of having so many restaurant greats sitting around a table sharing their origin stories and vulnerable moments, she felt that if that group of people got together irl that's probably the last thing they'd do. I had to agree.
I'm curious about your thoughts. When you're hanging out with industry friends do you end up reminiscing, talking shop, or do you try to catch up on other things??
And speaking of chats with friends, this month's ask [me] anything is based on conversations we've been having with clients lately so be sure to scroll down for that. We've also got some good news for both national sales and inflation (finally!).
Stay cool, and I'll see you in August.
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- Rachel & the MarginEdge team
P.S. If you took our very, very accurate Restaurant Personality Type quiz , your July mantras are here !
MONTHLY SALES METRICS & UPDATE
Full Service and Fast Casual ended the month +1% up from July 2023's numbers.?
Zucchini topped our Movers list with a whopping +76% price increase across MarginEdge customers in June. Fresh tomatoes topped our Droppers list, followed by red grapes and Romaine lettuce.
The average food category costs as a percentage of sales stayed the same for MarginEdge customers last month, with food costs averaging 28% of sales.?
ITEM TO WATCH
Avocados
Nowadays it's not just millennials and their (supposedly) debt-inducing avocado toast habits taking a financial hit - it's practically everyone. Median avocado prices were up +66% from January for MarginEdge restaurants this month and as one of the top 20 most commonly purchased products by said restaurants in June, it's safe to assume there's more than a handful of operators out there feeling a little green about it.
One significant issue contributing to the increase is the halt of USDA inspections in Mexico, a major exporter of avocados, due to security concerns for their inspectors.
On top of that, weather-related events like droughts and extreme heat in key growing regions like Mexico and Peru have resulted in lower yields. If you've been reading this newsletter for a while, you'll know that weather often plays a big role in product price increases.?
The good news is that inspections have resumed , and prices are likely to fall in the coming weeks so don't feel desperado. (Does it count as an avocado pun if it's just rhyming??)
ASK [me] ANYTHING
When should I be making menu/pricing changes?
Unless you're a big operation, chances are you're not updating your menu quarterly. It takes a lot of time, a lot of eyeballs, and a lot of adjustments to get them approved (oh, and then comes that super fun part where you wait for potential guest backlash). So when's the right time to make a change?
The short answer is: it depends. I know, I know, seems like a cop-out but we promise it's true! Menu changes are a big deal and need to be done right. Whether that's quarterly or even once a year, here are a few factors to consider when it comes to timing:
When you do take the leap to start changing your menu, make sure you're looking at menu performance and practicing (at least some) of the principles of menu engineering. If you're interested in learning more, we've written a helpful blog on the basics of menu performance and some best practices for multi-unit menu analysis .
?? Ask [me] anything! Really. Each month we’ll take a look at the questions we get and answer one here. Have a question about our product, accounting, or restaurant operations in general? ?? Email me?at [email protected] or message us on our social media channels.
THE ECONOMY
Inflation Update
Well, friends, the day has finally come when there is some positive (and by positive, I mean negative) news about inflation. June's report came in at a -0.1% decrease from May's numbers - our first decrease all year (and in the last four years !). Overall inflation year-over-year sits at 3%.?
Food away from home is still at +0.4% for June from May, and +4.1% YOY, the same as last month. Food at home slightly increased this month by +0.1% bringing overall food inflation up by +0.2% last month.
Limited Service meals are +4.3% higher than this time last year, and Full Service meals are up +3.9% YOY (both a slight tick up from last month).?
The biggest culprits for the overall drop were gasoline (all types), and some commodities like new and used cars.
Tl;dr - food away from home is sitting pretty in at the same rate as last month, while overall inflation decreased for the first time in four years.
'TIS THE SEASON
Boosting revenue for lunch service
Lunch service can sometimes be a conundrum for operators. During the pandemic, many restaurants closed because a lot of their business came from nearby offices or institutions that all went remote meaning no more lunch crowds.
If lunch isn't your strongest service, but you're not losing money (if you're losing money being open for lunch it goes without saying that you should definitely consider not doing that) here are four ways you can boost revenue mid-day:
Catering: Catering often has better margins than Full Service or even Fast Casual dining. And depending on your location, and the businesses around you, being open for a full lunch service may not always make the most sense financially. Catering out lunches typically requires lower labor costs (because you don't need FOH/wait staff, just a delivery driver) and creates less waste adding to those margins.?
Pare back your menu: If lunch is a little slow, consider matching your lunch menu to what's being prepped for dinner. If your prep cooks are already going to be in the kitchen prepping for dinner service, having a menu that uses those ingredients with a side of fries lets you kill two birds with one paring knife.?
Optimize for delivery: And speaking of paring back your menu, consider switching up your lunchtime delivery options to ready-to-go lunch boxes rather than made-to-order items. If you list your restaurant on a 3rd party delivery service like DoorDash, you can also think about having lunchtime specials or promotions to boost sales. Using a 3rd party can also help expand your range of potential guests if you're not nearby to office buildings or busy areas. If your business is already mostly delivery during lunch, you can also crunch the numbers on closing your dining room altogether then.
Switch to Happy Hour or Early Bird: One of the biggest drawbacks of lunch sales is that they're typically smaller checks with no alcohol sales (and we all know how great alcohol sales margins are). Consider opening earlier for dinner, or trying happy hour offerings that pair alcohol and food together. This ensures guests don't get too hammered on $4 well drinks because they're eating along with it, and the boost from alcohol margins can balance out higher food costs on your food items.?
Even if you're not making tons of revenue from lunch, it can still be worth it if it's helping take care of overhead or operating expenses. If they make sense for your business, these options can help boost revenue and avoid that mid-day sales slump.
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