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The restaurant industry is notorious for having narrow profit margins and high costs. How does anyone make a living at it? While you don’t want to cut corners in your restaurant’s operations to the point of having a negative impact on the customer experience, there are ways you can make more money without doing so. You can improve your restaurant’s profits by adjusting your menu occasionally, focusing on menu items that are popular and drive revenue. Here’s how.
Step 1: Cost Your MenuIf you calculate food cost for a menu item whenever you develop a recipe, you probably already have a good idea of what each item costs in money and labor, as well as your profit margin. It can, of course, be helpful to do so each season if costs for some ingredients go up or down. You may be surprised, for example, to find that your club sandwich has gone up in cost since the last time you calculated its food cost because the price of bacon has risen. This means that every club sandwich you sell is bringing in less profit than it used to. You’ll need to make a decision about what to do about this in the next step.
Step 2: Decide Whether to Raise PricesRaising menu prices is a tricky subject. On the one hand, if you raise them too much, longtime customers may get upset and take their business elsewhere. If you don’t raise them for too long, you cut into your profitability and may struggle to make ends meet. There are a few scenarios where raising menu prices is a good idea:
- When certain costs have risen permanently
- When the market can bear it
- When business is booming