1. Do a Thorough Inventory CheckYou may already have a process and/or software that you use to manage your inventory. If that’s the case, this step will be a breeze. Make a list of all the food items you have purchased for this recipe, along with their costs. You may need to break down the cost by tablespoon, ounce, or whatever measurement you use when adding a given ingredient to a recipe. This step will also be helpful later if you decide to try to reduce what you spend on a particular ingredient in order to increase profit margin for your recipe.
2. Cost the DishUsing the list of ingredients and prices you created, plug them into the recipe you have developed. The easiest way to do this is to have the recipe handy and write the cost for each ingredient next to it. For example: if, for your recipe for Boeuf Bourguignon, you need 5 ounces of chuck beef, and you pay $4.25 a pound for it, you can estimate the cost for that ingredient to be about $1.32 ($4.25/16 ounces * 5 ounces). Do the same for all other ingredients in the recipe.
3. Don’t Overlook “Extra” ExpensesWhile it’s easy to assign a dollar value to ingredients that go into the dish, don’t forget other food costs, such as the complimentary bread and butter you provide each table or the occasional free birthday dessert. Frying oil and seasonings, too, should be factored in, though they are used sparingly in each dish. To calculate these costs, look at your monthly usage of the food item and divide by average monthly entrees ordered, then add that to the cost of the dish you’re calculating pricing for.
4. Decide on Your Profit MarginYou can look at other dishes your restaurant serves to see what your average profit margin on a dish is. It will probably line up with the industry average of 3 to 5%. Keep in mind, these factors in other expenses beyond food cost, like staffing, overhead, and marketing. Let’s say you’re getting a healthy 5% profit on other dishes, so you want to aim for the same with this one. If you’ve broken down what your non-food expenses are per dish, add that to the recipe cost to get your total cost for the dish. Then add 5% to get your menu price for the dish. Let’s say your Boeuf Bourguignon costs $7.35 per serving to make, and your overhead, staffing, and marketing break down to another $4 per dish. That’s $11.35. Add 5% to that to get $11.91. You could price the dish at $12 and still make a small profit.
5. Look at the LaborEven if it’s possible to make a profit on the dish, another question to consider is whether it’s too time-consuming to make on a busy night in the restaurant. If many patrons order the dish, it may take away from your staff having time to turn out other orders in a timely manner. If the recipe requires more labor than an average meal, you might consider trying to consolidate steps or do more prep work in advance or charging more to compensate for the larger portion of the cost that labor eats up.
Keep Your Menu DiversifiedIn the restaurant industry, there are four nicknames for types of dishes:
- Stars: Your most popular and profitable dishes
- Plow horses: Your most popular but least profitable dishes
- Puzzles: Your least popular and most profitable dishes
- Dogs: Your least popular and least profitable dishes
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