Monthly Tip to Maximise Your Profit
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August 5th, 2003
Did you make budget last month? Are you beginning
to think that increasing your menu item prices is the only way
to make ends meet?
While there is always pressure to increase your prices, this
is not always the best thing to do and can easily decrease the
value perceived by your diners and eventually reducing your
covers. There are many ways to achieve maximum profit without
price increases. These include strategic price tweaking, menu
design item placement adjustment, item analysis, development
and elimination, promotion and even front of house staff training.
Let me share the experience of a client who recently considered
an overall price increase on his menu items and asked for our
assistance.
Step one: Menu costing and analysis
After updating menu item costings with up-to-date ingredient
prices from our database, our next step involved performing
a menu sales versus profit analysis. This involved accumulating
sales figures for the last 3 months for each item and plotting
these on a graph with the profit margin each one generated.
We then recommended items that should be eliminated, tweaked,
re-priced, added or marketed more effectively on the menu design.
Of the 6 entree items on the menu, we eliminated one “Dog” (low
popularity, low gross profit contribution) entree, and made
a small price increase to 3 of the 5 remaining entr