RESTAURANT - PROFITABLE MENU PLANNING

The prosperity of any restaurant is directly attributable to its menu. A restaurant is the culmination of food, atmosphere, and service. Many restaurants can thrive without a fanciful atmosphere or quality service, but none can survive without exceptional food.

The restaurant manager must examine his restaurant’s atmosphere and clientele carefully. Based upon these observations he can then design a menu that will be effective. The objective of this chapter is to present you with complete guidelines for planning a successful and profitable menu. It would be impractical in these pages to list specific examples of potential menu items. There are many excellent cookbooks that describe menu and recipe ideas in detail. The following sections will illustrate a basic outline, from which you can plan your own exclusive menu. Each of the procedures described plays an integral part in developing your cost control system. The procedures and systems will unfold as the book progresses. Some of these procedures may be adapted for your own particular needs. The underlying, fundamental purpose of each cannot be altered or else management will be in danger of losing control over the restaurant’s costs.

MENU STYLE

Menu style describes how much or how little variety the menu offers. Do you serve a limited or expansive menu? Kitchen size and labor cost control may influence whether or not you offer a limited menu. Menus with more options do have a broader appeal. Limited-limited menus are generally offered by fast food operations. These menus allow them to keep production simple and maintain a tight rein on food and labor costs.

Extensive-limited menus are offered by restaurants that serve three meals a day, such as coffee shops. While they offer more items, they limit the number of ways these items are prepared. Specialty restaurants (TGI Friday’s, Ruby Tuesday, and ethnic restaurants) have limited-extensive menus. By preparing and combining the same ingredients in different ways, these establishments are able to offer many more choices but still control inventory and costs. Fine dining restaurants offer extensive-extensive menus. These establishments offer a great variety of choices in items prepared and methods of preparation.

There are advantages to both the limited menu and extensive menu styles:

MENU STYLES

How many menu items should you offer? You want to provide the customer with variety, but not at the expense of your ability to control inventory and cost, nor by over-taxing your production or serving staffs. Research has shown that 60 to 75 percent of menu items sold are the same eight to 12 items, regardless of the number of choices offered. It is probably wise to offer somewhere between 18 and 24 options.

FORMATTING YOUR MENU

After you have defined your establishment’s goals and determined the style of your menu, you must decide what items will go on your menu. This decision can be done in a four-step process:

1. You must decide what menu groups you will offer. Groups are appetizers, entrees, soups, and desserts.

2 Decide what categories to offer within these groups. For entree choices, for example, you could offer the following categories: beef, poultry, seafood, pork, lamb, veal, and vegetarian. Decide how many dishes you will offer in each category. You may have four beef dishes, three seafood entrees, two poultry, and two vegetarian.

3. After deciding the groups and categories that will go on your menu, you need to decide on the specifics of the dish. Will you be serving ground, cubed, solid, roast, baked, grilled, broiled, or fried?

4. Finally, you must decide on the dish itself. If you are offering three beef entrees, you may choose to serve two solid beef dishes and one ground. Your actual menu items may be a strip steak, a filet mignon, and a hamburger.

While it may sound like an onerous task, by keeping these four steps in mind you will be able to maintain variety in your menu and control cost factors.

DEVELOPING THE MENU

SELECTIONS

All menu items selected must fit into the physical workings of the restaurant. The menu should be finalized prior to designing, selecting equipment for, and laying out the kitchen to maximize efficiency of time, labor, and equipment. The design and layout of the kitchen and work areas must meet the needs of the menu. If it does not, the entire operation will become slow, disorganized, and inefficient. Inefficiency can only result in a drop in employee morale and in the restaurant’s profit margin.

Just as the kitchen must meet the demands of the menu, the personnel employed to prepare the menu items must be selected to fit into the design of the kitchen. Careful consideration must be given to the number and type of employees needed. Is the menu simple enough for inexperienced workers to prepare or are the skills of a professional chef needed? Will the food be prepared ahead of time or upon receipt of the order? When will these employees be needed and for how long? Will there be enough room in the kitchen for everyone to work at the same time? Who will supervise them?

Planning the restaurant menu is a lot more than merely selecting menu items that are enjoyed and demanded by the restaurant’s clientele. Menu planning includes arranging equipment, personnel, and food products into an efficient unit that will be affordable and in demand by the public. Successful, growing restaurants have accomplished this blending.

Most restaurants employ a separate cooking and preparation staff. The largest restaurants may employ upwards of 30 employees for each staff. Each staff may then be divided into smaller departments. The preparation staff may be divided into baking, meat cutting, and cold food preparation and the cooking staff may be divided into broiling, frying, and carving. Smaller restaurants assign combinations of these responsibilities to a few employees on each staff. The smallest restaurant may employ one individual who arrives several hours prior to opening to prepare all of the food items and then performs a cook’s duties. Having separate preparation and cooking staffs is the most efficient method for producing a large number of consistent products at the least expense. This method, used in most establishments, will be the method described and referred to in this book.

Constant communication between the preparation and cooking staff is required for success. These groups of employees will be working toward the same end — at different times. An entree incorrectly prepared by the preparation staff will destroy the normal procession and organization in the kitchen, sending repercussions throughout the restaurant. The cooking staff are dependent upon the products that the preparation staff readies for them. Management’s responsibility under this arrangement is increased, as it must provide the necessary communication between the two groups for each to operate effectively. The benefits derived under this system — such as consistent final products, lower labor costs, lower food costs, and an overall increase in the organization and efficiency of the kitchen — far outweigh any disadvantages.

The major points to consider when selecting menu items:

• The menu item must be of superior quality.

• The raw materials used in preparing the item must be readily available year-round at a relatively stable price.

• The menu item must be affordable and demanded by your clientele.

• The menu item must be acceptable to the preparation and cooking staff system you use.

• The raw materials used in preparing the menu item must be easily portioned by weight.

• All menu items must have consistent cooking results.

• All menu items must have a long shelf life. Food items prepared ahead of time and not utilized may not be sold for as long as 36 hours.

• All menu items must have similar cooking times (approximately eight to 15 minutes), as any entree requiring a longer cooking time will not be completed when other orders are ready to serve.

• The storage facilities must accommodate the raw materials used in preparing the menu items.

• Menu items should be creative and not readily available in other restaurants.

LIMITING THE MENU

Begin to develop the menu by compiling those recipes and ideas that meet the requirements set forth in the previous section. Consider only the items that are compatible with the restaurant’s atmosphere, décor, and anticipated clientele. Based upon these guidelines, you should have little trouble compiling a considerable list of acceptable choices. The trick is to limit the menu to only those items for which the kitchen is equipped and organized and that the staff can easily execute — while still allowing for an interesting menu with plenty of varied selections.

All too often, a new restaurant will list numerous menu selections simply to round out the menu or offer token items that are on almost every menu. New restaurants should move toward specializing and serving only those menu items that they can prepare better than the other establishments in the area. It is simply not justifiable to create a diversified menu for the sake of offering a multitude of items. Specialization in the restaurant business is the key to building a solid reputation. Word of mouth is the most effective form of advertising available to the restaurant manager. Develop the menu with only those items for which you have the trained staff and equipment to properly prepare and serve. A successful menu is one that is honed to build a reputation for excellence.

Limiting the menu will create many advantages for the entire restaurant. The kitchen staff will become more experienced and skilled at preparing each item, as there will be a smaller selection for customers to choose from. The wait staff can then concentrate on promoting and recommending those items that the restaurant specializes in. From an administrative standpoint, a smaller menu will be easier to control.

Purchasing will center on only a few major food products; thus, the buyer may utilize his large purchasing power to obtain price breaks, discounts, and above-average service. Side dishes and desserts must meet all of the same qualifications as the entrees. The number and kinds of side dishes and desserts should be limited only to those items which are exceptional and slightly out of the ordinary, so they may be promoted as house specialties as well.

Always try to include some menu selections that are produced in the local area. Maine lobster, Cajun cooking, Texas beef, Gulf shrimp, key lime pie, and San Francisco sourdough bread are some examples. The tourist trade is an important source of revenue for most restaurants. Many establishments depend on it. With a little promotion, tourist trade can be an important new avenue for sales.

Once the menu is finalized, it is necessary for management to become thoroughly familiar with every aspect of each menu item. Extensive experimentation in the kitchen will be needed to discover the precise recipe ingredients, amounts, and preparation procedures. Take the time to find out everything there is to know about the menu items.

Determine where the raw products come from, which is the best type or brand to purchase, and how the kitchen staff can best handle and store the products. How do other restaurants in the area serve similar dishes?

The rule for developing a portion size is to use the largest portion feasible but charge accordingly. It is far better to serve too much food than too little. The crucial element, which must be constantly reinforced, is that every menu item — entrees, side dishes, and some desserts — must be a specific weight and size. Portion control is the basis for the restaurant’s entire cost control program. Its importance cannot be overstated.

Portion-controlling all food items is an effective way to control food costs, but it also serves another important function. It maintains consistency in the final product. Once the precise recipe is developed, the completed menu item should look and taste exactly the same regardless of who prepared it. A dinner presented to a customer on Tuesday must be exactly the same as it was on Saturday night.

Portions may have a variance of up to, but not exceeding, half an ounce. Thus, if the set portion size for a steak is 12.5-ounces, the steak may range from 12 to 13 ounces. Any amount over 13 ounces must be trimmed. A light steak should be utilized for something else. Although a half ounce variance may seem like a small amount, in actuality it will add up very quickly. Many restaurants allow a variance of only ½ of an ounce!

Because portion-controlling is such a vital kitchen function, purchase the best scales available. A good digital ounce scale will cost upwards of $200. However, this investment will be recouped many times over from the food cost savings it will provide. Purchase at least two ounce-graduated scales for the kitchen and always keep a third available in reserve.

One floor-type pound scale with at least a 150-pound capacity will be needed. This scale will be used to verify deliveries and raw yields. All scales should have a temperature-compensating device. Maintain these scales per the manufacturer’s instructions; clean them periodically and oil when necessary and they will provide years of service. To ensure the accuracy of the scales test them periodically with an item of known weight. Most good scales come with a calibration kit.

For practical reasons some food items, such as dressings, sauces, and butter, are portioned by weight. However, they should still be portion-controlled by using proper-size spoons and ladles. Soups and condiments must be placed in proper-size serving containers. At each work area of the kitchen, place a chart listing the portion sizes and other portion control practices. All employees must use the measuring cups and spoons and the recipe manual when following recipes. The basis for the food cost program you are developing is based upon the knowledge that every item has a precise portion size. Management has the responsibility to ensure that these standards are being practiced and adhered to.

TRUTH AND ACCURACY IN THE MENU

Careful consideration must be taken when writing the final menu to ensure its complete accuracy. Few restaurant managers would purposely deceive their customers, as the restaurant would only suffer in the long run. You must become aware of the unintentional inaccuracies you may have in the menu and the governmental regulations regarding them.

Due to the actions of a few unscrupulous restaurant operators in recent years, a crack-down on the whole food-service industry has been declared by certain regulatory agencies. All states have one or more laws that basically say that any organization selling a product must not misrepresent the product in any manner with intent to deceive. Many states have specific “truth in menu” legislation.

Every statement made, whether it be orally by the waitress or written in the menu description, must be completely accurate. For example, “fresh bay scallops” must never be frozen; they must be bay (not sea or ocean ) scallops. “Real maple syrup” must be 100-percent real maple syrup. “Imported baby spring lamb” must be 1mported, baby, spring lamb. Words and descriptions to watch are: fresh, real, imported, baby, 100 percent, B-B-Q or barbeque, pure, natural, and homemade. The description printed on the menu must be exactly the product you are serving.

You may be wondering how you can possibly write an enticing menu and yet still remain within the boundaries of the law. The trick is to be creative in writing the descriptions. State precisely what the product is, but modify the sentences to make the product sound enticing. Creative printing and the use of artwork will boost the appeal of the menu. The following is an example of how to dress up the most fundamental menu item — salad — and yet still describe exactly the products for sale.

Many restaurants, to limit liability, will print a disclaimer. A disclaimer is a statement that what you have printed is accurate to the best of your knowledge and that the restaurant cannot be held responsible for any actions beyond its immediate control. Here is one type of disclaimer:

"Due to the inclement weather this week, local Bay Scallops were not harvested. However, we were able to import some frozen Sea Scallops from Nova Scotia. These scallops are equal or superior to our regular fare."

Some restaurants print a general disclaimer at the bottom of the menu:

"We serve only the finest food available. However, at certain times during the year we may not be able to obtain the exact product desired; therefore, we may substitute a similar product that will be equal or superior to the original item. Should this be the case your waiter/waitress will inform you of the substitution."

Carefully analyze your menu for possible misrepresentations. Self-regulation in the food industry is the key to maintaining the high standards and reputation it enjoys.

NUTRITIONAL CLAIMS ON MENUS

If you want to include menu items that are marketed as healthy (i.e., heart-healthy, low-fat, reduced-fat, cholesterol-free), make sure you have the nutritional information for these items readily accessible. Items described as “fresh” are included in this category.

Since 1997 restaurants have been included in the FDA’s nutrition labeling laws. Any restaurant that uses health or nutrient-content claims on its menu must comply with these regulations. The FDA defines “restaurant” as “a place that serves food ready for consumption, including typical sit-down and carryout venues as well as institutional food service, delicatessens, and catering operations” (Restaurants USA, October 1996). If you use a symbol to designate these dishes, such as a heart shape, the regulations still apply.

The FDA regulations state that if you make health/nutrition claims on your menu you must be able to demonstrate there is a reasonable basis for making them. There is some flexibility in how restaurants may support the claim, but they must be able to show customers and officials that their claims are consistent with the claims established under the Nutrition Labeling and Education Act.

Some establishments are beginning to list ingredients and “nutritional facts” labels on the menu for the convenience of their customers. Such a label indicates the item’s value in calories, total fat, cholesterol, sodium, carbohydrates, and protein. Some states now require food purchased for take-out to be labeled in this manner. If your restaurant manufactures a product (your famous salad dressing, salsa, or tomato sauce) for off-site consumption you may need to comply with the “nutritional facts” laws applied to packaged food. There are several software programs available that will perform these calculations for you and print labels. Please review these programs at www.atlantic-pub.com.

If you decide to include these items on your menu, you must decide on the best way to communicate the nutrition information to your customer. Here are some things to consider:

• Information should be correct and clear.

• You may not need to include all the nutritional information on the menu; you may only need to have it available. Many of the fast-food chains simply list this information on a poster in a public area in the restaurant. Depending on your menu format, you may not want to clutter the space with this information. If you find that your typical customer is requesting this information, it may be better to include it on the menu.

MENU SIZE AND COVER

The menu cover should reflect your restaurant’s image as well as its identity. It can include graphics (the restaurant’s logo) and copy. If your restaurant is in a historic building, you may want to include a drawing or photo of the building on your cover. If you are operating a family restaurant that has been in existence for generations, you may want to put a paragraph or two of copy about your family’s history or food philosophy. The cover is the first step in the menu’s role as a communication tool and it is the first place on paper you can communicate your identity to the customer. The menu is the only item that the customer is guaranteed to pay attention to when she walks into your establishment.

According to the National Restaurant Association, the ideal menu dimensions are 9 inches wide by 12 inches tall. Other sizes can work as well and the number of items on the menu will partially determine the menu size. The menu size should be manageable for the customers. They are often maneuvering in a limited space that includes water and wine glasses, candles, table tents, and flowers.

The cover should be of some durable material; part of its function is to protect interior pages. It can be leather, vinyl, laminated paper, or plastic. Your establishment’s identity will help you choose the appropriate cover material. A fine-dining restaurant would not use plastic sleeves, but for a mid-price family restaurant plastic-sleeve menu covers would be appropriate. The cover’s color should also be chosen with care. The color should tie into the theme and décor of your restaurant; but remember, color does have a psychological impact, so you will want colors that will evoke pleasant images and feelings. Bear in mind that the more colors you use for your menu, the more expensive the printing process becomes.

You may want to include general information on the cover, such as your hours of operation, address, telephone number, the forms of payment you accept, and any special services you provide. Although your regular customers may not need this information, new customers will appreciate it and will make it easier for them to return if they know when you are open and how to find you again.

MENU DESIGN SOFTWARE

With the advent of the personal computer there have been a few menu design software programs developed in recent years. The software is generally very easy to use, having built-in templates and artwork. Your finalized menu can be printed out on a laser printer. Color, artwork, and graphics may be added.

Table tents and other promotional devices can also be utilized. The initial cost of the software will be easily recouped as you save in design and printing costs. You will have complete control over the design process. Changes can be made instantly. Daily menus can be created, which is a great way to accommodate special purchases that may have been made. The ability to generate new menus allows for instant price changes to reflect market conditions. One such software program is Menu Pro™. An extensive demonstration of the software may be found at www.atlantic-pub.com or by calling 800-814-1132 for information.

COPYRIGHTING THE MENU

Prior to printing the menu you would be wise to obtain a copyright. Copyrighting the menu protects it from being reproduced in any form without your written permission. A copyright would be extremely important if you were to prepare original artwork or write the menu in an interesting and novel way. Obtaining a copyright is a very simple procedure.
One of the pages of the menu, preferably the first or second, must contain the copyright registration. This notice must include the following three elements:

1. The name of the copyright owner.

2 The year of publication.

3. The symbol © and/or the word “Copyright” e.g., COPYRIGHT 2011 ABC Restaurant Corporation.

The Copyright Application Form TX may be found at the end of this chapter or at the website www.loc.gov/copyright. The registration process normally takes about four weeks and currently costs $45.

PRINTING THE MENU

Creatively printing the menu will have a marked effect upon the marketing of your offerings. The menus in restaurants across the country are probably more diverse than the food itself. Menus range from freehand writing on a white piece of 8 ½” x 11” paper to menus printed on boards, tables, walls, and bottles to menus spoken verbally. The menu can be turned into a promotional vehicle for your restaurant; it is a crucial internal marketing tool. It is the way you communicate to your customer your objectives and identity. Your menu design will directly impact guest-check averages, so it can help you achieve your profit goals. A well-designed menu can attract a customer’s attention to specific items and increase the chances that the customer will purchase those items. If you put an item in a box on the menu, the customer’s eye will be drawn to this area of the menu.

Regardless of how creatively the menu is utilized, it should be typeset and printed either by a professional or with a professional menu software. Using an unusual type style will dress up any menu. Discuss the possibilities with your local printer or graphics-art person or contact a company specializing in menu production, such as www.mega-designs.com. Artwork should be used; use the restaurant’s logo if nothing else. Your local printer may have an artist on staff or know of some freelancers in the area who can help. You can also find professional freelancers specializing in menus at www.elance.com. Listed are some of the various types of printing styles and sizes available.

Various Printing Styles and Sizes for Menu Preparation

Why reinvent the wheel? Atlantic Publishing has several books dedicated to menu design. There are at least four books that contain nothing but sample menus in four colors from other restaurants around the country. These menus, many of which are award winners from the National Restaurant Association’s Annual Menu Contest, will give you some great ideas. You can find these resources at www.atlantic-pub.com.

RECIPE AND PROCEDURE MANUAL

Your Recipe and Procedure Manual will contain all the restaurant’s recipes, preparation procedures, handling instructions, and ordering specifications. This manual, if properly used, will ensure perfection and consistency every time the menu item is prepared. The Recipe and Procedure Manual must be available to the kitchen personnel at all times. Recipes should never be prepared from memory. The employee, without constant reinforcement from the manual, will tend to forget the exact proportions and may even leave an entire ingredient out of the recipe. For this reason and to ensure consistency, the Recipe and Procedure Manual should be open and in front of anyone.

The example Recipe and Procedure Manual page shows the type of information this manual should contain. A separate page will be necessary for all entrees, side dishes, desserts, dressings, and sauces. In the example, the “Current Cost” column may be omitted if you do not wish the employees to know the recipe’s food costs.

The inclusion of this information will increase your employees’ awareness of the amount of “money” they are handling and responsible for every day. Under “Additional Comments” list all the accompaniments that a customer might request when ordering dinner. For example, if the entree is a steak dinner, the customer may request A.1. Steak Sauce, L&P Sauce, Tabasco sauce, or ketchup. These are items you will need to have available.

ORDERING MANUAL

The ordering manual contains all of the products that need to be reordered. You will find an example of an ordering manual page Food Ordering Form at the end of this chapter. The completed Recipe and Procedure Manual will list all of the food items you will need to order. Transfer these food items onto the order forms in alphabetical order. It is a good idea to group similar food items together, such as dry goods, seafood, poultry, dairy products, produce, and so forth.

PROJECTING MENU COSTS

To accurately assess the price to charge for a menu item, you must know the exact food cost of that item. You will need the completed Recipe and Procedure Manual and the current price lists from your purveyors. From your sales representative obtain projections on the average yearly prices for the major food items you order, such as meat products, seafood products, poultry, dairy, and produce.
Using the Recipe and Procedure Manual and the current price lists and price projections, compute the cost of each recipe item and place the amount in the column under current cost. Round all the amounts off to the nearest cent. Should estimates need to be given, it is better to figure a little high in order to cover yourself. Should your restaurant have a salad bar, estimate the average cost you expect for each customer. Allow yourself 25 cents per person over your estimate to cover everything.

The “Miscellaneous” column covers all the condiments and accompaniments not listed. Enter into this column approximately 5 percent of the total entree cost to cover these expenses. Adjust accordingly for each entree. If coffee, dessert, or any side orders are included in the price of an entrée, add a larger percentage to the total miscellaneous cost. Once open and operating you will be able to fix an average cost per customer for all miscellaneous costs and for the salad bar.

When computing the portion costs for items such as meat, fish, and poultry, you must consider the waste from cutting and trimming into the cost. The amount of usable portions you get when you are finished trimming or cutting a piece of food is the yield.

TO COMPUTE THE YIELD PERCENTAGE
:
1. Compute the gross starting weight in ounces.

2. Compute the net ending weight (yield) in ounces.

3. Divide the net yield (in ounces) by the gross starting weight (in ounces). The resulting figure is the yield percentage.

TO COMPUTE THE ACTUAL PORTION OF A PRODUCT

1. Divide the price per pound by the average yield percentage to get the actual price per pound after waste.

2. Divide the actual price per pound by 16 to get the actual price per ounce.

3. Multiply the actual price per ounce by the average portion size; this figure is the actual portion cost.

Total all the current costs for each item. This figure is the estimated total portion cost.

This cost figure is not completely accurate because of the large number of variable factors used in the computations. This figure is an educated estimate from which you may accurately set your menu prices. The costs listed here are food costs only; no other costs (labor, paper products, plates) are factored in at this point.

PROJECTING THE ACTUAL AVERAGE COST PER CUSTOMER

Once set up and operating, it will be relatively easy to compute the actual average cost per customer. The actual average cost per customer should be projected once every month. Doing so ensures that the estimates used in computing the menu costs are accurate. Restaurants offering a buffet service or “all you can eat” specials must project their actual average cost per customer at least once a month, or better yet, biweekly.

Keep a list of all the food items you do not charge for during a specific test period and their prices. You can develop this list from the invoices, which detail daily purchases. Add into this figure the dollar amount of food you have on hand at the beginning of the test period that you are not directly charging for. At the end of the test period subtract the amount on hand from the total. Divide the total cost by the number of customers served during that period. This figure is the average actual cost per customer. Use it in projecting menu costs in place of any estimates you have made with this figure.

PROJECTING MENU PRICES

Projecting menu prices is a complex procedure because of the number of factors that must be considered. In order to operate profitably most restaurants must achieve and maintain their food cost of sales at 25 to 40 percent. The food cost percentage is the total food cost divided by the total food sales for a given period. If the total food sales for a given period was $100,000 and the total food cost was $40,000 for that same period, the kitchen would be operating at a food cost of sales of 40 percent. One percentage point in this example would be worth $1,000.

Computing what you must charge for each entree item is relatively easy. You will need the estimated total portion costs from the preceding section. The total portion cost (food cost) divided by the menu price (food sales) must equal a food cost percentage of between 0.25 (25 percent) and 0.40 (40 percent).

Portion Costs ÷ Menu Price x 100 = 25–40%

Simply plug different menu prices into the formula until you reach the desired food cost percentage.

The complications result when you have determined the price you must charge in order to make the desired profit. Some of the prices you need to charge would be simply too high. No one would ever purchase the item at that price. What you must do in these cases is balance out the menu with high and low food cost items. The average cost of the menu must then be in the food-cost-percentage range desired. Poultry and seafood entrees will have a lower food cost percentage than meat entrees. Try to promote these lower food cost items to offset the higher ones.

Find out what other restaurants in the area are charging for similar dishes. Your clientele will dictate what the market will bear. The restaurant manager must set menu prices based on what customers will spend and what he must charge in order to make the desired profit margin.

Appetizers, side orders, beverages, and desserts can be priced at a very low food cost percentage. These items will contribute to a large percentage of your food sales and will lower your overall food cost percentage. Some restaurant managers, realizing this important point, have set up promotional contests awarding prizes or money to the waiter or waitress who sells the largest percentage of side orders. These contests can be very effective if the wait staff do not “hard sell” the items, but rather suggest the accompaniments to their customers.

Maintaining the food cost percentage is critical to maintaining your profit level. The food cost percentage does not tell the entire story. You must also be interested in getting the largest guest checks possible to bring the largest percentage of gross profit to your bottom line. For example, which would you rather sell:

• An item that sells for $5 and has a food cost of 35 percent (a gross profit of $3.25) or

• An item that sells for $10 and has a food cost of 50 percent (a gross profit of $5.00)?

Here is an example of a higher-food-cost-percentage item actually bringing a higher gross profit. Consider this important point when pricing out the menu!

The baked haddock dinner detailed above has a total food cost of $8.18, so if you were to charge $17.95 you would have a food cost percentage of 45.6 percent. Should the percentage be too high or the retail price too high you can reduce the portion size and the retail price. Some establishments may charge separately for the salad bar or side item. Should the retail price be lower than current market conditions or competing restaurants you can match the higher price and run a lower food cost on this entree to balance out higher food cost entree items, such as a prime rib dinner.

If you are not reaching your food cost goals or are not getting as high a check average as you would like, it may be because of your menu design. Not all items on your menu can be low cost and high profit. Your menu is likely a mix. Your menu design may be emphasizing high food cost or low profit items. Fixing the menu will help decrease food cost and increase profits. If you sell too many high cost items, your food cost will go up, because many of these (such as beef and seafood) have a high cost as well. If you sell too many low cost items, your check averages and gross profits will decline. Keep these facts in mind when designing your menu; you want to have a sales mix of both these types of items.

THE BEGINNING INVENTORY

The beginning inventory is the total dollar value of supplies on hand when the restaurant opens. This figure represents the starting point from which you can then compute individual costs. Each category — food, liquor, wine, and operational supplies — has its own beginning inventory figure.

A cost for each of these categories will be determined every month. To determine the cost for each area, simply add the beginning inventory value with the total purchases of that category for the month. Inventory the amount left at the end of the month and subtract it from total of the beginning inventory and purchases. The percentage of cost is the total cost divided by the total sales. The important thing here is to compute an accurate beginning inventory figure for your starting point.

Computing the beginning inventory is a simple calculation. If you are purchasing all new food products, simply total all your food purchases prior to opening day. This figure will be the beginning inventory.

If you are opening an existing restaurant and will be using some of the old supplies, first take an inventory of the old supplies. See inventory procedures in Chapter 12. Add the dollar value of these supplies with all your new food purchases prior to opening day. From the food order sheets, enter onto the inventory form all food items in alphabetical order.

Under the “Size” heading list the unit size of the product in your inventory. If two different sizes of the same product are used, list the item twice. For example, ketchup may be listed in the bulk, gallon size and in the individual service-bottle size. When extending a price for each unit it will be imperative that the cost corresponds to the appropriate size.

The important consideration at this point is that all the food items you will be using are listed. All entrees, side orders, desserts, condiments, beverages — every food item in any form — must be on the inventory sheets in order for you to project an accurate food cost. The inventory pages will be used later to calculate the dollar amount of unused stock at the end of the month. Leave at least a half-page blank on the last inventory sheet for any food items that may have been left out. You can write the additional items in as you inventory them.

Each category — food, liquor, wine, and operational supplies — will have its own inventory pages. You are concentrating on food now so that you will have all the information you need at this point.

By Douglas Robert Brown in "The Restaurant Manager's Handbook- How to Set Up, Operate, and Manage a Financially Successful Food Service Operation", 4th edition, Atlantic Publishing Group, USA, 2007, excerpts chapter 8. Adapted and illustrated to be posted by Leopoldo Costa.

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