When times are tight, where do you start cutting restaurant costs? The natural inclination for many restaurateurs is to look at your two biggest expenses — staff and COGS (cost of goods sold) — and slash from the top down, until you can make ends meet. But a savvy restaurateur knows there’s more than one way to skin a salmon.
Making targeted choices about where to cut restaurant costs and where to leave expenses be (no matter how high or low they may be) is a crucial part of maintaining balance in your bottom line. Cut too hastily, and you’ll end up alienating customers with reduced service or missing favorites on your daily menu. But cut decisively, and you’ll be able to grow your business out of the health of what’s left.
And with your menu items in particular, it’s important to identify how profitable and how popular each dish in question is. The pattern of where these two factors overlap (or do not) can give you a clear sense of where to begin in controlling restaurant costs.
All menu items can be properly broken down into one of these four categories, with fanciful names to help you remember and identify:
- Star (high profit, high popularity): dishes that people love and that make you money.
- Plow horse (low profit, high popularity): dishes that people love and that you break even on — but make up in volume.
- Dog (low profit, low popularity): dishes that do not get ordered and that cost you a lot of money to prepare.
- Puzzle (high profit, low popularity): Dishes that do not get ordered, but that would make you money if they did.
Determining what’s what on your menu takes careful cross-referencing of order records in your point-of-sale (POS) system and a complete breakdown of cost per dish, ingredient by ingredient (maybe even with consideration for the labor involved in its production). But once you have that, you should be able to locate each dish on the matrix above. And that’s where the fun begins.
We have seven surefire ways to manage your menu — using this information and matrix — that will help you control your prime restaurant costs without cutting your profits off at the knees.
1. Dump the dogs. Now.
Maybe it’s your chef’s favorite. Maybe it’s yours. It could even be promoted as the signature dish for your restaurant. But if no one orders it, it’s still a dog on your menu, taking up space instead of something that customers actually will order. That’s costing you money, every single day.
Because the profit potential is too low, dogs are not even worth attempting to tweak into something better. However emotional it may be to part ways, the responsible thing to do — and the thing that will actually affect your prime costs, is just to simply dump these dishes and replace them with something that has more profit and/or popularity potential.
2. Add variety to the plow horses.
Plow horses could easily be stars just waiting to be discovered. You’ve already jumped the first hurdle – customers want to order these dishes. Now is the time to experiment and see what can kick them up to the next level.
It could be as simple as varying the size of the dish by time of day or occasion. Maybe your Chicken Caesar Salad is low profit at half size, but at full dinner size it increases in value for you. Likewise, some appetizers could be low profit at sharing size, but pick up in profitability in individual portions, especially if it encourages a table to order more than one.
Offering alternative versions of a dish that incorporates premium ingredients can be another way to boost the profitability of a plow horse. Customers are used to seeing dishes with more flair jump up in price, so when you incorporate avocado or bacon or blue cheese into a cleverly named dish, it gives your customers an option that gets you closer to your goal as a restaurateur.
You can always try this type of variation through add-ons, if you want to preserve menu space. For instance, pizza may not be a huge profit center for you, but it is something guest typically enjoy customizing. And spending on premium ingredients can tally up to a price on a plow horse to easily rival that of a star.
3. Look for redundancies.
At the same time, determine whether you really need multiple versions of a dish. Is it really that popular? Does your Chicken Caesar Salad nearly always get ordered in dinner portion? If so, why even offer the lunch as an alternative, especially if the dinner portion is more profitable for you? If your Grilled Cheese Sandwich menu is 8 sandwiches deep in variation — and none of them particularly stand out as a star — it could be worth condensing these menu items down to a single item with multiple options for customization.
4. Increase prices moderately on stars.
Stars are often menu items that will get ordered — because of their uniqueness or high quality — even at a higher price. If you are the only restaurant in town offering Oysters on the Half Shell, and that dish is a star for you, odds are guests will pay just a little bit more. There’s no reason to gouge your customers, but likewise, there’s no reason to undermine your own prep time, COGS, and presentation with a bargain price on a highly sought-after dish.
5. Eliminate one-trick ponies.
Any dish that features an ingredient requiring a special, one-of-a-kind purchase for your kitchen should go — unless it pays for itself three times over. If that dish is indeed a star, then start devising one or two more dishes that could highlight the ingredient. The economies of scale in ordering should make your star even more profitable. Best case scenario: maybe you’ll end up with three star dishes!
6. Rearrange your menu.
Believe it or not, the physical size of your menu has a huge impact on costs, in more ways than one. Obviously, if your menu is enormous, the likelihood of dishes that don’t get ordered — or don’t get ordered as much as they should — ramps up. That just increases your inventory costs and potentially your waste budget.
But there are other reasons to cut back to a two-panel (or less) menu. Customers can get overwhelmed by the sheer volume of your offerings, which makes it harder for you to direct their eyes to the items which produce the most profit and incur the least costs on your menu.
Within categories (appetizers, salad, sandwiches, entrees, etc.) arrange items not by most expensive to least, but by most profitable to least. Highlight your stars either by calling them out graphically or increasing the type size so they jump out among all the other choices.
And lastly, if an ingredient in your restaurant costs you more money than your average component, print it on the menu. It’s likely the ingredient that’s enticing guests to order it. But if bacon or crab meat or gorgonzola cheese is not the alluring characteristic of a particular dish, why use it then? It’s costing you money that’s not seeing a return on investment.
7. Tweak your puzzles.
There’s some reason why these items don’t get ordered. Figure it out. They are taking up space on your menu that you can’t afford, costing you money EVERY SINGLE DAY.
- Is it because they’re off-brand? Dump them for a variation on a star.
- Is it because they’re just not marketed correctly? Rewrite them on the menu. Use descriptive words to entice the senses, like “wood-fired,” “heirloom,” or “freshly made.”
- Is it because they don’t have enough allure? You may have room to add a premium ingredient or two and remain profitable. Your puzzle could be a star in the making with just a simple tweak.
- Is it because they’re just a little bit off? Consider using a limited time offer to promote the dish but with a few tweaks here and there. See if the adjusted LTO dish has enough popularity to make it a star!
No matter what the mix of stars, plow horses, dogs, and puzzles on your menu, it’s important to always be thinking about ways to make your menu — and your business overall — more profitable, cutting restaurant costs while maintaining the level of quality your customers associate with your brand.
Want more tips on controlling restaurant costs? Check out our advice on inventory management and food waste:
