OPERATIONS
Raising menu prices is not the only way to make a profit
Optimizing menu performance and working with group purchasing organizations can boost profitability, according to a session at the National Restaurant Show. R estaurant operators are hungry for ideas on how to protect margins amid rising costs—without nec- cluding brands like Fireside Pizza, Rubicon Pizza and Base Camp. His company employs about 400 team members and generates about $27 million in revenue. BY LISA JENNINGS EXECUTIVE EDITOR RESTAURANT BUSINESS
are “silver,” low volume/high profit are “bronze,” and low volume/low profit are “dogs.” Suggestion: Get rid of the dogs. Then he recommends develop- ing recipe cost cards for each item, so you know exactly what the prof- it margin is. That information can inform any decision to highlight that dish, remove it, increase the price or adjust the portion size, for example. But another cost-saving tech- nique is working with vendors, and Villaman is an advocate of using a GPO to negotiate better pricing— like Entegra Procurement Services or Leverage Buying Group, for ex- ample. He said the move gave his restaurants more buying power. In their case, they were able to work with distributor US Foods to help lower their costs. Villaman’s group, for example, orders online so they don’t have to send a sales rep. The restaurant group pays every two weeks, instead of once a month, and supply drops come no more than two days each week. The first year, Villaman said his company saved more than $300,000 using a GPO. According to Entegra, fewer than 8% of restaurants in the U.S. currently take advantage of using a GPO, based on data from Restaurant Business sister brand Technomic.
His session walked through some basic tools for drilling down into menu performance. Opera- tors should regularly use year-ago sales data to make projections, for example. But the key to menu effi - ciency is taking a hard look at the sales mix and developing prime cost targets. The first step is classifying each menu item into certain categories. High volume/high profit dishes are “gold,” high volume/low profit
essarily raising menu prices. One way to save money is to use a group purchasing organi- zation (GPO), or a co-op, said Ray Villaman, CEO of Tahoe Restaurant Group, who led an education ses- sion called “Raising Menu Prices or Lower Food Costs? Do Both Opti- mally with These 5 Tools.” Villaman’s group operates four concepts and licenses a fifth, in -
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National Restaurant Association Show 2024
PHOTO CREDIT: SHUTTERSTOCK
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