Debunking Profit Margin Myths
Maintaining an average or better profit margin year-over-year is a great way to measure the success of a restaurant. However according to National Restaurant Association there are profit margin myths, restaurants should avoid in order to prosper. To help separate fact from fiction, we’ve provided the necessary MarketingVitals.com‘s insights to guide you through some of the myths.
Myth 1: Buying in large quantities to get volume discounts saves money.
According to the article, buying in large quantities may give you a discount. However once you factor in extra waste, employee theft, food spoilage, large portion sizes and the additional products purchased; your expenses actually outweigh your discounts. With Profit by Menu Item you can view the profit for each menu items so you can buy products based on your needs and focus on product usage rather than discounts.
Myth 3: Keeping food costs low means larger profit margins.
NRA suggests promoting menu items based on their gross profit contributions rather than focusing on menu items with lower food costs. Profit by Menu Item highlights your most profitable menu items so you know which items to promote. You can also coach and train your staff to upsell these profitable items.
Myth 6: The most important part of pricing the menu is determining each item’s food cost.
Although costing out each item is very important, NRA advises to determine what your customers are willing to pay in your immediate market. Our Segmented Guest and Check Average insights examines customer behavior. So you can see what the majority of your guests are actually spending when determining menu prices.