Obstacles of Performance
When you think about where most effort is placed toward achieving success, revenue generation has forever been the big game contender to focus on with labor costs as the biggest opposing force in collecting profits. While revenue must be king, awareness in other areas of operations has not seemed as important, misdirected by the influences of industry aficionados, too time-consuming, or just misunderstood.  I am talking about monitoring indicators that offer substance to how well your business might be doing. These factors can include menu mix, cover counts, labor productivity, average check, daily recipe costing, or cost of goods sold, all-encompassing a heap of information and hard work to calculate regularly.  Include effective purchasing/receiving procedures, inventory management, production and portion controls, or any other performance indicators and there is no shortage of procedural elements and calculations in our field, however, these all have their merits when it comes to profit generation.  Operators tend to ignore the tedious items, and this philosophy practice is not in your best interest.

Analyzing Guidance
Metrics have been around forever and if you work in hotels tracking Key Performance Indicators “KPIs” is an “SOP” or Standard Operating Procedure. If you work in other sectors of hospitality metrics is a newer equation to consider but this is becoming a mainstream conversation and a must-use consideration, although understanding what to track or which metrics to use remains a dilemma to operators.  While too much tracking is argumentative, restaurants are finding that they cannot continue to be competitive without the knowledge of certain performance factors.

Metrics Considerations
There is a lot to unpack here, but if you recognize future endurance as important, you must do the work to get ahead.  Adding generated metrics, which may already be built into your Point of Sales “POS” system, and redefining how you compile information and formulate decisions will be a significant step.  Secondly, you must control expenses just as much as you address revenue generation.  Metrics and cost management coincide as two conditions critical to better controls and higher profits.
Be aware that there are dozens of performance metrics out there and you must do the work implementing only what you can manage and what is best for you. If necessary, seek assistance to determine this, and perhaps use the same source to help manage the information while you adapt. I recently came across a metrics article by Francesca Nicasio that offers 22 restaurant KPIs. Here is the link: https://www.lightspeedhq.com/blog/restaurant-kpis/ ¹
 
Technology Driven Results
Barry Cohen, with The Astound Group, offers his reasoning that in today's data-driven hospitality industry, technology plays a vital role in tracking and analyzing performance metrics.  To stay competitive, operators must leverage advanced point-of-sale capabilities, kiosks, and artificial intelligence to streamline operations and enhance the guest experience. By integrating these technologies, restaurants can access valuable insights into customer behavior, preferences, and expectations, enabling data-driven decisions that drive revenue and profitability. Barry explains that AI-powered chatbots can help personalize marketing efforts, while mobile ordering and payment systems can reduce wait times and increase table turns. Additionally, advanced analytics tools can provide real-time feedback on menu mix, labor productivity, and cost of goods sold, enabling operators to adjust their strategies accordingly. To maximize the benefits of technology, operators must consider the following:

• Invest in integrated systems that provide a single source of truth for performance metrics
• Leverage data analytics to identify trends, opportunities, and challenges
• Implement automated processes to reduce labor costs and increase efficiency
• Utilize AI-powered tools to enhance customer engagement and loyalty
• Continuously monitor and evaluate the effectiveness of technology solutions

​Barry goes on to say, that by embracing technology and metrics, hospitality operators can create a competitive advantage, drive growth, and ensure long-term success, and I agree with his guidance.

Feasibly
I suggest feasibility as an initiative. Consider if your business strategy aligns with these questions.
1.    How will current transitions in guest habits and expectations upon their experiences affect your decisions?
2.    Are you considering innovative technology with advancements in point-of-sale capabilities, kiosks, or artificial intelligence?
3.    What are you doing to solve the heightened expense concerns?
4.    What are you implementing to address staffing declines or workforce uncertainties?
5.    What methods do you employ for marketing your product through the front-line team?

A starting point is to review the skillset and habits of your management because, without a team capable of contributing to your company’s development, your chances of business success are diminished.  Considerations must include an understanding of how information is gathered and how the decisions affect downstream results.  For instance, if you do not know how a dollar or more difference in cost or rate affects profits on an item you purchase or charge thousands of times over the year, evaluate one item and compound this over your inventory.  Consider 100 x 25 cents x 365 days equals a $9,125 loss, or the same in profit depending on management behaviors.

Considerations when looking to retrain your team.                                                                 
1)    Knowing who your guest is by gathering this information and using this to inspire their use, encourage additional sales, and elevate their satisfaction is paramount to influencing revenue.
2)    Demonstrating inclusive and noteworthy employee practices is a requirement to attract and retain good people and to build quality services.
3)    Operators should be proactive in collecting heads-up data and use metrics to help with decisions.
4)    Costs are skyrocketing, and operators must have a complete handle on all expenses and manage this process with a firm grip, as the alternative to this consideration can have adverse results.
5)    Operators must walk the floors talking with their customers to build relationships. Sitting in the office and not collaborating with the team is not a solution tactic.
In conclusion, operators often wait for revenue to come to them or expect profits to occur as a matter of natural principles of the process, and these strategies and doing as you always do will no longer stand up.  Doing nothing and hoping for the best only works for a small percentage of the industry, and your business may not be in this Metrics Equation.

1.       Article by Francesca Nicasio https://www.lightspeedhq.com/blog/restaurant-kpis/
If you like this article, you can locate Jim’s latest expense management book, Focusing On Expense Loss, at Amazon Books: https://tinyurl.com/2k2bpat3
​

MENU PRICE INCREASES NEED A QUICK REVERSE COURSE
 
When industry people get together to talk about hospitality there is never any shortage of enthusiasm. Topics of discussion often include new methods, advancements, current concerns, and directional advice, but how do you know what to accept as reasonable when there is so much information to consume? The advice you receive might be progressive; however, it can also be contradictory, one directional, and even shortsighted. You must research as much as possible to make the best decisions, and perhaps my outlook on this one topic can help you decide for yourself the importance of addressing your current pricing strategy. Otherwise, count me as the contradictory, one directional, and even shortsighted person, but also important and necessary to distinguish the difference.
 
Why a Reversal?
 
I believe present considerations on menu price increases need a quick reverse course. I say this because we are encountering reduced visits and guest spending irregularities that are triggering alarm bells with operators that are in turn countering with a drastic kneejerk response by increasing prices. This seismic reaction is in response to the pounding of higher costs everyone is incurring, but the customer market is hitting us right back with less frequency and buying less while in their seats. In my opinion, raising prices is an easy fix to counter increased costs but is perhaps a short-term solution that will backfire, and we all need to be much smarter than this.
 
Market adjustments are hammering the hospitality industry from all angles and competition is both waning and becoming more difficult at the same time.
 
According to a recent 2024 survey by TouchBistro (600 FS restaurants across the US) consumers are ordering less dishes, fewer customers are visiting during the week and on weekends, customers are ordering
less alcohol, customers are tipping less, and many other statistics are included in this lengthy report that are impacting revenue and profits. While this report can be characterized as minor to industry proportions and perhaps subjective by the type of businesses in the research, we all know these outcomes are happening and we must decide what to do about them. To read more about this survey here is the link; https://www.touchbistro.com/blog/restaurant-industry-statistics/ ¹
 
I believe that the contrast between those that successfully implement new ideas and resist raising prices and those that don’t do much of anything except raise prices will open a division between progress and failure that we have never seen before. My advice is to start reducing your prices unless you want to lose market share. I am not talking about hotel price fluctuations or dynamic pricing. I am referring to deliberately increasing prices because your costs have risen, or your competition is doing the same. Operational costs are up, however in my opinion there are other ways to address this.
 
decisions immediately affect customers’ reactions, and profits, before they are realized in reports, and this becomes compounded in one direction or the other each time the process is repeated.
 
Alternatives to Menu Price Increase
Menu prices are often random fabricated anomalies based on gut feelings with incorrect recipe assumptions, as well as kneejerk reactions to costs and competition. This is one of the most common operational flaws I encounter as a consultant. Do the work by tearing apart the fabric of every recipe, each piece evaluated for its individual cost to be applied to the full plate presentation. Otherwise, you are fooling yourself and carelessly adding to the hopeful game of revenue surpassing expenses.
Before you raise prices, fully evaluate your costs and production.

1. Reduce menu size to reduce preparation and labor requirements.
2. Locate same items and same quality for less cost.
3. Consider recipe ingredient adjustments to lower recipe costs.
4. Consider alternate preparation ideas to reduce preparation costs and labor requirements.
5. Change items from expensive and low profitability to lower cost and higher profitability.

While you do not want to upset your regulars; you also need to remain in business. Reduce your menu size and save money but do this strategically. Your menu may be too big for efficient ordering, inventory management, preparation, and delivery performance. Evaluate preparation and menu mix performance to find sales and profit laggards, find ways to reduce prep as well as waste, and look to improve overall profits. Only top and mid-level performers should be the majority and reduce the favorites that are dogs, although a lost leader here or there is alright if the planning and execution of the item has foresight considerations. If you are not generating profits on an item, you may be wasting labor hours, overordering products, overpaying for ingredients, or performing other wasteful processes, and it's time to organize a solution.
Good Behaviors Lead to Better Outcomes
Behaviors in management and methods supporting better performance have many instruments at our disposal. While it is easy to just raise prices, this is one of the last guidance recommendations you would hear from me, unless the menu engineering isn’t properly organized. Take a glance at my book, Focusing On Expense Loss, as the material offers alternatives to raising prices and other management considerations. Take a step back and look at your behavior and the reasons you are raising your prices and think about what can be done to reduce them and remain profitable.
1.       According to a recent 2024 survey by TouchBistro https://www.touchbistro.com/blog/restaurant-industry-statistics/
 
By Jim Lopolito, President of Lopolito Hospitality Consultants, Corp. (LHC), a leading consulting firm that provides forward-thinking reviews and solutions nationwide to businesses in the hospitality industry.  Advisory services are available to restaurants, country clubs, hotels, caterers, and other food service businesses with solutions for Turnaround Purposes, Operational Development, Training, Property and Facility Management, Golf and Pool Operations.  Jim is the author of the book, Focusing On Expense Loss.
 
Jim is a member with Cayuga Hospitality Consultants, which is a network of independent hospitality professionals and senior industry leaders.
 

Cost percentages are a common metric hospitality operators use to evaluate food and beverage department performance. I removed this strategy of menu pricing and performance factoring back in the early 90’s, and I am here to suggest you do the same. Percentages can be useful as a supplementary reference when read and understood correctly, although, misunderstanding or non-use of percentages is what I generally encounter when in the field.
 
For decades, chefs have been pressured to reduce their food cost percentages, however, this is an old-school approach and provides unreliable data with misleading interpretations of how well a business is performing. My suggestions of unstable results equally occur for the beverage side, but I will focus specifically on the food department. One significant misunderstood aspect evidenced is that an operator can encourage a food cost of 40% with higher profits compared to the 35% food cost they may be pursuing if the menu engineering is correct and the leveraging and selling of menu items is managed properly.
 
Another method that has been around for a long time but not as commonly used in the industry, is Contribution Margin¹. Contribution Margin (CM) is the amount each item contributes to profits and is more valuable as a tool than the food cost (FC) percentage. The method of CM includes knowing your actual recipe costs and adding a profit amount to the cost to establish the menu price instead of using a percentage. Using CM allows operators to understand and differentiate among the best items to sell for performance. A percentage-based consideration is not efficient and considers more parameters to generate answers. Contribution Margin use is simpler and when used in connection with Sales Mix² information improves a competitive edge with more profits from the same covers, thus increasing performance factors.
 
Comparing Percentage and Contribution Margin Strategies
 
When using percentages as a metric
($5 cost of recipe / 33% food cost assumption = $15.15 menu price)
1)      You establish recipe cost and menu price variances based on a balance of return that can accommodate a 33% food cost. (Adjusted based on your desired percentage)
2)      You must have control over your sales mix, which determines the balance of the food cost percentage you are trying to achieve, however, realize that a lower percentage does not mean the best profit. (Sales Mix is the variety of items you sell daily)
3)      Purchase and preparation costs must remain consistent. (When costs change percentages change)
4)      Cost Of Goods Sold data is required for daily and monthly percentage evaluations.
 
When using Contribution Margin as a metric
($5 cost of recipe + $10.15 = $15.15 menu price)
1)      You establish recipe cost and construct the menu price by adding the amount of profit desired to the cost reasonable to achieve the best profit on each item. (Percentage is not a factor)
2)      You must have control over your sales mix, however, when you know how much each menu item contributes to profits you have an advantage in knowing what to sell. (Percentage-based menu pricing does not readily offer this information)
3)      As costs change you know exactly how much this affects the item. (Percentage-based menu pricing does not readily offer this information)
4)      Cost Of Goods Sold data is not required in determining daily or monthly profits. (Daily and monthly profits are readily available with an Item Sales Report with corresponding CM profits applied)
 
Let’s assume you have a steak, potato, and vegetable plate where the recipe cost is $12 and the cost percentage on this menu item has been determined at 35 percent. Using a 35 percent food cost the menu price on this meal is $34.28, or a $22.28 Contribution Margin. Compare this with a chicken, potato, and vegetable recipe cost of $7 with a 30% food cost and the menu price for this meal is $23.33, or a Contribution Margin of $16.33, thus the chicken has a lower food cost but a considerably lower contribution to profits. With these considerations, you must decide if raising or lowering a price will factor into revenue or profits in any way, and at the same time the percentage changes. Applying percentages and chasing a target is difficult, but selling based on proactive considerations where you know the items to sell, based on what each item contributes to profits, leads to better performance
In both food cost percentage and Contribution Margin you need to understand processing, waste, and shrinkage in recipe and menu factoring.
 
Costs Management
Decisions immediately affect profits before they are realized in reports, and this becomes compounded in one direction or the other each time the process is repeated.
Methods supporting better performance have many instruments at our disposal. If you read my book Focusing On Expense Loss³, implementing cost management is essential in today’s success, and anyone who says otherwise is suggesting that expenses do not matter. Increased revenue does not equate to increased profits unless you are managing the expense side too. In today’s climate, this book offers excellent solutions.
 
Menu Mix Salesmanship
Innovative training to sell the correct menu mix is not a common tactic used by establishments as operators are afraid to share data with the teams responsible for marketing the menu. However, if your frontline people are provided the 5-10 most profitable items to market most often when tableside, higher profits will follow.
If you want higher profits, sell the higher profit items more often, but you must know what they are and not guess.
1.      Contribution margin - Wikipedia
2.      Sales Mix: Definition, Uses, and Examples (investopedia.com)
3.      https://www.lopolitohospitalityconsultants.com/focusing-on-expense-loss.html