Formulating a Return on Investment (ROI) advertising plan in your restaurant must be an ongoing method for managing your hospitality business. However, establishing accurate recipe ingredient costs and sharing profitable menu items information with your team is an essential component for the outcome to have positive results and sustainable deliverables. While there are elasticity issues, nearby competition, and your principal clientele to consider in menu pricing, having a price on your menu you know is correct can help bring in more profits especially when everyone on your team is on board and knows how to react to your promotions successfully.
1: Pricing Based on the Competition
If your competitors have lower menu pricing and you kneejerk react to reduce your pricing accordingly the results can be devastating, especially if your food and beverage costs are higher. Alternatively, the raising of your prices along with your competition or just to generate more profits can equally hurt your business when public opinion differs upon each establishment and you become overpriced as a result. All too often foodservice businesses use competitors menu prices around them to price their own menus, and this is such a bad idea. If you have no idea what your product is worth in cost, value, and perceptually, you cannot price your food and beverage just to keep in line with the location down the block. Prices placed on menus that are random make no sense at all and not having knowledge of your costs and the comparison between each menu item profitability can restrict business growth and can certainly reduce profits.
2: Selling Blind on Social Media
With the rise and simplicity of social media usage restaurateurs often perform their own advertising strategies using Instagram and Facebook to lure in new customers with pretty pictures of their food & beverages and they forgo the necessity of proper planning or considering the downsides of their actions when the lack thereof is occurring. Social media has become saturated by every food service establishment, and this form of marketing without forward thinking strategies and in-house staff preparations will only lead to profit loss disappointment.
Blind Practices Include:
3: Staff Knowledge not Aligned with Marketing Efforts
Misdirected promotional strategies combined with lack of knowledge by staff all too often can gain short term customers but can end in a loss of profits on items sold. Because of Menu Mix (MM), Cost of Goods Sold (COGS), and other factors management has no ROI strategy to understand if their efforts are delivering. Very often customers see the pictures and visit the location one time never to return because the service orientation and training was not supportive of the marketing efforts. End of month reports indicate a rise in customers or higher check averages only to result in lower profits because the specials sold or the popular menu items recommended by staff were lower profit producers.
Higher check averages does not mean higher profits unless the items sold are higher contribution margin contributors from their alternative menu items, which is a menu mix strategy.
MM and COGS analysis is necessary knowledge to promote or suggest the selling of higher profit menu items. Owners that I encounter often do not know what items on their menus produce the highest contribution to profits; therefore, promotion of these items on social media fails them when low profit producers are sold over other higher profit menu offerings. Owners are asking management to explain profit reductions only to hear excuses that have nothing to do with the real truth. If you do not know the reasons why you have low profits and possibly losing your business you can start by knowing your costs.
4: Not Training Front of House Team
Pricing out ingredient costs is one essential method to having reports that can be understood and evaluated. After you have established all your costs and menu prices you need to place the higher contributors on your menu where they will sell more often. Then you have to train your team on selling the higher contributors whenever possible. If you follow these basic steps you will receive higher profits and have an upper hand with your social media and marketing efforts, and on your competition.
1. Price out all menu items and know the true menu stars that add the most to profits.
2. Offer this information to FOH staff so that they can promote intelligently.
3. Feel confident that advertising efforts are generating the results desired when everyone is knowledgeable, ready for the promotion and on board with the efforts.
5: Selling Based off Food Cost and Not Contribution Margin
A full itemized report of your entire menu is necessary to know how much each recipe generates in profits. Each day of sales will result with a different menu sales mix and varying profits based on the items sold each day. This is important to know because you want to know what items need to sell more often to improve profits, and this must be clearly delivered to your service team. A Chicken Saltimbocca meal may have a lower 32% food cost but only generate a $10.00 contribution to profits; whereas, the Prime Rib has a higher 40% food cost and generated $17.00 to profits. All too often food cost is the measurement management uses to discuss profits with the chef; however it is the contribution margin amount that is more essential in the management toolbox.
Use of Social Media benefits a well-organized company using effective employee training and cost measuring methods placed ahead of random advertising. Having a full understanding of recipe costs, providing staff with the essential tools they need to sell your most profitable items and placing higher contributors to profits in locations on the menu that generate more interest is critical in the establishment of a profitable business.
Obstacles can be a significant constraint to performance and can create reasons for employees to resign, customers to leave, and profits to diminish, with owners and managers contrarily disregarding the constant remedy opportunities employees offer them. Although my focus of profession is hospitality, the fact of the matter is that obstacles are in every company. It does not matter the type of business you own or manage, as obstacles are present and can even hinder your culture if they are not recognized as limiting the service abilities of your staff.
Obstacles can be anything, but in foodservice they can be preparation limitations in a poorly designed kitchen, a coffee machine that has only one working heating element, an ice machine that continually breaks down, or a walk-in refrigerator that has no room to even walk in. Add them all up in your business and then look at performance issues. These common types of obstacles prevent employees from being effective in their role to the owner or manager, but are not always considered when an employee is being charged with poor performance. The obstacles that are occurring in your business may transition to interference's against your employees, conceivably resulting in a complaining employee, poor service, and unhappy customers.
Time after time the expectations we place on employees are jammed by obstacles that encumber their role in service. In almost all instances the burden of poor service falls on the employee when in fact the owner or manager can be directly at fault for these instances. How often has an employee informed an employer that a door causing concern needs fixing, or there is not enough silverware in stock to accommodate a party, or shelving is not sufficient to properly manage inventory, or a piece of equipment is in disrepair but everyone must use it. Many employers just say deal with it, and go on with their misunderstanding of why their business has slowed, or staff has left. Address these circumstances and perhaps a different outcome can prevail.
My contentions that employers do not consider conditions that may prevent an employee from performing to the level of expectations is real and common, and in my view a direct reflection on the performance of the manager or owner. When employees decide to leave for reasons like poor working conditions, management must consider the obstacles in their business that if addressed, could have prevented these failures. Eliminating obstacles that directly affect employee performance can result in better service, gratified staff, and reduced turnover.
Solutions to obstacle are not always easy, and there is generally a monetary value to result an obstacle. However, when your business thrives on service and you have areas in your shop that are preventing your team in their performance, fixing obstacles becomes more valuable to your bottom line then the commonplace action of inaction.
Today I want you to walk through your business and observe, and accordingly, ask a question to your employee’s specific to what is preventing them from doing their work. If you can, really pay attention to what you see or hear, and perhaps fix your obstacles. While this may not be the only reason for performance issues, it goes a long way with employee appreciation.
THE STORIES OF HOSPITALITY