What it takes to turn your food passion into a successful business
The Business of Food (2 of 4) is the second in a four-part series of articles focused on exploring what it takes to turn a passion into a successful and profitable business. In this article I cover, Menu Engineering, Waste, Table Turnover, Multiple Dayparts and the question of “Can it be Delivered?”.
Menu Engineering
I cannot overemphasise the importance of this component in the “Business of Food” as a tool to help owner / operators optimise their business on a daily, weekly, monthly and yearly basis. Although a lot of literature is available on the subject, I will share a high-level summary of this principle below.
This approach vets your menu items against one another and compares their performance based on two key metrics.
- How popular they are: Sales mix
- How profitable they are: Contribution margin
So basically, what menu engineering does is it examines the data pertaining to your menu items, evaluates their sales price versus their cost price and determines their contribution margin. It then compares their sales volume to assess both popularity and profitability. In the ideal world, all your menu items are popular and profitable. That will never be the case because of the comparative nature of the tool.
Categories
You then classify your menu items into the below four categories :
Stars:
- High contribution margin.
- High popularity ratio (sales mix percentage).
- Excellent performers compared to the rest of the menu items.
Plow horses:
- Low contribution margin.
- High popularity ratio (sales mix percentage).
- Popular but not profitable (comparatively).
Puzzles:
- High contribution margin.
- Low popularity ratio.
- Profitable but not popular (comparatively).
Dogs:
- Low contribution margin.
- Low popularity ratio.
- Neither profitable nor popular (comparatively).
Taking Action
The idea behind this tool is to use it to update your menu regularly by introducing new items to keep things interesting and people excited. With that said, culling is as important as introducing new items. What I tell my clients is, think of your menu as a building and your menu items as tenants. They need to pay rent. Failure to do so will mean you need to replace them. Harsh as this might sound in the rental example (of course I do not condone evictions), you need to treat your menu items with the right dose of emotions. Enough to create something special and memorable, while still objective to take decisions on letting them go when needed.
You can focus in the beginning on improving your puzzles and plow horses and take an informed decision on culling the dogs if you feel you explored all avenues of improving their performance.
Some basic recommendations to improve puzzles and plow horses include:
Puzzles : Simply renaming menu items sometimes works. Change their presentation. Reinterpret the dish while keeping the same core essence. Incentivise front of house team members on upselling.
Plow horses: Closely look at the recipe and examine areas to improve profitability without sacrificing quality. Analyse portion sizes to assess if you can reduce any of the components. Re-look at the garnish and assess if you can save any money with alternative presentations.
Zero Waste
Do your bank account and the environment a favour and control your waste. Our industry is responsible for millions of tons of food waste per year. I will not dive into the harmful consequences this has on our environment in this article, nor how this food can feed millions of people in need. I will address these environmental and ethical dilemmas in a separate article. For now, let us focus on the commercials. Waste equals money. The cost of the ingredients. Cost of processing them. Cost of their disposal.
There are multiple strategies you can use to minimise waste which fall inline with food cost management tactics. Besides control measures, the key is how you design your menu with waste in mind.
Below are three effective measures you can take:
Predict Demand
The first step in minimising waste is to predict demand levels. The ability to forecast your demand and plan your production accordingly is one of your most effective tools to help minimise waste. Find the right technology to help you with this endeavour. Once you set your Par levels (minimum amount of inventory needed to meet demand), you can train your team on managing production to meet the demand volumes.
Minimise Inventory Items
Avoid adding unnecessary new inventory items / ingredients when introducing new menu items. Explore multiple creative and novel ways to use existing inventory items.
Maximise Usage of Offcuts and Byproducts
Maximise the use of offcuts and byproducts. The straightforward traditional method is looking at sandwiches, soups and roasts. These are typical ways in which you can take leftovers or waste of one menu item and reinvent them into another. There are far more innovative applications these days from fruit peel infusions, to spent coffee and stale bread dough starters, to homemade kombucha, and veggie crisps. You probably noticed the trends of “ugly veggies” and offcut meat dishes all targeting the same principles of reducing waste. Adopt a mindset of circular economy and closed-loop systems with your ingredients and menu items. It makes both environmental and financial sense. One of those win-win situations.
The final point I will mention is to consider creative usages of organic waste. From coffee beans that can be turned into usable materials to creating energy from cooking oil waste. In a closed loop system, one person’s waste is another person’s resource.
Table Turnover Time
You want to maximise your revenue per available seat to ensure your business is profitable. You can do this in two ways. First, by expanding your menu offer to cover the various meal periods. Second, by turning your seats the maximum amount of times per meal period.
This depends on the type of restaurant / offer you have. A 12 course tasting menu restaurant would struggle to do over 2 (if lucky) turnovers in a single meal period, while a fast casual restaurant can aim for 2 to 3 turns per hour (with each meal period being around 3 to 5 hours).
Another determinant is the restaurant you own/operate and whether your primary proposition is convenience or experience driven. If you are a restaurant, for example, catering to a business district consumer, then you must have a menu that you can “finish / execute / serve” relatively quickly.
It is important, depending on the establishment you operate, to use technology where possible to track average prep times and set standards that become your team’s targeted KPIs. You can also do this manually if need be.
Preparation time becomes more relevant when we dive into the world of deliveries. One of the most important KPIs you will focus on, is speed of delivery. Preparation time is a key component of that metric and will directly affect how successful you are in capitalising on the opportunities of the digital world.
Multiple Dayparts
Another topic dear to my heart is multiple daypart / meal period operations. You can observe this with the massive fast-food chains who painstakingly worked hard to introduce breakfast into their menus and eventually reaped the rewards. It is all about mathematics, and this is the argument I make for my clients in order to fully embrace this concept. You pay rent 24 hours a day, 7 days a week. A sound business decision is to make money during the maximum number of hours of those days.
A word of caution. Try not to add more inventory items when adding menu items as mentioned above. The core of a successful business model from a food perspective is managing your inventory. Not only do excessive inventory levels mean higher potential waste, but inventory in your storage means less money in the bank. It ties up your liquidity.
Your customers might vary in terms of having different needs during the various meal periods. This goes back to, know who you are cooking for. These include:
- Speed of service requirements.
- Spend threshold
- Occasion, meaning group size and composition
Can it be Delivered?
An important building block to consider these days more than ever is, can your food be delivered? Sure, you can opt not to be part of this wave. Some choose not to for the sake of quality control. Others omit this to maintain their experience delivered. Current market conditions have forced many owner / operators to think on their feet, adapt (pivot) their businesses to stay afloat and survive the volatility experienced and restrictions placed on our industry. My advice is, contemplate and evaluate this in advance. Try to figure out a way to both maintain your quality standards and make a profit from a delivery component within your business.
While preparation time is a key metric to help you succeed in the world of home deliveries, you need to also consider whether or not your food is deliverable. Ask yourself:
- How delicate / fragile is it?
- Is it very sensitive from a food safety perspective?
- Does it handle well during transportation and movement on its delivery journey?
- How well does it hold hot temperature without drying out?
- What presentation modifications do you need to do?
- Is your price point competitive in the digital market place?
Yes, more questions to ask yourself, but it is best to ask all these questions in advance rather than just reacting to adversary market conditions without forethought.
Continue reading article 3 of 4
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Links to other related articles
If your enjoyed this article and found it useful then I would recommend you check out the following :
RESTAURANT BUSINESS MODEL The building blocks of setting up and operating a successful restaurant
RESTAURANT DESIGN GUIDE What it takes to design a successful business not only a beautiful space
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