A good restaurant menu will encourage customers to dive into your offerings. They should be able to rely on popular go-to items and new favorites—with a fair amount of flexibility mixed in, so they know what to expect. But your menu should not be set in stone (read: do not laminate). The big reasons for keeping it loose: fluctuating food costs, spoilage and passing trends.
Creating a menu can be a lot of fun. You get to play around with food combinations—their tastes and appearances, and how to describe them. But it’s a complex beast. For one thing, what do you charge for each item to make sure you’re profitable? Knowing your food costs and portion control are two ways to help price your menu correctly, so you make a profit while not pricing yourself out of the local market. (Another way to help ensure a profit is to build in a balance of expensive and inexpensive items.)
Know Your Food Costs
To keep your food costs in check, review your menu at least twice a year to make sure prices are where they should be, and nix items that aren’t selling. This doesn’t mean you have to rewrite the whole thing or add a ton of new items.
Generally, your food costs for any given menu item should be around 30% to 35% of what you sell it for. This means that if you pay $1.00 for something, you need to charge minimum of $3.34. That may seem like a huge markup for a latte, but remember that you aren't just paying for the latte, you’re paying someone to make the latte, serve the latte, and clean up after the latte is consumed. Plus everything in your café or restaurant, from payroll to the electric bill, needs to be covered by the food you serve.
Let’s look at the actual cost of that latte.
The initial cost can be broken down into the following items:
2 oz. espresso: $0.40
Plug it into this costing formula:That makes your cost for the latte $0.83.
Cost of your product/.35 = menu price
And you get: $0.83/.35= $2.90
So $2.90 is the minimum you should charge for that latte in order to make a profit. (Adding extra flavorings, shots of espresso, etc. will increase the cost and price.)
Note: Expensive ingredients lead to pricier menus, but that doesn’t mean you should use the cheapest coffee, milk, syrups, cups, etc. At a coffee shop, quality far outweighs cost if you want return customers (and to be considered “specialty,”). If you’re also serving breakfast and lunch items, you can balance high and low food costs to carve out a reasonable profit margin.
3 Tips For Controlling Food Costs:
1. Portion Sizes
One reason chain restaurants are so successful is that they are exacting about portion control. Employees in those kitchens know exactly how much of each ingredient to put in every dish.
To control portions in your own café or restaurant, everything should be measured out, at least until you can safely eyeball ingredients. Or you can purchase some pre-portioned items, like single-serving cream cheese packets for bagels. They may be more expensive, but can save you money in labor and food waste.
2. Create A Balanced Menu
Food markets fluctuate depending on the season, the weather and the price of fuel. There is little you can do when prices for milk and coffee go up, short of changing your entire menu every few weeks, and who has time for that? However, when you balance expensive items, which are prone to price fluctuations, with items that have stable prices, you can help maintain your desired food costs.
3. Make Items Versatile
Throwing away food is throwing away money. Using ingredients in several menu items will keep food spoilage down. If you offer a Monte Cristo sandwich, try to offer other items that feature both ham and cheese. It is also a good idea to update your menu periodically and remove items that aren’t selling.
Controlling food costs and portions, and avoiding food spoilage are solid ways to assure you’re making money on each menu item. Now go have some fun revisiting your menu, so you can be sure you’re giving your customers what they want at a price they—and you—can afford.