“The opportunities to cater to your younger guests are worth the expense,” “To get repeat customers — that's what they're really shooting for.”
restaurateur, anonymous
How to Calculate Food Margin
Plate Selling Price – Cost of Plate = Food Margin ($)
| Kid's Beef Recipes Menu Costing | ||||
|---|---|---|---|---|
| ITEM | COST OF GOODS | SELLING PRICE | FOOD COST (%) | FOOD MARGIN ($) |
| Beef Taco Construction | 2.02 | 6.99 | 28.9 | 4.97 |
| Striploin Steak Jr. | 3.25 | 8.29 | 39.2 | 5.04 |
| Hail Steak Caesar | 2.56 | 6.99 | 36.6 | 4.43 |
| Campfire Pasta | 2.28 | 5.99 | 38.1 | 3.71 |
| Mini Angus Burgers | 2.12 | 5.99 | 35.4 | 3.87 |
| Personal Pan Meatloaf | 2.22 | 6.25 | 35.5 | 4.03 |
Adding is Easy with Beef
We know that beef will consistently out perform competing menu items in terms of profitability and can be a drawing card for your restaurant.
Building signature beef dishes for your kid's menu will add to your bottom line as well. When deciding where to dine, families' decisions are influenced if a restaurant offers a kids' menu. 80% of parents with children up to 12 years cite this as an important factor along with searching for healthier alternatives with better quality food for their children at good value. There is a great opportunity for restaurants to lead by example when it comes to adding more beef items onto their menus for kids, but at what cost?
A number of restaurants have been successful in attracting families back to their establishments because they gave careful consideration to improving the kid's menu by adding higher quality foods, and healthier choices, while offering families better value, a growing trend these restaurateurs could not ignore.
Think of the Kids' Menu as not just a profit centre but primarily as a reason for adults with children to choose your establishment repeatedly. That's not to say that kid's meals need to be lost leaders In fact, in the example below, while the Beef Taco Construction costs more to produce and has a higher food cost, the contribution dollars generated is almost $1.00 higher than the common “Mac and Cheese” found on so many menus. Beef Taco Construction includes higher quality ingredients, like beef and higher perceived value than Mac & Cheese that allows you to ask for a higher price on the menu. The profit of $1.00 goes straight into your pocket, while meeting the expectations of your guests. Successful operators realized a long time ago that they bank dollars, not food cost percentage. Offering more beef on your menu is a win-win for all.
| Beef Taco Construction vs Mac & Cheese | ||
|---|---|---|
| Beef Taco Construction | Mac & Cheese | |
| Cost of Plate: | $2.02 | $1.30 |
| Food Cost: | 28% | 26% |
| Selling Price: | $6.99 | $4.99 |
| Food Margin: | $4.97 | $3.69 |
| Sell 10–Gross Profit | $49.70 | $36.90 |
| The gross profit on the Beef Taco Construction was $12.80 more. | ||
Consider the value these young guests bring to your establishment by filling seats at usually slower times and how often they will visit if they are satisfied. Find a price point that the parents paying the bill can live with week after week while offering better food quality and choices for their kids.
Understanding Menu Mix and its Effect on Food Margin
When planning a children's menu for your restaurant consider the same principals you take to design your main menu. This involves designing an appealing selection of items that are competitively prices in the marketplace. This can be tricky because you need to price the items so that you can operate profitably and offer your younger guests a good price/value relationship.
First look at the following factors when developing your menu:
1. What the market will bear – We know families want healthier, better quality and greater variety of dishes that include beef for their children. Find a price point that the parents paying the bill can live with week after week while offering better food quality and choices for their kids.
If you studied microeconomics in school you remember the economic term “price elasticity of demand,” which, among other things, helps us understand how much you can increase the price of an item until people stop buying it and purchase a “substitute” product or service, or go without. As common sense would tell you, for nearly all products, the quantity sold will decrease as the price is increased; however, some products are less elastic (or price-sensitive) than others, including perceived higher value menu choices for children. But most restaurant items are relatively “inelastic,” i.e. there is a narrow price range that people will pay for any given item. Even slight price increases will cause significant drop in the quantity sold. If you stray outside this range, the consumer will purchase a substitute.
To make a Kid's Burger a more elastic item, we need to add value, i.e. an appealing name like “100% Canadian Beef Burger, Kid-Size”, or add a healthier side, a visually appealing Kids' Menu or a special concept or theme for kids. By serving the same burger with ham and pineapple on top and naming it after a rock star, you might be able to increase its price with minimal “erosion” (decrease) of sales. And in fact, in some cases it might be worthwhile to increase prices, and risk some “erosion” of sales, as long as the total profit increases. But you need to do so incrementally. Again, think pennies.
Among the factors that must be taken into account when pricing your menu is concept, food cost, gross profit, the market, location, economic climate, personnel (kitchen and front of the house), competition (direct and indirect) and value (as perceived by the guest.) Focus on the following: Menu item value is critical, and for families value means, healthier, more choices and affordable among other factors. Don't be afraid to ask guests and employees alike what they would pay (or sell) for a particular kids' menu item. Not long ago, a fast-food restaurant introduced a “$6 burger,” which they sold for less than $4. This is a blunt but effective illustration of what you are trying to achieve in creating the perception of value.
2. Who is your target market? – It is important to understand who your target market is therefore develop and price your menu accordingly. For casual restaurants your target market will be larger due to its affordability and therefore will appeal to a broader base of customers including families with children.
3. What are your competitors charging and offering? – It is good practice to know and compare your children's' menu to market competitors, however, here is an opportunity to develop an inspiring menu with options for children to taste grown up foods at smaller portions, or offer proper food, well priced and decent choices for children that many restaurants are not.
Menu Engineering
The process of merchandising a menu is sometimes referred to as Menu Engineering. This complex analysis looks at each item on a menu and how they contribute to the overall profitability of the menu as a whole. Savvy operators are constantly analyzing and tweaking their menus to generate top dollar. Knowing that 80% of parents with children up to age 12 say having a children's menu with healthier options is important taking a closer look at your kid's offerings can contribute to the overall profitability of the menu as a whole.
One of the first steps in menu engineering is analyzing the mix and gross profit of your menu items. Menu engineering allows you to make small adjustments to item placement, price, description and other factors that can have an immediate and dramatic affect on the menu mix. To understand Menu Engineering further, click here.
Food Cost: Maximize Efficiency
Food Cost is a great system chefs and food and beverage managers use to control portioning, waste, shrinkage and theft. Actual weekly or monthly inventories are compared against theoretical menu costs and a “variance” derived from the difference. Assuming updated product costs and accurate inventories, this tried and proven system is a must for all operations committed to maximizing efficiency. Regardless of your theoretical food cost, the closer your actual FC is to your theoretical FC the more efficient your operation is – and that is what FC measures. FC is not the optimum system for determining menu profitability.
How to Calculate Food Cost:
(Cost of Food / Plate Selling Price) X 100 = Food Cost PercentageSome would argue that a 4 hour inventory and 2 hours of calculations – every week is simple! Take the cost of the food, divide it by the selling price to your guest and express it as a percentage, and that is your food cost percentage.
Food Margin:Maximize Profit
Food Margin is a system that measures the dollars a particular menu item contributes to the bottom line. Food margin is critical for all menu development, including a children's menu. Developing a successful Kid's Menu using higher quality food items, providing healthier choices and a family-friendly experience will meet the expectations of your family guests. Adding value to your guests' experience adds profit to your bottom line. More than ever families are choosing casual dining establishments, make it yours!
When building a children's menu, study each item, their cost vs. selling price, and their food margin.
What’s Changing–Kids Menu Choices Are!
Building signature beef dishes for your kid’s menu will add to your bottom line as well. When deciding where to dine, families’ decisions are influenced if a restaurant offers a kids’ menu. 80% of parents with children up to 12 years cite this as an important factor along with searching for healthier alternatives with better quality food for their children at good value. There is a great opportunity for restaurants to lead by example when it comes to adding more beef items onto their menus for kids, but at what cost?