How to Improve Margins with Recipe Costing

How Recipe Costing and Menu Engineering Can Improve Margins

Learning how to effectively cost your recipes and engineer a unique (and optimized) menu is vital if you want to run a successful restaurant. This article explores each of these processes and how technology can amplify your effort and improve your restaurant margins.

As a modern restaurateur, you have access to several advantages that your culinary predecessors did not have. Perhaps one of the most significant benefits you have is the power of technology to optimize your restaurant’s operations, minimize waste, calculate and estimate profits and inventory needs, and improve your margins. 

While these use cases tend to lie at the forefront of most restaurant technology marketing strategies, the restaurant management tools you use can also be leveraged to help with other important tasks like creating and costing your menu. In order to turn any kind of profit, knowing how to recipe cost and build an optimized menu is essential. In this article, we’ll talk more about recipe costing and help you consider a method to calculate recipe cost.

So how can you use technology to make recipe costing and menu engineering easier? First, let’s take a closer look at each of these processes

What is recipe costing?

Wondering how to cost a menu? This one is pretty self-explanatory. Recipe costing is the process by which you, the restaurateur, figure out exactly how much it costs to make a particular dish. This can be a tedious process – especially if you’d prefer to leave your knowledge of math in the dark recesses of your mind where it has been comfortably living for the past decade. Unfortunately owning and operating a restaurant will require some math, but thankfully there is an abundance of technology to assist.

Why is recipe costing important?

Recipe costing is important for a few reasons, but the primary one is it helps you decide how to fairly price your dishes for the consumer. On one hand, you don’t want to charge so much that customers go elsewhere. On the other, you don’t want to be paying patrons to eat your food. Knowing how much something costs to make allows you to create an accurate pricing plan that will pay you back for your service and allow you to continue living the dream.

What about menu engineering?

Menu engineering can be a little more difficult than finding out how much it costs to make a certain recipe. It’s the process of using reliable data collected in your own restaurant to inform your menu’s design and content. While recipe costing is mostly just a matter of simple math, menu engineering requires an in-depth knowledge of your customers, your restaurant food costs, your most popular dishes, and your most profitable dishes.

Once you have a better understanding of how your customers interact with your menu you can design your menu in a way that influences your customers to choose more profitable items—increasing your margins and making everyone happy. Menu engineering also helps to identify which dishes are doing little more than taking up real-estate in your menu. These are the items you should cut out completely to make room for more profitable options.

How does restaurant technology help with recipe costing and menu engineering?

Recipe costing and learning how to engineer your menu is a lot of work, especially if you’re new to the game. While it has been shown time and time again that restaurants who engage in these practices are generally more successful than those that don’t, finding the time to learn and execute these processes can be a significant roadblock. This is where restaurant technology comes into play.

Your point of sale or back of house systems should be able to track which of your menu items are most popular, which dishes bring in the most money, and analyze your restaurant food costs. As a dedicated food service provider, you should be spending your time feeding your passion for food by feeding your dedicated customers, not doing hours of endless math trying to figure out how you should design your menu.

Using restaurant technology is a great method to assist in these tedious processes and can streamline your workflow and optimize your guest experience, which will translate into healthier margins and more satisfied patrons and employees. Whether you’re opening your first restaurant or your fiftieth, leveraging restaurant technology to cost out your recipes and engineer a more profitable menu is the way to go.

Find software that offers in-depth reports on profitability, a daily operations template, and inventory tracking to make educated decisions that will pay dividends in the future.

Leveraging Technology to Manage Restaurant Labor Costs Whitepaper cover image

Leverage Technology to Manage Restaurant Labor Costs

Between increased costs, labor shortages, and socio-economic complexities - staying on top of labor costs is more important than ever for franchise owners.

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