Specify a desired selling price for a recipe the tool will then calculate the cost of goods and profit margin.24%) for a given recipe the tool will then calculate the selling price necessary to achieve that goal Software-based recipe and menu engineering tools in restaurant back office systems make it easier to keep track of profit margins and, just as importantly, model the effects of changes in selling price, costs, and ingredients.īy drawing on a database of your menu item’s current ingredients and their individual costs (by region, if applicable), these food-cost tools allow operators to: Problems arise when typical variables for a restaurant chain are introduced, such as:īecause there’s an enormous amount of data to track, and because small changes in pricing or ingredients can have a huge effect on restaurant food costs, calculating gross profit can be a very difficult exercise without the right tools. For example: an item that sells for $10, and that costs $3, would generate gross profits of $7 (selling price - cost of goods) and a gross profit margin of 70% ($7 / $10).(Selling price - cost of goods) / selling price = gross profit.You probably already know how to calculate a profit margin: Here’s how you can tackle food costs: True food cost gross profit margin “We lose money on each transaction, but we make it up in volume.” It’s an old joke, but when it comes to restaurant food cost, this adage reminds us that knowing the profit margin of each menu item is critically important to overall profitability.īut keeping menu-mix information current can be a challenge, especially in a multi-unit, multi-region restaurant chains with shifting costs, menu items, selling prices, and frequent LTOs.
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