Method for improving the gross margin of a restaurant
Management control

Method for improving the gross margin of a restaurant

Improvement is a continuous cycle, it is a process that must be applied continuously. If you slacken off, the results will drop immediately.

This is 5 steps to improve a restaurant's gross margin

  1. Put in place measurement tools (Indicators)
  2. Controlling the cost of raw materials
  3. Calculate the material costs of recipes
  4. Identify food losses and wastage (stock discrepancies)
  5. Create a map that is both more profitable and sells more

1 - What is the gross margin in catering?

The gross margin of a restaurant is a performance indicator displayed in %. It corresponds to the turnover minus the cost of food (raw materials).

The Food cost ratio represents the importance of the cost of raw materials in relation to the turnover, which always represents 100%.

Food cost = (Cost of raw materials / CA) x 100

Gross margin = 100 - Food cost

Example: Tarte Tatin

                   Awards of sale : 4€ HT

                   Cost material : 1€ HT

So... (clears throat) Food cost: (1 / 4) x 100 = 25%

                   Marge: (100% – 25%) = 75%

2- Setting up measurement tools (Indicators)

2.1- What should be measured?

  • Restaurant Sales, Ratio & Gross Margin
  • Purchases of raw materials
  • Attractiveness of the map

2.2- How often to measure?

  • Each month (sales, ratios, gross margin and purchases)
  • With each new card

It allows:

  • identify items to be deleted
  • Allows to check the coherence of the menu with customers' expectations

2.3- Setting up a Dashboard

This feature allows you to view reports by category: solid, alcohol, soft...

Dashboard

It allows you to:

  • View your results, turnover, ratios and gross margins (over a selected period).
  • Analyze your expenses by groups of personalized categories (Alcohols, solids, soft... )

3- Controlling the cost of raw materials (restaurant gross margin)

Controlling your material cost requires a certain amount of agility on your part. A simple method consists in privileging local and seasonal products, thus proposing a seasonal menu.

Of course, negotiating your suppliers' prices is an excellent way to control your costs. But you still need to know, which commodities and at what price to negotiate, that's what we will see here.

3.1 - Negotiating supplier prices

Before you negotiate with a supplier, you need to know exactly what you buy each year.

You have to :

  • Measure your purchase volumes
  • Calculate your average price
  • Compare supplier prices

Why don't you start with:

  • Measure your annual purchasing capacity (volume and value), all references included. This allows you to know precisely your purchasing power with this supplier. Measure in the same way your purchases on the commodity subject to negotiation.
  • Calculate the average (annual) price of the commodity subject to negotiation. This will be your reference price during the negotiation.
  • Compare prices charged by competitors to find out your supplier's price position.

Measure your purchasing power

Purchasing analysis

Calculate the average purchase price

Calculate Average price

Compare prices

Compare supplier prices

3.2 - Reducing waste

Reducing food waste is a major issue in the restaurant industry. Financial losses can be heavy, some simple actions can greatly reduce this waste.

Choose appropriate packaging

For example, you buy your mascarpone packaged in 5kg jars, but your consumption is relatively low.

  • Switch to 3kg or 1kg packaging (even if the price per kg is higher, you gain by reducing losses).
  • Adapt the preparations to the number of people using the restaurant (for 30 covers / day, do not prepare 40 dishes of the day).

Checking the receipt of ordered quantities

You have ordered 15kg of veal nuts, your supplier delivers 18kg, so take action, otherwise the next time you order from him, he will deliver 20kg for the 15kg ordered.

Order the right quantities

To avoid too much waste, it is essential to order the right quantity, and that is the difficulty. To make it easier to forecast your needs, there is a simple solution: reduce your offer. Indeed, reducing the number of recipes (from the same range) on your menu allows you to have more product rotation. For example, going from 5 different fresh fish on the menu to 3 will simplify the identification of your ordering needs and thus reduce the risk of expired shelf life.

You can also order:

  • According to the reservations for the identified menus
  • Compared to a similar time before
  • Compared to a regular model

3.3 - Monitoring price trends

Keeping track of price changes is crucial to ensuring that your menu offers quality dishes at no extra cost. The use of a tool to measure price fluctuations is an asset when creating or modifying your menu.

4- Calculate the material costs of the recipes (restaurant gross margin)

The cost of materials is a basic ratio in catering. It allows the sales price of a recipe or a complete service to be defined. It is calculated simply by adding up all the costs of the foodstuffs used in the recipe. It is one of the three expenses included in the production cost, along with labour and operating costs.

4.1 - Technical data

The data sheet is THE basic reference document, used both in production (kitchen and bar) and in management to anticipate stock and cash flow requirements through ratios and margins.

In production, it allows any new employee to be quickly autonomous, guaranteeing you the maintenance of the quality and costs of your dishes.

For example:

Technical data sheet

4.2 -Menus

One of the major difficulties in creating a multiple-choice menu is to ensure that your menu is well composed. You need to make sure that you can make enough margin in all circumstances, i.e. if your customer selects the dishes with the highest production costs.

To check the margins and production cost of your menus, calculate :

  • the average cost excluding VAT and the maximum cost excluding VAT
  • average and minimum margin

4.3 - In the case of a buffet

In the case of a buffet, you have to do things differently, you have to calculate the average material cost per customer over a defined period.

Here's how to calculate it:

Total buffet material costs over a period / number of place settings over the same period

This calculation is based on a time period. It can be a service or a week.

The longer the duration, the more reliable the estimate.

5- Identify stock differences

It is essential to control your stock variances. This control consists of evaluating your theoretical consumption and comparing it with your actual consumption over a defined period. The objective is to identify overconsumption and disappearance of goods in your stock to optimise costs and increase profitability.

In order to be able to carry out a deviation check, it is essential to have 4 data records for the selected period:

  • The inventory at the beginning of the period
  • The inventory at the end of the period
  • The current purchases
  • The period sales

Filling in the losses allows you to refine the search for the origin of the discrepancies.

5.1 - Inventories

Carry out monthly inventories. You can also carry out partial inventories in order to control your stock on a pole of activity (bar, kitchen) or by category of raw materials (butchery, alcohol, champagne...).

5.2 - Calculation of the difference between purchases and consumption (restaurant gross margin rate)

  • Compare the quantities of food consumed with the quantities purchased over a period of time.
  • Check the differences between 2 dates: difference = Inventory start + invoices - sale - inventory end .
  • Filter by category or variance cost.
Checking stock differences

5.3 - The origin of the discrepancies

There are a number of possible reasons for inventory variances:

  • Theft.
  • Losses due to outdated DLCs: too many orders.
  • Losses due to waste: too much preparation.
  • Proportion of ingredients in recipes not respected.
  • Quantities invoiced by the supplier not in conformity with the receipts.
  • Billing errors (cash register)
  • Inventory Error

5.4 - What action plans?

In the event of discrepancies observed, it is necessary to undertake to identify the origin of these discrepancies in order to implement appropriate corrective actions.

Concentrate on the commodities with the most expensive deviations, then move on to the next ones. Proceed by elimination.

Once the commodities have been identified :

  • Check deliveries (check the quantities delivered and invoiced by your vendor).
  • Adapt orders and packaging if necessary.
  • Record losses (CSD exceeded, breakage).
  • Search for the relevant recipes.
  • Check compliance with the technical data sheets.
  • To make the staff aware of the respect of dosages and cuts.
  • Use dosing devices to facilitate compliance with dosages.
  • Have a printer in the kitchen to prepare only what is entered on the cash register.
  • Check the offers.

6 - A more profitable (attractive) and better selling Card

The various factors to be taken into account are:

  • Customer reaction to the price offer (price response index)
  • Profitability of dishes (margin rate)
  • The popularity of the dishes (number of sales)
  • Price dispersion (on the same product range)

6.1 - The price response index

This principle measures whether the proposed offer corresponds to customer demand. It measures the coherence of the menu in relation to customer demand. By calculating the average of the prices proposed on the menu and the average basket, we obtain two numbers:

  1. average supply
  2. average demand

The idea is to bring supply as close as possible to demand.

For more information: https: //koust.net/principe-d-omnes/

Response Index / Price

6.2 - Menu engineering (restaurant gross margin rate)

How can you increase your restaurant's profits by 15% or more?

Firstly, the menu engineering allows the study of the profitability and popularity of the dishes in the same range offered (starter, main course, dessert, cocktail...). It is the way in which these two factors influence the placement of items on the graph, highlighting the performance of your products. The objective is therefore very simple: to increase the profitability of one dish per customer.

7 - Advanced reports

Profitability

Analyze the profitability of your imported items via your crates.

Profitability analysis

Conclusion restaurant gross margin

It is important to improve the gross margin in your restaurant. This will save you money and therefore optimise your turnover. In addition, you will reduce your costs but also your environmental footprint by limiting waste and litter. In a restaurant, the gross margin is a notion to which you must pay attention in order to improve the management of your establishment and therefore the result of the company.

Koust

Koust is a management software dedicated to CHR professions.
Koust allows you to optimize the profitability of your establishment.
The idea is simple: better control over quantities and costs by having more control over procurement and production.

Free Trial

Request a demo