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How to Reduce Food Waste in Your Restaurant

How to Reduce Food Waste in Your Restaurant

Restaurants are of one the biggest culprits of food waste. With a little effort in reducing wastage, your restaurant or bar can make a big difference, save money, and help the environment.

Every day, restaurants and bars throw out tons of perfectly good food. You may be surprised to learn how much this adds up!
Food waste is a major problem that restaurant and bar owners must address. Not only does it cause massive damage to our natural resources, but the food left uneaten after customers leave their tables can lead you into financial distress; especially as prices of supplies continue to rise post-COVID.

Reducing food waste is an important step in the right direction to improving your restaurant’s sustainability. As you limit costs from wasted foods, profitability increases and helps small businesses like yours thrive.

Restaurateurs can play an important role in reducing food waste by understanding how they are able to reduce this issue.
In this article, we’ll show you how big the problem is, not only in Canada but worldwide. You’ll gain insight into how food waste impacts your business and ways to reduce it to save your business money. Firstly, let’s take a look at the problem at hand.

How Big Is the Food Waste Problem?

Justin Guinn for Toast reports that 4-10% of all food bought by restaurants is never eaten by customers, resulting in restaurants losing $1,000 per 3.3 lb of uneaten food.

According to The Globe and Mail author Ann Hui, over 50% of all food produced ends up in landfills for around $31 billion wasted each year in Canada alone. Contrary to popular belief, households only make up a small percentage of total food waste at about 14% compared to the food industry, which contributes to about 86%.

In Europe, the problem is even worse. An estimated 26% of 2.5 trillion pounds of food is wasted by food services and restaurants, equaling around 533 billion pounds of food. 

The United Nations Food and Agricultural Organization estimates that about 1/3rd of all food goes to waste worldwide.

How Food Waste Impacts Your Business

Restaurant margins are already incredibly tight, so it’s important to find ways to save money where you can. And reducing food waste is a great place to start.

Not only does wasted food cost you money in terms of the uneaten food itself, but it also leads to increased garbage disposal costs. The more food you waste, the more garbage you have to dispose of – and that costs money.

In addition, food waste has a hidden opportunity cost. When you’re throwing away uneaten food, you’re also throwing away the labor, water, and other resources that went into growing, transporting, and preparing that food. 

By reducing food waste, you can free up resources to invest in other areas of your business – like marketing or employee training.

When talking about the monetary impact of food waste, it’s important to also consider the reputational cost. In today’s environmentally conscious world, customers care about where their food comes from and how it impacts the planet. If they perceive your restaurant as being wasteful, they may be less likely to visit – even if you have great food and drink.

In fact, about 72% of diners care about how restaurants deal with their food waste, and 47% would be willing to spend more money at a restaurant that has an active food recovery program according to Unilever and reported by refed.

That offers a potential competitive advantage for restaurants that can effectively reduce their food waste or set up a food recovery program.

Refed also claims that “for every dollar invested in food waste reduction, restaurants can realize approximately $8 of cost savings,” so there’s a clear financial incentive to act.

What Causes Restaurant Food Waste?

Restaurant food waste can be divided into two types of waste as detailed by Katherine Pendrill for Touch Bistro:

  • Pre-Consumer Waste: This includes all of the stock wasted in your restaurant before it ever even reaches your guests. For example, if your new line cook gets a little too enthusiastic on the grill and burns a steak that can no longer be served, this is pre-consumer waste. 
  • Post-Consumer Waste: This includes all food that gets thrown out after it reaches your customers, and is by far the larger category of food waste. 

Several factors can cause each type of waste, so let’s tackle the most common causes of wasted food in restaurants and how to prevent them.

Over-ordering 

One of the most common causes of food waste is over-ordering. This can happen when restaurants order more food than they need, resulting in perishable items going bad before they can be used.

An inefficient or improperly managed restaurant inventory system can cause managers and chefs to order an unnecessary number of products. By monitoring inventory levels regularly, you’ll cut back on food waste and save money.

Incorrect portion sizes 

Poor portion control happens when restaurants serve customers more food than they can eat, resulting in leftovers that are often thrown away.

If you’re regularly throwing out food, it might be a sign that your portions are too large. Proper portion control allows you to save money without sending out lower-quality food to your customers. 

Keeping a consistent standard portion size for each dish on your menu will help you avoid waste and ensure that customers are getting their money’s worth.

Food spoilage 

Product spoilage is a costly and avoidable issue in any food business. By inspecting all incoming product carefully and labeling it with clear best-by dates, you can substantially reduce the amount of spoiled food your business has to throw out. Implementing a first-in, first-out (FIFO) storage system is an effective way to make sure your inventory doesn’t go bad before you have a chance to sell it.

Mismanaged kitchen prep 

In a busy restaurant kitchen, it’s easy for things to get lost in the shuffle. If your cooks are prepping too much food or not storing it properly, it can lead to significant amounts of waste.

By keeping a close eye on your kitchen prep and making sure food is being used or stored properly, you can minimize the amount of waste your restaurant produces.

Lack of customer demand 

Many restaurants find that they’re wasting food because customers simply aren’t ordering certain menu items. If you notice that a particular dish isn’t selling well, try to find a way to make it more appealing to customers or remove it from the menu entirely.

How To Reduce Food Waste in Your Restaurant

There are a number of simple steps you can take to reduce food waste in your restaurant or bar. Take action now with the following tips:

Prevention

The best and usually simplest way to reduce food waste is through prevention. Try implementing these solutions in your business:

Review and change your menu – Restaurants can increase their bottom line by designing menus that take food waste reduction into account—such as using fewer ingredients and repurposing food prep trim and overproduction.

How to do this: 

  • You can achieve this by minimizing the different types of ingredients used in each dish, using lower-cost ingredients that are more likely to be used in their entirety, and designing recipes with food waste reduction in mind.
  • Cooking in bulk, adjusting portion sizes, and cross-utilization of food products and get you started on the path towards reducing your restaurant’s food waste.
  • To avoid ordering too many food items that will eventually go to waste, use ingredients from standard menu items in specials or promotional dishes that are only available for a limited time.

Portion control – As we mentioned before, one of the main reasons restaurants end up wasting food is because they’re serving customers too much. Proper portion control can help you avoid this issue and save money in the process.

How to do this:

  • To practice proper portion control, start by evaluating your current portions and see if they’re appropriate for the dish and your customer base. If you find that your portions are too large, make adjustments accordingly.
  • Provide smaller portions and offer optional refills if the customer wants more. A great product for this are sides that go with an entree. For example, if you serve fries with a burger, serve a smaller portion of fries and offer additional fries per request. This way, customers only get what they want— and you avoid having to throw away uneaten food.
  • You can also use portion control as a way to upsell customers by offering larger portions at a higher price point. This is a great way to increase your profits while still reducing food waste.
  • You’ll also want to have a few different options of sides available for your customer to choose from. If they don’t want the sautéed vegetables, they can choose the mashed potatoes instead. This allows customers to choose what they actually want to eat— and avoid wasting food.
  • Serve your food on smaller plates. Studies have shown that people tend to eat everything on their plate— no matter what size the plate is. The Delboeuf Illusion is a psychological phenomenon that demonstrates how our brains perceive the size of objects relative to one another. This means that if you serve food on a smaller plate, it will appear to be a larger portion and customers will be less likely to waste it.

Procurement And Supply Chain Processes

You can also reduce food waste by making your procurement and supply chain processes more efficient. Try out this solution:

Use less-than-perfect produce – We’ve all been to the grocery store and seen the “imperfect” produce that’s discounted because it’s not cosmetically perfect. While it may not be pretty, these products are perfectly fine to eat— and it’s often a lot cheaper than the alternative.

How to do this:

  • The next time you’re purchasing from a supplier, take a look at the imperfect produce and see if there’s anything you can use for your menu. This product is often discounted, so you’ll be able to save money while reducing food waste.

Production Efficiency

Production efficiency is essential for any food business, but it’s especially important for restaurants because of the high volume of food they go through. There are a few ways to increase production efficiency and reduce food waste:

Waste Tracking – One of the best ways to reduce food waste is to track it. This can help you identify problem areas and make changes accordingly.

Ways to track:

  • There are a few different ways to track food waste. One is to weigh all the food that’s being thrown away. You can get this data from your waste hauler, but unfortunately, there are chances for this to be inaccurate.
  • Another way to track food waste is to keep a running tally of how much food or drink is being wasted each day. Log the weight, type of food, and reason for throwing it again. For example, 2 pounds of lettuce – thrown away due to spoilage. This is a simple, low-cost solution, but is very labor-intensive. If you’re a bar owner or manager you can utilize Hailo Data’s Bar Waste Sheet template to track and document drink waste.
  • You can capture waste by placing bins at each kitchen station. This is a more accurate way to measure the weight and type of food being wasted. This method is also labor intensive and requires more space in the kitchen. 
  • Implementing a smart scale and monitoring system is the most accurate way to measure waste by category. This technology allows you to view real-time information online and can create simple reports for you that are easy to understand and actionable. The only downside is that this requires upfront capital and can also be labor-intensive. 

Streamline recipes – Streamline your recipes and prep processes to minimize the amount of time and resources needed to produce each dish. This can help you reduce food waste while still serving high-quality meals.

Ways to streamline recipes: 

  • Eliminate steps that don’t add value 
  • Make sure recipes are clear and concise 
  • Ensure that all ingredients are being used 
  • Use standardized portion sizes 
  • Minimize the amount of prep work 
  • Only make what you need

Train staff on proper food handling – Your staff should know how to properly store, prep, and cook food to minimize waste. 

Training topics: 

  • How to properly store food 
  • The correct way to prep food 
  • How to cook food so that it doesn’t go to waste
  • How to spot spoilage
  • What to do with food that needs to be thrown away

What To Do When You Have Too Much Food?

If you’re at the point where it’s too late – you have taken action to reduce waste with the steps above but your bar or restaurant still has a surplus of food, the best thing to do is try to find a way to use it before it goes bad. 

Have a sale – If you have perishable items that are close to their expiration date, see if you can use them in a special or offer them at a discount. While this isn’t the norm, it can help you avoid waste and bring in some extra revenue.

Donate – If the food is still good but you won’t be able to sell it before it goes bad, consider donating it to a local food bank, soup kitchen, or shelter. However, it’s important to check with your local health department first to make sure the food is still safe to eat and that you’re following all the proper guidelines.

Give to livestock – Livestock animals aren’t as picky as humans when it comes to food, so you may be able to donate your extra food to a local farm. Have a mushy strawberry or a soft apple? A pig would love it! Just make sure you check with the farm first to see what they’re able to take.

Compost – Have an expired carton of milk or some wilted lettuce? Maybe a diner’s incomplete meal that they left behind. Don’t throw it in the trash! Composting is a great way to reduce food waste and help the environment. If you have food that can’t be donated or used, see if your local composting program will take it. 

What NOT To Do When You Have Too Much Food

Don’t let good food go to waste! Here are a few things NOT to do when you have a surplus of food:

Don’t let it sit out – If you have food that needs to be refrigerated, don’t let it sit out for too long. Bacteria can grow quickly on food that’s been left out, making it unsafe to eat.

Don’t throw it in the trash – It may seem like the easiest thing to do but throwing food in the trash is a waste of money and resources. Not to mention, it creates methane gas as it decomposes, which is harmful to the environment.

Save what you can – If you have food that’s starting to go bad, don’t try to salvage it all. Inspect it carefully and only keep the parts that are still good. For example, if you have a head of lettuce that’s starting to wilt, you can still use the leaves that are still fresh.

Conclusion

Food waste is a business-threatening problem, but there are actions you can take now to reduce the amount of food waste your restaurant produces. By careful planning, storage, and prep, you can keep your food from going to waste and help save the environment too!

Remember that prevention, food recovery, and recycling are all key to reducing food waste. With a little effort, your restaurant can make a big difference by taking these simple steps. You can save money, help the environment, and make sure good food doesn’t go to waste.

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How to Earn Repeat Customers and Build a Community of Regulars

How to Earn Repeat Customers and Build a Community of Regulars

Regular customers are who keep your restaurant or bar alive; whether it's generating traffic in the slow hours or bringing their friends along and increasing business. Find out how to keep your customers coming back.

Earning repeat customers on a regular basis is extremely important for restaurateurs and bar owners. When compared to attracting new customers, it’s a lot more profitable to keep people who’ve already visited your small pub, restaurant or bar coming back. 

For this reason, returning customers should be a top priority and the main focus for restaurant and bar owners. The ability to keep these customers loyal to your business really goes a long way to increasing sales, and can be a great boost to your business. As outlined by AJ Agrawal for Forbes in this article, repeat customers are easier to market to, provide more value per head, and are a lot less maintenance than new customers.

Likewise, Melinda Curle for The Rail cites research from the Garnet Group that found “20% of a company’s existing customers generate at least 80% of its future revenue” and concludes that creating regulars is essential to increasing future revenue.

Repeat customers also help to spread positive reviews about your business in the local community through word-of-mouth marketing. These returning customers can be a great source of new clientele too, as they can encourage their family and friends to come along to your independent bar or restaurant.

With this in mind, here are our top 10 tips to help get repeat customers and build a community of regulars for your independent pub, restaurant, or bar:

1. Have Stellar Customer Service

Though having great food supplied by top-quality food distributors such as Sysco or Food is vital to ensure customers want to come back to your restaurant for food quality, what’s even more important is the customer service that they receive.

The customer experience you provide will be the most important factor in deciding whether someone returns to your small pub/restaurant in the future. As The Rail notes again, restaurant customer service is as important as the menu. If these customers had a great experience at your independent restaurant, pub, or bar, then they’ll want to come back again and again. The reverse is also true: if they had a bad experience at your restaurant, the likelihood of them returning is very slim.

But how do you go about improving your customer experience?

In large part, it comes down to your staff and how they interact with these customers visiting your small bar, pub, or restaurant. To ensure stellar customer service is served, you need to train your waiting staff and bartenders on how to interact with your clientele.

This could include:

  • How to greet customers – for example, ensuring staff greets customers as soon as possible after they enter the establishment, asking them how they are and smiling warmly at them.
  • How to deal with complaints/negative feedback from customers – a.k.a. not rising to provocation and offering apologies and a token such as a free dessert.
  • Ensuring they know to collect orders and serve food as quickly as possible – you could even set a target for a particular time.
  • How to upsell food/ drink items to increase sales whilst building a rapport with customers.
  • What to say when a customer is leaving to ensure they leave with a positive perception of the restaurant or bar they just visited.

To ensure they’ve got the hang of things, have your staff try out some practice scenarios since most people learn by doing, rather than just absorbing information. This also gives you the opportunity to identify the customer service behaviours that your staff might need a little more practice with. Beyond just training up your employees once when onboarding, consider that over time they might need a refresher. 

As such, you should think about how you can keep your staff’s skills up to scratch. Perhaps you could write the most important procedures on a blackboard in clear view of your staff in the staff room, or provide training sessions monthly, quarterly or annually to all staff members. This helps to ensure that your customers will receive great customer service each time they visit your establishment.

2. Reward Loyalty

Earning your customers’ loyalty is incredibly important for a small bar, pub, or restaurant, and one way to encourage your clientele to stay loyal and encourage them to keep coming back. To do this, you could introduce punch cards that allow your customers to get a free drink, side, or dessert. 

Customers could be rewarded after buying a certain number of meals or drinks through a loyalty reward program. Additionally, you could consider giving the occasional freebie to your most loyal customers, which they’re sure to tell their friends and family about. Not only will this make your regulars happy, but it will help to ensure they stay regular. This is the power of word-of-mouth marketing and ‘delighting’ your customers. As summarised by Sophia Bernazzani for Hubspot, “a delightful customer experience” is essential to retaining and gaining customers.

3. Plan For Busy Periods

As we’ve already touched upon, a stellar customer experience is vital to turning customers into regulars of your independent pub, bar, or restaurant, and is even more important than having lower food costs than your competitors.

Numerous sources cite one of the most common complaints made by customers about restaurants is waiting times, from having to wait too long to be seated, to waiting endlessly for their food to arrive once they’ve ordered. It makes sense then, that to improve your customer experience, you should ensure that each shift is equipped with the appropriate amount of staff so that there are enough people to cook, bartend and serve customers in a timely manner.

To hone this system over time, it’s a good idea to note down times when your establishment seemed understaffed and/or you received complaints from customers, so you can try to make sure it doesn’t happen again.

Obviously, you can’t predict exactly how busy every shift is going to be, but you can make an educated guess and plan accordingly to reduce the number of customers who have an unsatisfactory experience at your restaurant, pub, or bar.

4. Collect & Use Customer Feedback

To make your small bar, pub or restaurant even better, you need to learn from the insight of your customers. After all, you might think you’ve done everything you can to perfect your customer experience, but your clientele may pick up on things that you’ve missed.

As such, it’s a good idea to collect feedback wherever possible, from having your servers ask customers how their experience was at the end of their meal, to using surveys, to perusing reviews online and reading comments and messages on your establishment’s social media. This intel can then be used to improve your independent pub, bar, or restaurant from things that may be deterring customers from returning.

To help you to improve your customer relations, address any potential customer complaints, and deal with unexpected customer scenarios download Hailo Data’s Customer Relations Template.

5. Harness The Power of Social Media

One of the hallmarks of the last few years has been the rapid shift of our world to online, where most of our lives took place during the pandemic. This means that while an active social media presence was important before the pandemic, it has now become crucial in a world after the pandemic. For many businesses, the ability to keep their customers engaged online can be the make or break of their business in the new digital era. 

The Restaurant Times advises that all small restaurant owners create social media pages and update them regularly to develop a strong personality and brand image online and stay connected with their customers. This increases the likelihood that you’ll be able to transform your customers into regulars, as you develop a relationship with them outside of them visiting your brick and mortar bar, pub or restaurant.

Social media provides a single location for your customers to check on the latest promotions, menu features and events offered by your establishment. Finally, social media is all about relationships as it’s where friends stay in touch, family members connect and brands interact with their fans and followers. Similarly, you can grow relationships with your customers by interacting with them via social media, replying to their messages and comments on your posts, and liking any content of theirs that relates to your independent restaurant, pub or bar.

A strong social media presence will drive loyalty to your establishment and make your relationship feel more personal than transactional. In turn, making customers more likely to come back to your small bar, pub or restaurant over a new establishment that they have no connection with.

6. Offering Promotions

There’s nothing better than a good promotion to entice customers to return to your independent bar, pub, or restaurant. At the end of their visit, you could give customers a voucher to receive savings on meals or drinks in the future that can be redeemed within a narrow time frame to encourage them to come back sooner than they would have otherwise. Alternatively, you could offer promotions to previous customers via email, and utilise email marketing to entice these customers back to your restaurant or bar. 

Additionally, you could train your staff to make customers aware of any ongoing promotions, such as deals going on later that week or month. As Ryan Andrews suggests on the Eat blog, you could introduce and promote a plat ju jour on your menu, giving customers the opportunity to buy a bargain meal package, and perhaps include a reduced price meal side and drink on a specific day of the week.

After all, people love value for money and might shy away from getting sides and extras if they’re being frugal. This gives them the perfect opportunity to treat themselves by trying something they usually wouldn’t on a regular menu offering and may encourage them to buy the particular food option again outside of these promotions if they enjoy what they had.

7. Consider Introducing Happy Hour

Having a particular time of day or day of the week when your customers can reduce costs while enjoying their usual drinks gives them a reason to return regularly to your establishment. If you don’t serve alcohol, you could lower food costs on your menu at a certain time of day or offer buy-one-get-one-free deals to reduce costs for customers and make them more likely to visit.

Not only will this give you the opportunity to turn customers into frequently visiting regulars, but since happy hours take place when business is slow anyway, they can help to significantly boost sales, increasing your overall turnover.

8. Plan & Promote Fun Events

Sometimes, your customers need a reason to go out. To give them that reason, how about planning some fun events or activities that they can look forward to throughout the year?

For example, you could plan an event to celebrate new food or drink items on your menu, host a match night, or facilitate a games night or karaoke party to give your repeat customers something new to enjoy from your independent pub, bar or restaurant.

Remember to promote these events via your social media so your customers know when they should rock up to join in on the fun.

9. Build a Sense of Community

Part of the experience of going out to eat or drink is being around and interacting with other people. With this in mind, there are a number of strategies you can use to build a community around your establishment.

One of the simplest things you can do is to encourage your staff to develop relationships with the customers: asking them to make an effort to remember their names, have real conversations, and note down any key information about them that will help you provide personalised customer service to them in the future.

Likewise, as described earlier, you can use social media to develop a friendly rapport between your small restaurant, bar, or pub and your customers by replying to all their messages and comments. More than having meaningful interactions with your staff, giving your customers the opportunity to interact with each other will make them want to come back to continue growing these new connections.

You can encourage this in a couple of ways. Kevin Tam at Bar & Restaurant suggests placing a bar in the middle of the room, as a design space that fosters socialisation and brings people to the middle of the room to interact. As well as making it easier to see all the tables so people can spot others they know. However, for those who aren’t open to doing a complete renovation of their space, there are other ways you can encourage your customers to engage with each other. Events that encourage socialisation, such as darts or beer pong nights, provide the perfect opportunity for different groups of your small bar’s customers to interact and engage with one another.

It’s also a good idea to remember that the people most likely to become your regulars are going to be those who live closest to your independent restaurant, pub, or bar. As such, delivering flyers–or running online marketing campaigns that target those closest to you and perhaps offering them special promotions, is a great way to bring in new customers. 

10. Switch Things Up

When you turn customers into repeat customers, and then repeat customers into regulars, it shows that you’ve done a great job of making your restaurant or bar a place where people want to be and interact. However, no matter how good your bar or restaurant is, experiencing the same options all the time can get boring. So, to ensure you keep your regulars interested, it might be worth having a strategy to change things up every now and then.

You could do this by adding different meal or drink options to the menu every quarter, or adding seasonal or festival specials around different holidays, to make your regulars come back to try something new. Not to mention, you’ll attract customers both old and new.

 

As stated by McKinsey, “The restaurant industry’s greatest challenge to date” is earning repeat customers and regulars, as it becomes vital to the success of small restaurants and bars over time and how they succeed in their local community. Try these tips out and let us know what crowds and fun you draw to your bar or restaurant.

Interested more tips, tricks and advice on all things restaurants? Halio Data is a free resource for hospitality businesses, where you can learn how to run a more profitable and successful business based on our expert industry advice. 

Be sure to bookmark this page, or follow us on social media to keep up to date with our latest posts. 

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Psychology of Menu Design

Psychology of Menu Design

For small restaurants and bars, every penny counts and losing sight of your costs can significantly impact your bottom line. Get to know the tools and resources available to help you track and reduce your food costs below.

As a the owner of a small bar or restaurant, your menu isn’t just a piece of paper – it’s your sales pitch. A great menu should not only present your products clearly to your customers, but should also be a method you can use to maximise profits. The key to hitting these objectives is to get inside the minds of your patrons following some simple psychological techniques.

Psychology factors into so many aspects of the restaurant experience, from the choice of your decor, smallwares, music and lighting to your staff culture and their attire. Menu design is no exception. By taking into consideration some basic human traits and behaviours, you can tap into the wants and needs of your patrons, all in a way that works to your advantage as a restaurant.

In the time it takes to whip up your favourite entrée, this post will take you through actionable steps on how to implement psychology within your menu design. Once complete, you’ll be able to create a menu that boosts profits and upsells with ease.

Where to start with your menu design: Identify your target audience

Your restaurant is a business, and all businesses must have a clear idea of who they are targeting within their products, services and marketing. 

Every element of your new menu should have your target customer in mind. When designing your menu, you need to think about who is going to be spending money with you, and how you can encourage them to spend even more.

Your team and those in charge of designing your menu must know: 

  • The theme of the restaurant
  • The type of cuisine served
  • The level of formality 
  • How much you anticipate each diner spending
  • Typical age range of your customers
  • Typical habits or interests of customers
  • and most importantly: the profitability of each of your menu items.

Before undertaking a menu design, start by creating a brief that addresses each of these points. When everyone involved in the process is on the same page, mistakes will be far less likely.

What a good menu should do

We all know that food is not just available at your restaurant. It’s cheaper to eat at home. So why is eating out still so enjoyable for your customers? 

The answer lies in the one thing that can’t be replicated elsewhere – the experience.

So when it comes to approaching menu design, you should seek to capitalise on those aspects of your bar or restaurant that keep people coming back for more: the things you do so well that they can’t find at home. Ultimately this is what your customers are really paying for. So don’t be shy in reflecting this within your menu design. 

Whether you own a restaurant, cafe or bar, your menu should do the following basic things: 

  • Entice hungry customers
  • Increase sales and profitability
  • Streamline your kitchen operations
  • Create customer satisfaction that encourages loyalty

Establishing a price structure for your menu

Before diving into the creative elements of your menu, you need to determine how each of your items will be priced. 

Psychology wise, your patrons have already made the decision that they will be eating out, so they already expect to pay more for their food. It’s now up to you to use your menu to create opportunities for your restaurant which will up their spend. Plus, justify the higher costs through perceived value. 

No two restaurants will have the same pricing model. So a great place to start is to consider your niche as a restaurant, along with your target clientele. 

If prices are on the higher side, then is the food served and the overall experience worthy of this? 

Likewise, if you are wanting to target the value-oriented customer, then how can you still keep things profitable? 

The final price structure must address these potential issues. Even if that does mean having flexible pricing depending on the day, hours of the day or similar variables. Just make sure there’s a solid foundation behind your logic. 

Ensuring profitability

Unless your restaurant is turning a healthy profit, your business won’t survive. How you price your menu items will be a determining factor in whether you sink or swim, so now is the time to work out your overheads. 

Established restaurants may have an existing pricing structure that works well. However, newer restaurants will need to list and price up every item from scratch, along with any deals or specials. All costs must be accounted for. 

Handy tip: Create a spreadsheet for every item or deal like so. This will help you to determine whether the pricing is correct, and if so, how much profit each item is expected to bring. The results will also influence where each item is placed on the menu itself. 

Item

Initial cost (per portion)

Overheads (total)

Menu price

Total profit

Fries

$0.50

$1.50

$5

$3

Your overhead (per menu item) is the main section to focus on, since these costs are non-negotiable. Include every single expense involved in producing that item. So as well as the cost of the ingredient, think about how it needs to contribute towards rent, utilities, taxes, labour costs etc. 

You can then work out how many of each item you’d need to sell in a day to cover your overheads in total, ensuring it’s a realistic goal in line with your pricing model. 

In addition, financial forecasting can also help you to work out your most profitable times of the year vs quieter times to ensure your finances remain on track. 

Price theory and decoys

People always welcome a perceived bargain or deal when dining out, so how can you make this seem like this is the case, without dipping into your profit margins? 

Some tactics to consider within your menu design include:

  • The use of “limited-time offers”, “specials”
  • Avoiding using dollar signs
  • A price that end in .95
  • Price anchoring

Deals can also be used to promote lesser performing items or can reduce the impact of stock issues (i.e. too much stock has been ordered of a particular item)

Mastering the art of menu engineering

Menu engineering considers where people’s attention is most likely to fall on the page. Items are then categorised by profitability and popularity in response.

Likewise, menu engineering can also help restaurants to improve profitability on underperforming items. That’s because poor placement could be the real reason why certain items aren’t being ordered.

Hospitality professional @Darrra_O highlighted another important angle of menu engineering saying: “So many restaurants have bogus menus they can’t sustain. It’s not a good look when over half of the items on your menu are unavailable. Keep your menus simple, create a signature dish and maintain quality. Also, conduct menu engineering every 3 months for checks and balances.”

Create effective menu item placement through menu engineering analysis

Menu engineering is about getting the right items put in the right place on your menu. By ‘right place’, this means where the most popular and profitable items are easiest to spot. 

To get started with menu engineering, refer back to your spreadsheet that allows you to calculate the food cost and profit margin of each item. Categorise all menu items by their profitability and popularity. Based on these results, you can then engineer your menu according to what is the most profitable.

Menu engineering is an ongoing process, so ensure to include a plan for maintenance and optimization. For example, finding a time once a month to compare your menu against the results on your spreadsheet to see where the most impact is on the page, and whether or not the strategy is correct. 

Don’t forget that seasons or holidays may also impact what people are craving, which is why your menu should be regularly tweaked to avoid missing out on where the current demand is. 

Menu matrix analysis

Once you have your data, you can then create a menu matrix. This is a visual representation of your best and worst-performing items.

Doordash expertly explains how to do a menu matrix analysis, based on the following four key principles:

  • High profitability + high popularity = Stars (placed on the upper right)
  • Low profitability + high popularity = Horses (placed on the upper left)
  • High profitability + low popularity = Puzzles (placed on the lower right)
  • Low profitability + low popularity = Dogs (placed on the lower left)  

Depending on the results of your restaurant menu matrix analysis, you can consider removing items from the menu altogether, switching up the hierarchy, or making changes to the ingredients or prices of certain dishes to make lower-performing items more popular. 

You’ll also know which items to leave alone to avoid making costly mistakes to your menu (i.e. any ‘stars’).  

The golden triangle

When we look at a menu, our eyes typically move to the middle first before travelling to the top right corner and then finally to the top left. This is known as ‘the golden triangle’ by menu engineers and graphic designers alike since these three areas are where you’ll find the dishes with the highest profit margins.

So what we don’t want are your sides or other low profit items being placed in these headline sections. Instead, the golden triangle needs to put profitable items front and centre. 

Limiting choices

When we are hungry we are in search of a quick solution. Having too many choices makes the journey from A to B too complicated, which is why simplified choices are the way to go. A great strategy is to keep the number of items per section under 7, as our brains can’t process any more options than this. 

An added benefit for a small restaurant or a small bar is that by limiting the number of dishes on your menu, you can reduce your overheads as a business, not to mention the pressures on your kitchen. 

Now is the time to think about your star menu choices, so that the most popular options are what stands out. 

Creative & visual aspects of your menu design

You know who your target customer is, and you know how much you’d like the average customer to spend to make a profit. Now, it’s a case of infusing these ideals within the creative elements of your menu design to make it a reality. 

Humans are visual creatures. The appearance of your menu in terms of the layout, colour use, and font choices all need to be considered. Specifically, how the design can facilitate the psychology of both hunger and the willingness to spend money in solving that hunger.

Colour theory

Did you know that every colour has associations connected with it? 

The types of colours appropriate for your restaurant menu will depend on its niche, i.e. fast food, traditional, fine dining or even themed restaurants. This also connects with your restaurant branding as a whole. 

For example, bright colours are commonly used in the fast food industry, as they subliminally connect with the idea of speed and excitement. McDonald’s use of red and yellow is in fact to symbolise their fries and ketchup. Red is a stimulating colour, thus increasing our heart rate, which is why it’s also commonly used by restaurants as well. 

In contrast, one colour which isn’t a great choice for menu design is blue, since blue has an association with mould within the food industry. As well as being widely considered the most unappetizing colour, blue can even reduce feelings of hunger.

Top tip: Avoid heavy colour use in the background of your menu, as this may make it difficult to read your menu. 

Typography

Similar to colours, fonts also have different associations with them, making some more suitable than others depending on the theme of your restaurant or small pub and its intended clientele. 

If you aren’t hiring a graphic designer with typographic skills to choose your menu fonts, then you’ll need to spend some time studying these meanings. 

Aspects to consider include font choice(s), font size, text alignment and the space between words and letters. In short: Your text needs to be clear for everyone to read.

Simplicity is key

Nobody likes being overwhelmed when browsing a menu. So, you need to think carefully about what really needs to go on the page, and what doesn’t add value from a visual perspective. 

Be sure to utilise white space and remove any unnecessary text or ingredient descriptions.

Online menu design

Don’t forget about your online menu design! In the digital age, it’s highly likely your patrons will check out your menu on your website or on social media before deciding whether or not to book a table. 

Some handy hints include:

  • Make sure your menu is easy to access on your website and social media pages, ideally visible on the page rather than a PDF which has to be downloaded. 
  • Ensure online menus follow responsive design principles, and are designed for screen not print, including the font and colour use (RGB). 
  • Integrate CTA buttons on your online menu, encouraging people to call to enquire or book a table directly to maximise ROI.

Own an independent restaurant, independent pub or independent bar? Intimate single location venues can often benefit from nostalgic menu design. 

So, be confident in experimenting with the themes that best cater to your clientele if you have anything special to offer up that can be alluded to within the design. 

Menu language

Are you selling a ‘beef burger with fries’, or a ‘Chargrilled Canadian Angus beef burger, cheddar, maple smoked bacon, topped with tomatoes, lettuce and crispy onions, served with homemade fries’?

Whether your restaurant cooks up burgers, fish, desserts or even vegan food, the language you use to describe your dishes should conjure an image that’s so enticing, it immediately makes people want to order it. This is especially the case if your menu doesn’t have a lot of imagery going on, as the descriptions will need to do all the work. 

Think about the type of food your restaurant serves up, and consider applicable power word adjectives that will truly sell what you have to offer. 

By the same token, keep item descriptions short and sweet to avoid confusing customers. 

Naming your dishes

Every item on your menu will need a headline to describe it, either consisting of one word or a short sentence. There should be a sense of pride in whatever name you give to your dishes. There’s also plenty of room to personalise the name in line with your restaurant theme or branding. 

 

Top tip: Remember that confused people don’t buy, so make sure that the names of items are easy to understand for your audience.

Continue to track your menu progress

All menus should be subject to regular scrutiny to see what’s working, and crucially what’s not. As a restaurant owner, ask yourself whether your current offering is generating the right results, or whether further tweaks are needed. 

Continue to track your sales, profitability, and food costs in your POS or other business records and adjust your strategy as needed. 

If you’re unsure, go back to the original goals we mentioned at the start, including whether your menu is enticing customers, boosting performance and streamlining the efforts of your kitchen. 

The more you are in tune with your customers and business as a whole, the easier it will be to align your goals with your actual menu offering. 

Menu design psychology: In Summary

Your menu design should seek to do two things: make people hungry and drive profits for your business. Considering the psychological elements in relation to menu design is about understanding what makes people hungry, and crucially what gets them to spend their money in your restaurant in relation to that hunger. Every design in terms of the wording, design and overall presentation must factor this in. 

Have an appetite for more tips, tricks and advice on all things restaurants? Halio Data is a free resource for hospitality businesses, where you can learn how to run a more profitable and successful business based on our expert industry advice. 

Be sure to bookmark this page, or follow us on social media to keep up to date with our latest posts. 

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How to Keep Track of Your Food Costs

How to Keep Track of Your Food Costs

For small restaurants and bars, every penny counts and losing sight of your costs can significantly impact your bottom line. Get to know the tools and resources available to help you track and reduce your food costs below.

When managing a restaurant budget, your food costs are one of those financial aspects that you can’t just set up once. You have to consistently track and manage your budget to ensure you keep your food costs low and reduce your food waste to protect your restaurant profit margins. In fact, after staffing issues, high menu costs are cited as the number one concern for small independent bar and restaurant owners.

Running a restaurant can take up much of an owner’s time, and it’s rare to find the opportunity to do the thorough analysis that is required to track food costs properly. And with the increases in inflation and the ongoing supply chain issues, maintaining reasonable prices while sustaining profitability is becoming more of a challenge. This guide will help you with simple ways to track your food costs easily and determine if you should adjust menu prices while keeping your customers happy and not appearing to overcharge.

Why It's Important to Track Food Costs

Your food costs are a measure of the menu price of dishes against how much the ingredients to make the dish cost. According to Lorri Mealey with The Balance, “food cost should be in the neighborhood of 25% to 35%. In other words, if you pay $1 for something, you should usually charge a minimum of $2.85.”

Your restaurant food costs determine your restaurant’s financial health and can help you assess menu pricing and strategies. Regarding your restaurant budget, food costs are one of the most challenging aspects of balancing your budget.

1. Increase Profits

In the food industry, there is a lot of accounting for when focusing on profitability, including staff, the space, daily operations, and food costs. Calculating accurate food costs can help you to increase your restaurant profit margin by ensuring you are making the most out of your menu items.

2. Optimize Ordering

You can get a better idea of your inventory needs by tracking your food costs which allows you to optimize your ordering. You can optimize your ordering with the outcomes to ensure you order just enough to reduce unnecessary food waste and ensure you have enough ingredients to make it through the week.

3. Improve Customer Experiences

Your customers will visit your restaurant to eat their favorite menu item. If you are out of any ingredients, your customer’s experience can turn negative and could damage customer loyalty.

How to Calculate Food Costs

Running any business requires you to calculate a budget and continue to update your budget to monitor your restaurant and its profitability. Reviewing your budget regularly can help you keep better track of your finances and help you set and achieve your goals. With the right tools, you can easily manage your budget and stay on top of the cash flow within your restaurant.

Calculating your average food cost percentage is essential to regulating the budget and determining the menu prices to maintain profitability. The average food cost, shown as a percentage, is the highest expense for any restaurant or bar, and it can easily go overlooked as you focus on the many aspects of running a successful business. 

The simplest way to determine your food cost is by determining the costs of your ingredients versus the revenue those ingredients produce for each meal sold. You can get this number one of two ways:

1. Period Costs

Take the total costs for a specific time period and divide them by the total food sales during that same time period.

2. Plate Cost

Take the food cost of a menu item and divide it by the sales price or the plate cost and multiply that ratio by 100. Keeping track of both numbers can help you to determine your menu pricing more accurately and help you to achieve your cost goals. It’s the first step you want to take to accurately track and manage your food costs and determine your menu profitability

You can analyze how your costs change over time to give you insights into how food costs are trending to allow you to make decisions on whether you need to improve cost control efforts or update menu pricing. 

Food costs are just one of the many aspects of controlling your small pub, restaurant, or bar’s bottom line. You’ll want to ensure your restaurant is staffed appropriately while maintaining profitability. You can use tools to determine your labor costs, such as the Sysco Source Labor Cost Calculator, to help you accurately assess the full scope of your expenses.

Knowing your food, labour, utilities, back bar supplies, bar hardware supplies, etc is critical to your bottom line.

Tools to Help you Track Your Food Costs

Tracking your food cost percentage is vital to protect the bottom line of your restaurant. You need to consider the many factors impacting how to manage food costs by considering portion sizes, recipe costs, and menu items. There are a lot of software solutions and tools that can help simplify the task of tracking your food costs. These tools can help you manage your food costs better while optimizing  your profitability. 

1. Restaurant Inventory Management Systems

Restaurant inventory management systems can help you in several ways beyond tracking your food costs. An all-in-one system can help you track ingredients, manage vendors, and provide low stock notifications. Ideally, you would want one that integrates or has a functioning POS that can help you to automate many of your inventory management tasks and even alert you when it is time to order more. The features continue to improve as technology and smart functionality advance. Some inventory management systems even have built-in price trackers to keep an eye on rising costs to help you better manage your bottom line.

2. Food Cost Calculators

To balance expenses and calculate food costs, entering it in an excel spreadsheet can be time-consuming and can sometimes lead to inaccurate predictions. You want to be able to leverage real tools that can help you quickly calculate your food costs. There are a lot of apps available, but the American Foods Group has an easy-to-use Food Cost Calculator that allows you to email and print your calculations for you to reference at any time.

A great resource to track and calculate food and beverage costs is Hailo Data’s Food and Beverage Cost Management Document. The download provides support with systems for calculating cost of goods sold (COGS), recipe costing, inventory management and more.

Tips on How to Manage Food Costs

Your food costs can change drastically over time and if not kept in check, can create a financial burden that can threaten the success of your small restaurant. When ingredient prices rise or shrink, you want to be able to strategically manage your menu prices while ensuring the positive customer experience remains intact. Follow these simple tips to help you manage and lower food costs.

1. Track Food Prices

Food prices are always changing depending on a number of factors, including simple supply and demand, weather, transportation costs, and more. With inflation being at a 40-year high, tracking food prices is more important than ever. You can check the USDA Food Price Outlook reports to see the trends and forecasts for what to expect for food prices on average.

2. Manage Portion Sizes

Controlling portion sizes and edible portion cose can play a major role in controlling your food costs. You want to be sure you are serving just the right amount of food to your customers. You can determine if your portion sizes may not be right by:

  • Tracking plates that come back to the kitchen and observing if there are leftovers.
  • Taking note if there has been an increase in requests to box up leftovers.

These are indicators that you may need to cut back on portion sizes for your menu items.

Ensure your kitchen staff is properly trained and has the right tools to measure equal portion sizes for every meal. Even a minor shift in your portion sizes can significantly impact your overall food costs.

Write Prep Sheets

For each dish, build a prep sheet that contains preparation instructions for each dish with weights or measures for each component of the dish.  (Don’t worry, over time the experienced staff won’t need to refer to it).  This makes it very easy for new kitchen staff to learn the correct plating methods for a dish. 

Post Plating Pictures

Take pictures of finished dishes to help staff learn how to plate orders just right. 

Invest in Restaurant Inventory Management Software

Tools like Optimum Control from TracRite can make it very easy to manage portions, track your costs, and train new staff.  There is an initial investment in time and effort to set it up, but the savings generated can reach into thousands of dollars per year.

3. Take Inventory Daily or Weekly

You should be taking inventory of your food regularly to keep track of your food usage and get a better idea of the associated costs. You can use your inventory to determine what you need to order less of and maybe what you need more of.

4. Offer Daily Specials

Using daily specials, you can reduce your food waste and, subsequently, your food costs. If you have ingredients you may not have an opportunity to use or – more commonly – have leftover inventory from that you would like to use up, leverage the talents of your chefs to create a unique menu item to offer as a special. You’ll want to encourage your front-of-house staff to recommend your specials to help reduce food waste.

5. Research Vendors and Suppliers

Even if you have a great relationship with your current vendors and suppliers, keeping track of any new suppliers popping up in your area is always a good idea. You can use competitor research to leverage better prices with your current vendors or switch if it makes more sense. You can also schedule quarterly reviews with your suppliers to ensure you get the best prices.

6. Use Menu Engineering

Menu engineering is an in-depth review of your menu to analyze the popularity and profitability of your menu. Menu engineering uses psychological tactics to help to increase your restaurant profit margin by strategically restructuring and redesigning your menu. You can determine the least popular items and remove them if needed. Menu engineering increases profits while maintaining a great customer experience. Learn more about the psychology  behind menu engineering and top tips in our Psychology of Menu Design blog post.

At its most basic, menu engineering requires you to:
* know what each item on your menu costs you (see above)
* know your margin of profitability for each item (list price minus cost)
* determine if there are menu items with low profitability that you can either redesign (to reduce the cost), reprice or (if they are unpopular) remove

As Sebastian Rankin writes for Lightspeed, “Menu engineering is a way to evaluate a restaurant’s menu pricing by using sales data and food costs to guide which dishes to feature and their menu price. Equipped with that data, menu engineering involves categorizing menu items based on their popularity (sales volume) and profitability.”

Lightspeed has a great chart for organizing your menu items into four groups based on Popularity and Profitability.

Lightspeed Menu Matrix

Source: Lightspeed

7. Manage Food Orders

The harder you are willing to work to optimize your food orders, the more you will be able to save. You can offer a limited menu to cut the number of ingredients you need, buy seasonal produce for extra savings, and opt for more prep work to reduce costs.

8. Reduce Food Waste

Managing your food costs relies heavily on reducing your food waste. Food waste is inevitable, but there are measures you can take to help reduce the waste. You can get creative to use food before it spoils or to use up any scraps to make broths or soups. Creating a compost bin using your food can also help reduce costs in other areas of the restaurant.

You can also manage food waste by ensuring your front-of-house staff is trained to take accurate orders. Make sure they have the resources they need to take orders and encourage them to work on their accuracy with their customers. Provide them with notepads and pens and ensure part of their service is to repeat orders back to the customer.

9. Conduct Sales Forecasting

Sales forecasting can be crucial in organizing your menu and optimizing your food costs. Every quarter, you should look at trends from previous months or years to identify patterns to provide insights into what the possible future of your sales within the next quarter will look like. Sales forecasting can help lower food waste, optimize ordering, ensure you properly schedule staff, and more.

Conclusion

Managing and tracking your food costs can seem overwhelming, but ensuring your restaurant is successful is essential. For small restaurants and bars, every penny counts and losing sight of your costs can significantly impact your bottom line. You can get the most accurate data by using the tools and resources available to help you track your food costs. Accurately tracking can increase your profitability while maintaining customer satisfaction for your restaurant or bar.

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