Posted on August 19, 2024 

The operation of a profitable restaurant demands strategic and comprehensive planning, a forensic review of financial and operational principles, and a thorough understanding of customer needs, wants, and behavior. Equally important is a structured review of your business's metrics and policies. I call this Revenue Management.

It begins with the creation of a menu, with selections that have appeal to a viable and sustainable market. It requires designing (Menu Engineering?) a menu that becomes your single best marketing tool when put in the hands of your customers. Let’s not create a price list, let’s create an effective marketing tool that nudges our customers to buy those items we most want them to buy, those with the largest real dollar profit margin. Be careful using just percentages! Bills are paid with dollars, not percentages.

Pricing those menu selections is both art and science. We all see SWAG approaches (do you know what that means?) but why not Factor Pricing, Prime Cost Pricing, Prime Cost Pricing including other fixed and variable cost items? But does it not make sense to alsoconsider other factors, such as Elasticity of Demand, Perception of Value, Direct and Indirect Competition, as well as Profit Targets? Of course it does, and we can dig deeper.

How about Elasticity of Demand, Perception of Value, Direct and Indirect Competition, as well as Profit Targets? Sounds a bit like Margin Analysis, and I can help you with that too! All this we will manage when we talk about cost behavior as it relates to menu pricing, but we need first to:

· Understand the basic principles of pricing, pricing psychology, and margin analysis.

· Understand the calculations needed to conduct pricing and margin analysis.

· Understand the decision process that emerges from margin analysis.

· Understand how we learn from the data we derive from these exercises to

      increase our average profit margin and profitability.

Understanding profit margin is essential for fiscal sustainability and growth. These strategic insights provide the framework for profitability and equip you to make data-driven decisions that spell the difference between success and stagnation.           

Stephen Lipinski Consulting can guide you through every aspect of restaurant management, and the first step is yours to take. Choices. Decisions. Take Action!   

    
Text me at 607-280-2340 to schedule a no-fee, 30-minute conversation.

"Ready! Aim! Fire!" is the way to go, not "Ready! Fire! Aim!"

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