Do The Work!
Don't Worry About Your Sales

Bill Marvin “The Restaurant Doctor”

March 20, 2009

The last things you should be worrying about these days are your sales and your food cost percentage. (Catch your breath, still your pounding heart and let me explain!)

Neither sales or FC% are important in themselves -- the key number is your level of profitability. In fact, it is the only rational way to assess if your business is successful or not.

When your brain switches over to a profit-based frame of reference, the important number is not what you sell an item for but what sort of margin in has -- how much money it contributes to pay the bills after you sell it.

Here are some simple illustrations that I use in some of my seminars:

1. Would you rather have a 25% food cost or a 50% food cost?
Let's say you have two items on the menu -- an enchilada that sells for $8 and costs $2 to put on the plate (25% food cost) and an $18 steak that costs $9 to plate (50% food cost). People are only going to order one entree, right? When they choose the enchilada you have $6 left to pay the bills. When they choose the steak you have $9 to play with. Get it? In this example you would make more money at a 50% food cost.

2. Times are tough. What do you do if steak isn't selling well?
Let's say you took the enchilada, put 50% more "stuff" on the plate (for a total of $3 in product cost) and created something called a "Fiesta Combo" that you could sell for $12. The item has the same $9 margin that you enjoyed with the steak but you have dropped the price point from $18 to $12.

You don't pay bills with percentages. When you think in terms of margin you will focus on what an item makes rather than what it sells for. This will allow you maintain the integrity of your pricing structure because you won't have to use coupons and discounts when guests to want to spend less during tough times.

Instead, you can offer lower-priced items (compatible with your market position, of course) that may be nearly as profitable as your more costly choices. If you get the margin, who cares what it sells for?

Yes, it is wise to allow guests to spend less just as it is wise to give them the opportunity to spend more ... but savvy operators will make money no matter what path the guest chooses. It just takes a little more work to craft a menu that will provide this flexibility and still keep you positioned where you want to be in the market.

DO THE WORK!