9 Ways For A Food Business To Increase Profits
For many food business owners, they work hard, potter along with the everyday tasks, and for many businesses, they are not actively reviewing their margins.
Receiving your end of year margin several months after the year has already passed is now a thing of the past. Frequent, accurate control of your stock is necessary to know and improve your gross margin.
Here are 9, quick ways to increase the profits margins for a food business;
For the purpose of this article we will assume that these points relate to a restaurant operation.
1. Know the cost of each dish – if you know this you are protecting your gross margin. Never sell a dish at a loss. Always sell based on the required margin and what the market will pay. Balance is required here.
2. Know your sales mix – accept that you are not going to make the same margin on each dish being sold. Understand that if you sell a steak your margin will be low (as its a high-cost dish). If you sell more pasta and chicken (low-cost dishes), your margin will be higher. What your other dishes?
3. Manage your suppliers – Where possible fix prices with suppliers/vendors for a period of time. This will be difficult with seasonal food suppliers such as fresh fruit and vegetables, but they can still be fixed for 1-2 months. For meats (your highest cost product), ensure that prices are fixed and that lowest cost doesn’t mean the best quality. Only you can decide this
4. Know what you’re selling – Are you offering a dish that is not selling? Is it taking up shelf or menu space, space that could be used to host a new market offering that people want and need. If it’s not selling it’s because your customers don’t want it. If you know the highest selling dishes, then create different versions of them. Your customer will love you for it.
5. Frequent, accurate counting of your stock – You must undertake weekly or at least monthly counts (depending on how busy your operation is) of your stock and then calculate your gross margin. Don’t become that busy fool! This is why you are in business. Don’t neglect this task.
6. Monitor waste – A contentious issue. While you want to know the waste that’s occurring, you want this to be recorded so as to get a figure on it. At the same time, don’t criticise those that are recording the waste for if they think that they will be receiving a tongue lashing from the boss they will stop recording it. Instead incentivise good working procedures and practices around food waste
7. Weigh your waste – When a table is cleared and plates return to the kitchen, start weighing the waste. This is an easy to use metric that can tell amazing things about your business. It will show you whats being wasted and from whats dishes. Is that pasta dish regularly coming back half eaten? Best to keep portion sizes small and offer more/second helpings. Much better from a customer care side of things.
8. Use clear, non-coloured bin bags – easier to see whats being wasted at a glance. Who wants to sort through black garbage bags?
9. Know your stock levels – The best metric of all… am I over-stocked? If so, you are tying up cash flow and it is normally likely that you have additional unwanted stock on hand as a result of over ordering. If you can get deliveries on a daily basis, then 4-6 days stock on hand is ideal. I’m all on for a deal, but if you are buying bulk of a product that is perishable or not likely to be used in the next 2 weeks then it is likely that your wasting a key resource – Cash.
General Rule of Thumb Reminders
Know your gross margin of each item – No margin, then don’t stock it and don’t sell it. Either reduce the cost, reduce the portion size or increase the price. Protect your margin.
Manage your waste – You must know – do I have a problem, what is causing that problem.
Have a read of our blog on Top 5 Most Common Stock Management Mistakes for more ideas on how to combat losses.
Consider when the best time to carry out this evaluation of your profit margins is, we would advise to do this after you have carried out a stocktake of your full premises. Start afresh, go forth and boost profits!