Running a cafe or a restaurant in Sydney is competitive business, with fixed costs and competition all on the rise the modern day business owner has ever more challenges to overcome to make a success of it.
Tinkering with the price of a regular/large coffee or a glass of house wine can only go so far with your customer, such is the sensitivity of this price point… but your pricing strategy need not begin and end here. Fundamental to the success of your menu’s profitability are identifying your two major expenses and maximising your efficiency with both:
Cost of Sales: Your Cost of Sales/Turnover is generally defined by the recipe cost, pricing, wastage and marketing.
Wages: Your Wages/Turnover relates to the efficiency of your attributed labour cost and how much turnover output can you get from your wage input.
So when you breakdown a menu item it is much easier to see the cost to turnover relationship and understand your wage cost and your wastage risk for each dish. From here, if you have discovered a good option, you can implement a marketing strategy and up-sell your dish!
A simple, profitable example would be the humble ham, cheese and tomato sandwich – not a showstopper by any means but often a staple item of a grab and go cafe menu:
Menu Item One - Ham Sandwich
Bread (2 slices of Sourdough Bread at $8 per loaf) $1.14
Ham (30g @ $18 per kilo) $0.54
Cheese (One Slice @ $11.67 per kilo) $0.24
Tomato (50g @ $6 per kilo) $0.30
Mayo (15g @ $0.53 per 100g) $0.08
Recipe Cost $2.30
Price $8 (including GST)
A healthy Gross Profit on the face of it at 71%. However, remember that the price is GST inclusive, and this is a grab and go item so you need to factor in 4c for the paper bag and napkin.
Gross Profit Margin 68%
Gross Profit $4.97
Other notable mentions about the Ham Sandwich are that the item is very quick to make = low wage cost item, and that the ingredients list is finite = low wastage risk item.
Now that you have a good option you can implement your marketing strategy.
The Ham Sandwich is neither original nor particularly exotic, something like Parma Di Perfection (Italian toasted provolone cheese, prosciutto and sun-dried tomato sandwich) has much more of an appeal to it.
Menu Item One - Parma Di Perfection
Bread (2 slices of Sourdough Bread at $8 per loaf) $1.14
Prosciutto Di Parma (Two Slices @ $58.82 per kilo) $0.71
Provolone Cheese (One Slice @ $3.45 per 100g) $0.71
Sun-dried Tomato (50g @ $9 per kilo) $0.45
Butter (15g @ $1.35 per 100g) $0.20
Recipe Cost $3.21
Price $10.50 (including GST)
Gross Profit Margin 66%
Gross Profit $6.33
Whilst the recipe cost will invariably increase as you elevate the quality of the ingredients in turn you can price your item higher accordingly; therefore your profit margin will increase too, so long as you keep the gross profit percentage similar.
On the flip-side, a more complex and non-profitable example for many Australian/European style cafes and restaurants would be the Thai beef salad:
Menu Item Two - Thai Beef Salad
Lime (quarter @ $0.80 each) $0.20
Garlic (quarter clove @ $25 per kilo) $0.03
Palm Sugar (4g @ $1.09 per 100g) $0.04
Fish Sauce (4ml @ $1 per 100ml) $0.04
Sesame Oil (2.5ml @ $2.10 per 100ml) $0.05
Soy Sauce (1.25ml @ $1.50 per 100ml) $0.02
Ginger (2.5g @ $19.9 per kilo) $0.05
Beef (Rump Steak 160g @ $25 per kilo) $4
Tomato (Grape Tomato 50g @ $20 per kilo) $1
Cucumber (Lebanese quarter @ $0.88 each) $0.22
Onion (Red quarter @ $0.53 each) $0.13
Chilli (Red half @ $0.50 each) $0.25
Mint (Bunch quarter @ $3 each) $0.75
Coriander (Bunch quarter @ $3 each) $0.75
Thai Basil (Bunch quarter @ $3 each) $0.75
Peanuts (Toasted 15g @ $10 per kilo $0.15
Kaffir Lime Leaf (0.5g @ $3 per 10g) $0.15
Recipe Cost $8.58
Price $18.00 (including GST)
Gross Profit Margin 47.5%
Gross Profit $7.78
Other notable mentions about the Thai Beef Salad are that the item requires more time to produce = higher wage cost item, and the ingredients list is exhaustive = high wastage risk item.
As you devise your menu make sure that the list of menu items is concise and try to keep your ingredients list to a minimum, but not to the detriment of any dish. The best planned menus are those which use the same ingredients for multiple menu items. Well-designed menus will also generate more revenue through how they are marketed to the customer, with a catchy description, strong design and a good layout. Be sure to deliver a menu that lives up to the billing, your customer cannot be deceived. Your pricing will usually determine your customer base, so aim for a range of prices to broaden your market appeal. Lastly display your menu items and prices in random order; allow for all items to be considered - but highlight your most profitable menu items.
Your menu is usually the only piece of literature that your customer gets to see, so let your menu tell your story and ensure that it really sells your business!
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