Dominic is making good money with the Italian restaurant he opened three years ago in a small town just outside San Diego. People like his food and he’s earning a good living. But a few months ago, Dominic noticed his profits slipping. With a steady stream of customers since day one, Dominic never had the time, or found it necessary, to cost out his menu ingredients. But, now that his numbers are declining, Dominic needs a solution, and fast; if he doesn’t find one, his restaurant is almost certain to close.
The story above is fictional, but the scenario is all too real for the countless restaurants that shutter every year. “People connect too quickly to the emotional side of food instead of the business side when they start a restaurant,” says Glenn Cybuski, a Penngrove, California-based chef, restaurateur, and consultant. “They open a restaurant and sell a ton of product and at the end of the month all the bills are paid. Eventually, they will fail, because, when profits start going away, they won’t know what it’s tied to, whether it’s higher rent, labor, ingredient costs, etc. If you’re not watching the numbers, eventually, you will fail.”
An argument for menu costing
Most operators who don’t cost their menu cite reasons such as not knowing how to or not having enough time, Cybulski says. “Operators contact an expert when they start to see their profits shrink,” he says. “But food costs are the foundation of your business. Are you going to build your house on sand or rock?”
Other operators who have attempted menu costing will often do so when first opening a restaurant and then fail to update it, which doesn’t account for changes along the way. “Around 20 percent of independent restaurant operators have attempted some type of costing, but only around 1 percent have legitimate systems in place to cost their menus and update their costs on the fly,” says John Nessel, president of Restaurant Resource Group in Sandwich, Massachusetts. “Updating means they have a system in place where they can update ingredient prices and the system would flow those changes through to all of the menu items.”
The most popular choice is one where new and existing operators look at the prices of surrounding restaurants and aim to be in line with or in competition with the competitor, Nessel says.