Menu Analysis to Fight Inflation

#cashflow inflation menuanalysis restaurant accounting restaurant menu sustainable Jun 22, 2022

Extra fees and raising menu prices might be working as a short-term solution to inflation. However, your customers will become frustrated over time, and your operation cannot sustain that solution. You must look at it in a way to survive, and ideally thrive. What changes can you make today that are sustainable AND helpful to your business in the long run? It is time to get creative and think of ways to fight against inflation. We've said it once, and we'll say it again; your menu is the blueprint to your business. What menu ingredients are used in multiple recipes? Taking a deeper dive into the things you currently are doing and adjusting to something better is the best way to beat inflation. 

I think there are ways that you can really make a difference in your business without having to raise prices too much to keep your customers loyal. The goal right now is to be aware of what's going on with inflation, but also make sure that your business is still on solid footing and that you have your customer base secured. Inflation has been with us since Summer of 2020. What is important to remember in times of inflation is we know the pressures on our business are reflecting in the bottom line. We have seen cases if we raise prices too quickly, we lose our customer base, and volume drops dramatically. We really want to make sure we are aware of what is going on with our customers in our area, because every area is different. You may have three locations and their response to inflation may be different depending on the customer base. So, what you'll see in this blog are some tips that can help make sure the business model makes sense and is profitable without losing our customer base.

In the last few months most of you are eager to look at your numbers because something feels off and is  not working. More than anything right now, we’re looking for a cash flow plan. Unfortunately, I think unlike COVID, this plan is going to be different for everyone because again, every area is different. Everyone’s customers are going to be dealing with inflation differently. If you have seniors or people on fixed income, they are going to be affected more by inflation than people who maybe are in a working environment. If your operation is in Florida and majority of your customers are on a fixed income, they have a set amount that is budgeted to spend every month. Due to inflation their disposable income is affected due to raising gas and food prices. Similarly, this is true for those in a higher tax bracket. People in a working environment may have had their wages increased therefore making them less impacted by inflation. Being aware of how our customers are impacted by rising prices is extremely important because you can then strategize creative action against inflation.

Your goal is to stay profitable and keep customers coming back in the future. Keep moving forward and respond as best as you can to the things that are beyond your control. You will find that this feeds into building our best practices. Let’s reflect back to 2020, the people that were able to respond well during the pandemic were the people that built new best practices. Prior to Covid, it wasn't really something that you did, you wouldn’t look at your sales numbers frequently or build weekly budgets. In those early days of Covid, when your sales were down 50, 60, 70%, you NEEDED to have a weekly budget that got you to break even. This situation, while thankfully not as severe, is similar in ways. Until things become more consistent, you need to focus on what is sustainable and will have your operation profitable even after the storm settles.

Those of you who worked with us know that our goal is to make you and your operation as efficient as possible. If you could take 15 minutes a day to strategize and analyze your operational data and use that strategically, I think you'll find it can make a huge difference in how your business responds to inflation. The first thing we're going to talk about is menu analysis. Menu analysis from an accounting standpoint isn't necessarily menu costing cards, although it may lead us there, we are looking at it in a more strategic way. Menu analysis is being aware that not all items are the same. All items are not going up in the same way. Some people might say, well, food cost is up 5%, but on your menu, it's not a flat 5% increase. Some products and services have gone up a lot more than 5% and gone down as well. Not everything is impacted in the same way. We need to know exactly what is in your menu and purchasing that is driving up food cost. Sure, there's fuel surcharges and that's part of cost increases, but there's also certain items that are fluctuating drastically and we need to know what those items are.

We did this analysis last summer with one of our clients and what was interesting was the cost of chicken wings. Every time they served chicken wings; they were losing money. After looking at food cost we found that fish had actually gone down in price. So, the joke was, let's do a fish fry. Let's do an appetizer that's fish because that actually had gone down 15%. The more aware you are about your costs and options the more creative you can get with the creations for your customers. If you are not able to take the risk of offering something new to your customers today, we may not have menu items tomorrow. It is time to be creative and be aware.

Depending on what you use for your software, this vision is from what we call our Dashboard. This software allows you to see the items that you purchase and visually displays any price increases or decreases. You may find one item is cheaper in 2020 and that is great! But the idea is the software you use can be the secret weapon for getting creative with your menu analysis. There are so many tricks you can use with menu analysis. For example, say your Beef cost has gone up a few dollars per serving but your Chicken is down, you can now offer any Burger as a Chicken sandwich. You just doubled your sandwich section on your menu and are probably making a profit on that sale.  

Everyone is seeing an increase in their costs, but as mentioned earlier not all businesses are the same. The more detailed and data driven we can be, the better our decisions will be. Practice good habits and get into the routine of knowing your operation so you can stay sustainable. You should definitely be reviewing your price changes every week, even if it's just going through your invoices. You  should be aware of what is increasing in price before you place those orders so you can determine if you need to run a special or get creative with the ingredients you have.

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