By Anna Skyttä
Profitability is a precondition for operations and continuity regardless of the industry you are in. At a minimum, a profitable operation ensures that you can cover costs, and pay for your employees. Profitability that rises above the minimum level enables you to improve your operation through investments. Related to restaurant or food service operations, external factors influencing profitability often come up. Such as costs for the property, costs related to your employees, taxation, and competition, to name a few.
You cannot deny the influence of external factors. Still there are many factors that are within the operator’s scope of influence. The right sized margin enables you to cover necessary costs, and by minimizing waste you can make savings. And you shouldn’t have too much of ingredients lying in your inventory, as it ties up your capital. There are a lot of details related to all of these, which enable you to fine tune profitability and make it better. And as we know, small streams have their own significance in the big picture.
Margin Calculation Forms The Base For Profitable Operations
Margin is what is left in between the sales price and the costs. With profitability in mind, you should always define a target level for the margin. Often you define the target margin in percentage. Some times it might make more sense to define it in dollars.
You are often forced to set the sales price following the market situation or the competitors’ pricing. In order to reach your target margin the costs should not go over a certain price point. If you cannot reach the target margin with the current costs and you cannot raise the sales price, you need to find out if you can reduce costs in some way. Maybe you could change some ingredient or supplier into another, for example. If you are not forced to set the sales price into a certain level, you can calculate it based on your costs and the target margin. So depending on the type of operation or the competition, you can look at the margin calculation from different perspectives.
The margin calculation is basically quite simple mathematics. Simple can still become complex or at least challenging when there’s a lot of information in the background. A kitchen system will help you with this, as it calculates costs and margins for recipes, portions or whole menus automatically and accurately. With the system it is also easy to experiment how different sales prices effect on the margin, or how different sized margins effect on the sales price.
Profitability Through Optimizing Menu Items And Portion Sizes
Food that your customer leaves uneaten on the plate ends up in waste. This waste equals to ingredients, that you have prepared for nothing and tossed away in the end. However, these ingredients have already created costs and weakened your margin. So food waste coming from your customers’ plates eats up your profitability in addition to putting strain on the environment.
In order to reduce food waste from leftovers you should look into your menu items, as well as the portion sizes. Is there some part of the dish that is left on the plate more often than others? If your customers don’t touch it at all, you might consider replacing it with something else or leave it out altogether. If it is left uneaten partly, you might reduce the amount of it in the portion. In a service line operation the previously mentioned are similarly valid for reducing waste from the service line, and partly for reducing leftovers on the plates, as well. For reducing leftovers on the plates in a service line setting, reminding the customers to ’take only what you can eat’ is important, as well.
When you have your recipes and your menu items in a kitchen system, it is easy to make changes to them. When you change the portion size, the system automatically calculates ingredients, costs and margins according to the new portion size. If you want to experiment a menu item or a recipe with a modified content, you can copy the original one as a base for the new version. This makes it easy to create a new version, and the original will still be available in the system, as well.
Sales Forecast To Promote Profitability
When you are able to forecast sales as close as possible to the actual sales, you won’t be ordering too much of ingredients or preparing too much of food. The first mentioned will help you to reduce wastage in the inventory, and the latter wastage from the leftovers. Sales data from the past is often useful when forecasting future sales. When you have that data in your kitchen system, you can easily utilize it for planning. In JAMIX Kitchen Intelligence System you can easily utilize sales data from the past directly as the production quantities on the upcoming menu.
Despite precise and accurate forecasts, every now and then you experience situations, where previously made plans are not valid anymore. With regards profitability, especially a need to downsize your forecast might lead to excessive amounts of ingredients ordered or excessive amounts of food prepared. In JAMIX System you can easily make changes to portion amounts even at the last minute. The system will automatically calculate the need for ingredients according to the new portion amount. If you made the changes before ordering ingredients, you will be able to order the right amount of them. If the need for changes turns up just before production, you can easily adjust the production quantities with the system.
Drive Profitability By Taking Control Of Your Food Inventory
When you are able to keep the quantity of the food items in the inventory at a level corresponding to your need, there won’t be excessive capital tied up in the inventory. You could utilize that capital for something that develops your business. When the inventory balance is at an appropriate level you shouldn’t be experiencing problems coming from outdated items. JAMIX Kitchen Intelligence System automatically calculates the need for ingredients based on the portion sizes and the portion quantities on you menu. You can use the shopping list directly as a base for you orders in the system. This makes it easy to order ingredients just according to your need.
The system helps you to stay up-to-date with the food items you have in the inventory. When you register deliveries, as well as withdrawals in the system, you will have the real-time inventory balance right on your screen. If you have several storage locations, the benefit of the system is emphasized even more. In addition to registering withdrawals related to production, it is important to register wastage that originates in the inventory. Waste can be generated for many different reasons. When you register those reasons in the system, it is easier to get a grip of the big picture. Monitoring waste coming from the inventory enables you to set targets for reducing wastage. And less wastage drives you to better profitability.
A Kitchen System Increases Efficiency Which Leads To Improved Profitability
A kitchen system is a great tool for managing the previously mentioned things, which already improve profitability as such. Utilizing systems and technology comprehensively in kitchen operations increases efficiency. In addition to the earlier mentioned costs related to ingredients and wastage, technology brings savings related to your staff. With the help of a system, you can perform many tasks in the kitchen simply faster, and partly even automatically. This reduces the need for staff related to those tasks. The system also reduces the amount of possible human errors. This in its part enables your operation to run more fluently.
In the labor intensive food service industry you should utilize the possibilities of technology to the fullest. In the kitchen there are still a lot of things to do, which systems or equipment cannot handle. If you are able to delegate part of your work to technology, you will have more time for the tasks which it cannot do for you … as decide, which means you want to implement in your restaurant in order to improve profitability.