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Wednesday, May 30, 2007

Safe Portion Control Solutions

I guess everyone is aware of the smaller coffee cans now for sale in the supermarkets. The traditional one pound coffee can has shrunk to as little as 11 ounces for certain brands. Each item sold has a little shelf tag with the cost per pound so savvy shoppers can see the true cost per pound differential. The questions for cutting your portion size involve: when? (if at all); how much?; and, what are the other alternatives?

If you are worried about both a higher food cost percentage and the local restaurant competition, I can recommend a few safe portion control solutions. The magnitude of the portion size reduction is key. Not too many people noticed when the cans of coffee stayed in the 15 to 16 ounce zone. When the coffee cans went to 14 ounces, the media picked up on the change.

Today, there is some concern in the marketplace about portion size. The recent press regarding super burger sizes at some of the top QSR groups is negative. Trans fats are out. So is this a good time to reduce the portion size of your top selling item by one sixteenth? That's 6.25% less cost for the same sales price. If your food cost was 35% before hand, you'd have a new 32.8% projected figure. Maybe it is a good time but you may want to take a few extra steps to insure success.

If many of your patrons are currently leaving food on their plate when the busboy comes around, they will most likely ignore this incremental move. An important point here involves frequency. These moves should be made rarely and never twice in a two year period.

It is always possible to offer more than one size or cut for a center of the plate item. Restaurants have traditionally offered King and Queen sized steaks and have offered early bird specials with smaller portions. Terms like petite and super-size are now part of the restaurant customer's jargon. If you are creative with your selling prices for these alternative portion sizes, it is possible to modify customer behavior and point them to higher margin selections.

A price increase for a popular menu item is a decision which many fear. Often, the popular items are the reason customers come to your place of business. These items tend to be less price sensitive than unpopular options. Extreme care should be taken in a highly competitive market with price the number one customer decision variable. Price increases should be done annually or semi-annually on a scheduled basis just before a busy period if possible. Generally, the marketplace tends to expect price increases when the press reports significant inflation. The surging prices for corn and gasoline provide cover this year.

Sunday, May 20, 2007

More Portion Options

In last week's post Dealing With A Portion Problem , we focused on a chronic over sized steak which had been offered to guests over time. This entree was highly popular (one third of customers make this menu choice). I suggested any reversion back to the standard size should take place slowly.

Some may want to try a different approach.

Rather than focusing on the over sized portion, you could consider offering an even larger portion menu choice. In our example, we were offering a half pound steak for $25. The actual serving size of 2/3 of a pound exceeded our standard by a wide margin. We could offer a full one pound steak for two for $45. The cost of the steak per trimmed pound is $15 in our example. The new steak for two would have a center of the plate cost of 33.33%. Our smaller size is producing a 40% center of the plate cost.

If the clients take to the new menu item, we might start reducing the smaller steak's portion size more aggressively (don't go too fast). Since the full one pound choice offers cover, the reduction operation won't have the same exposure. Remember, our example involved an entree which was highly popular. You are trying to get the same gross margin for two people while lowering your cost of sales percentage.

Your dessert sales may rise since two people will consume the half pound portion as originally budgeted. Total gross margin will increase if this happens. Hopefully, your desserts are priced to yield an excellent cost of goods sold as well.

Thursday, May 10, 2007

Dealing With A Portion Problem

Let's say you install a very tight portion control system with a POS feed, a sophisticated recipe model, weekly inventories and a complete purchasing history. After three weeks of fine tuning the recipe model, you realize your kitchen staff were given the wrong portion size for your most popular menu item.

Roughly one third of your customers choose this item as their entree. This entree uses a pricey meat which costs $15 per trimmed pound. Our current portion size is two thirds of a pound instead of the standard one half pound portion. We charge $25 per entree. We serve 120,000 annual covers. The $2.50 per cover variance has an annual unfavorable impact of $100,000. Should you immediately require the kitchen to cut the portion to the standard?

There are many issues involved in this decision. Obviously, your frequent diners have become accustomed to a more generous portion size. It is very likely they would perceive the difference if you reduced the portion at once. Local competition is a key factor. Option one is to do nothing at all.

I would begin to correct the problem slowly. Make a new standard of 10 ounces. This is a small difference and you'll get 16 portions from 10 pounds trimmed. Currently, we use an extra 2/3 of a pound. You'll save this $10 for each 16 portions ($25,000 per year). Track the new standard closely and keep new menu price increases in line with your past policies. Always check local competition carefully before changing the price on a key item.

When the portion size is unchanged on a star menu item, price increases are less likely to impact customer perception. I would avoid decreasing the size and increasing the menu price simultaneously. Wait until your normal menu revision month to raise the price.

Thursday, May 03, 2007

More on Take-Out and Delivery Issue

I received an email from Wayne regarding my post on Take-Out service. He has a great point regarding delivery costs. When the food is not picked up by the customer, delivery costs (which can be substantial) need to added to my break even list.

I have a quick question for you after reading your
monthly blog. I know you mentioned "as long as your take-out sales
cover the costs of food, production, packaging and order costs, your
overall profit will improve" but I question when one uses a delivery
service which charges 30% for pick-up and delivery and you add costs
(food & packaging) and labor charges to possibly break even.

How would your overall profit increase unless those
individuals return to dine in your restaurant where the profitability is
possibly higher due to dessert and beverage sales or those individuals
by word of mouth recommend your restaurant?

Thanks for your time.


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