How Rising Ingredient Prices Affect Your Bottom Line and What You Can Do About It!

ingredient prices

It doesn’t take a rocket scientist to understand that rising ingredient prices eat directly into your profitability, unless you do something about it.  

Restaurants more than ever need to look at their menu’s strategically to manage food costs. Raising the menu price alone will only take you so far and unfortunately won’t win you brownie points with your guests. 

Below are some creative ways that restaurants are dealing with rising ingredient costs to maximize their margins.  

Use “Market Price” on your menu 

Having a set cost for your burger doesn’t give you much wiggle room when the price for beef starts to rise. As prices for poultry, seafood, and even produce fluctuate daily, think about marking your menu with “Market Price”. This will leave you with the flexibility to easily change your selling price as ingredient prices creep up or down. There is even software on the market, like our Food Cost Management software, that will automatically update your menu costs based on the most recent purchase price for those items.  

market price

Many restaurants are also using QR codes or even menu boards now which makes changing your menu price on a day-to-day basis that much simpler!  

Review the performance of your menu. 

Every restaurant has those items that customers absolutely LOVE and the items that get ordered once a year. The goal here is to really limit the items on your menu and focus on those that sell well and bring in the most margin.  Unless you are a takeout Chinese restaurant, there is no reason for pages on pages of dishes ranging from A through Z.  Every item on your menu requires ingredients for that dish to be on hand at any given time. This means that you are spending money on inventory that you aren’t even selling.  

Look into your POS once a week to get a better understanding of what is actually selling. Analyzing sales data and food costs can help your restaurant decide which menu items to really focus on, where to increase prices and which menu items might need to be retired.  

Which dishes take the most labor and cost the most for you to make? Would your customers really miss these items? The goal is to keep your high profit, high popularity dishes and ditch those that are low on both profit and popularity.  

Limit the ingredients you have on hand 

Don’t buy ingredients that are only used for one dish or as garnish. Start thinking of ingredients that could be used for several dishes. You can also think of swapping out ingredients for less costly ones.  This will not only reduce inventory but also cut down on prep time. Chances are you’re running on a skeleton crew so any work you can take off their plate will easily streamline operations.  

Portion Control 

Controlling portions and following recipes is a simple way to cut costs and maintain consistency. When I was younger, I worked at a pizza joint, and the owner told us to put a “handful of mozzarella” on each pizza. Well, let me tell you that my hands, being a 6’2” male, were much larger than Jenny who was a good foot shorter than I. An easy fix to this is to have a recipe for your employees to follow. 4oz of cheese for example, would maintain consistencies no matter who was making the pizza. And if cheese prices go up you simply adjust the recipe! 

There is a myriad of other ways to help battle the rise of ingredient prices. The important take away is not to have a “business as normal” mindset. You need to be proactive and willing to change with the economic climate.  

About Me
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Steve Moody is a Digital Product Marketing Manager at Buyers Edge Platform, and a part-time Ice Cream Connoisseur.

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