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In the Mix

On Mar 30th, 2015

I was always told; an EPOS system is only as good as the reports it produces and you are only as good with what you do with that information.

How many of us ever really look at the till reports or review the information within these reports or even discuss or action the information?

About 12 years ago I remember being involved in doing some work for a motorway service station and reviewing their sales reports. If I recall, they sold something like 397 different items if the café and 90% of their total sales came from the top 10 selling items or dishes i.e. pot of tea, cappuccino, full English breakfast etc. and this is what the management team focussed on; trying to drive a greater profit margin between what they paid for the products and what they sold them for. Simple!

Lately, we spend a lot of time reviewing and actioning the Sales Mix reports and trying to apply the same principles. However, the results at the other end of the table are equally important.

One of my first consultancy projects was through a bank to try and determine why 2 restaurants in Chester, with high levels of sales and a good reputation had such low food gross profit margins and therefore, was putting the business at risk.

We started by looking at the usual benchmarks e.g. wastage, theft, delivery weights and supplier costs. We couldn’t find anything at this stage so we asked for a sales mix report. The best-selling item by far was a Tournedos Rossini (a fillet of beef, on a crouton, topped with a foie gras parfait and served with a Madeira sauce as well as potatoes and vegetables). A hearty meal that was now a signature dish on the menu and extremely popular with the customers.

Obviously, at the time, every time one was sold another £25 went into the till however, breaking down the costs of the dish I recall the profit margin was minimal and therefore, this dish was not adding any cash margin into the business.

Taking the dish off the menu could have been a disaster therefore, we had to work with the chefs and suppliers to try and put a decent margin between cost and selling price however, and more importantly, we had to do this across the menu and then train the team to sell items by profit ranking and guess what? It worked.

On most menus you will have some dishes that yield perhaps 80% gross profit and some that only yield 60% however, through reviewing your reports, actioning the information and training you should be able to achieve your gross profit margin targets. A lot of businesses market a ‘loss leader’ however, I would never advise this as there are literally thousands of smarter ways of enhancing your menu.

We have done the same with our food menus, drinks lists, coffee menu and ‘chippy’ and it works for us. In particular we had issues with our beef, cod, potatoes, coffee beans and real ales.

Your gross profit margin targets are set in order for you to then afford to pay your staff costs, rent, rates and other overheads and to hopefully be left with a profit. If you can enhance your margins by paying particular attention to your sales mix then that incremental profit is all yours.

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