Today, we are concluding our two-part series on how restaurants can become more profitable. We are focusing on how you can identify profitable items and how a POS can do that, as well as tips to repurpose dead inventory.
You know, it is not always about chasing sales and getting new customers. Yes, that is important, but by looking internally at your costs and where you have the best ROI, you can greatly increase your profits. That was the purpose of the first article, so if you missed it, the link is below:
Focus on Profitable Items
It’s important to identify which items generate the most profits for your restaurant. It’s also good to remember that your bar program is the highest profit center for your restaurant. Focus on selling more alcohol at better margins. But if you do not have a bar, then find meals or items you do sell that offer the best profit margin.
Just as a quick refresher, how do you calculate margin? Let’s take you through a little example:
For example, say you sell a dish for $25. To make this dish, it costs you $10. First, find your gross profit, or the difference between the revenue ($25) and the cost ($10).
$25 – $10 = $15 gross profit
To find the margin, divide gross profit by the revenue.
$15 / $25 = 0.60 margin
To make the margin a percentage, multiply the result by 100.
0.60 X 100 = 60% margin
The margin is 60%. That means you keep 60% of your total revenue. You spent the other 40% of your revenue on buying the ingredients and labor.
This is a simplified example, but the principle remains the same.
Use your POS Data
Use your point-of-sale system, like Northstar POS, to track sales to see which items are most popular. Then take a look at your costs of goods to calculate which items generate the most profits. Find ways to promote these items to guests to ensure that more of these high value items are sold.
Here’s some ways to do this:
Leverage distributor deals
Once you’ve identified your highest selling and most profitable items, then the next step is to make these items even more profitable. You can do this by building good relationships with your distributors and getting deals on these items.
Look to buy in bulk. Many distributors run “case drop deals,” which provide significant discounts on bottle cost if you buy multiple cases at once.
How to identify dead inventory
Running inventory monthly is the only way to really know which items are dead stock, or just slow movers. A great way to quickly identify your low value inventory is with an inventory platform like the Northstar POS System.
With this system, you can quickly identify low value inventory by running reports on slow moving stock, identify the shelf life of specific items in your inventory, and look at the frequency of ordering for each item. If you can identify which items do not sell, you can make a concerted effort to sell them. Once dead inventory is sold down, you will know not to order them again. This strategy works for all items you have in inventory, including beer, wine, liquor and food.
How do I repurpose dead inventory?
There are many ways to find new uses for dead stock. Here are a few way:
We hope you have found these tips helpful in making your business more profitable and every dollar spend, the most effective it can be!