Ryan Williams
Jeremy Julian

Pt. 2 – Become More Profitable: Focus on the Right Items & Repurpose Dead Inventory

September 26, 2018

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:

  • Put call outs for these items on your menu.
  • Have servers promote them at the table.
  • Highlight these items on social media.

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:

 

  • Food: like we discussed earlier, you can:
    • Challenge your chef and staff to create a new dish using those slow-moving ingredients.
    • Put call outs for these items on your menu.
    • Have servers promote them at the table.
    • Highlight these items on social media.

 

  • Liquor: Create cocktails with slow moving liquors to find a new way to sell them. Promote these cocktails as specials and have them highlighted by your servers at tables.

 

  • Beer: Run beer specials or put slow moving items on your happy hour menus. It’s better to sell an item for a lower profit than be stuck with it in your liquor room.

 

  • Wine: Run specials. Make sangria with it. Use sparkling wines in cocktails and for mimosas. Just get creative.

 

We hope you have found these tips helpful in making your business more profitable and every dollar spend, the most effective it can be!

 

Curious about how Custom Business Solutions can help your company? Check out their Northstar POS system and its capabilities to power and improve your restaurant!

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