Cost effective menu planning

- Last updated on GMT

Related tags: Cost, Profit

A decent food offering is now essential for pubs, as people turn to eating out more than they have done ever before. So make sure its profitable......

A decent food offering is now essential for pubs, as people turn to eating out more than they have done ever before. So make sure its profitable... Food is now an essential part of the mix for many, if not most pubs. People generally eat out more often and in a wider range of venues that they did a decade ago. For pubs, offering food is a useful way if generating extra trade at less busy times, eg afternoons and early evenings.

Deciding what type of menu to offer depends on your estimate of the demand, as well as the sort of dishes which will appeal to your target customers.

At the outset, it is important to be confident that what you are planning to sell is going to be profitable. This is where knowing the Gross Profit, often shortened to GP, is vital. The GP is the difference between the price you pay for a product, and the price you sell it to your customers, and is usually expressed as a percentage of the selling price.

The GP figure does not include VAT, nor does it take into account the other costs associated with serving a product - everything from the electricity to run the fridge and the microwave to the wage costs of staff to prepare and serve it.

This is one reason why a pub in a major city centre is likely to have a higher GP than a suburban local. Although both pubs may pay the same for a product, the city centre pub's costs for wages, rent, etc are higher. In some parts of the country the standard GP can be as low as 40 per cent, while it can rise to 60 per cent or more in outlets with higher running costs.

Food also tends to have higher costs associated with it than drinks. Even relatively simple dishes, such as a freshly-made sandwich or a deep fried portion of frozen chips, require considerably more time than it takes to pour a pint. For this reason, pubs should aim for a GP of 55 per cent or higher on food.

Prawn Cocktail

To get it down to basics, let's look at a dish which appears on many pub menus, the prawn cocktail. While some may say that this is old hat, it is always a strong seller, simple to make, and a great classic. The recipe here can be varied by changing the garnish but is based on the key ingredients of the prawns, lettuce and cocktail sauce.

Ingredients:

  • 2 leaves of Cos or Iceburg lettuce
  • 80-100g prawns
  • 1 large tbsp (20g) cocktail sauce
  • 1 wedge of lemon
  • 1 slice of brown bread
  • 5g butter
  • pinch of paprika

Method:

Finely shred the lettuce and place it in the centre of a bowl.

Carefully arrange prawns on top of the lettuce

Spoon over the sauce and sprinkle with a pinch of paprika

Garnish with a lemon wedge and serve with brown bread and butter.

Note: There are plenty of packaged cocktail sauces available, or make your own using 70 per cent mayonnaise mixed with 30 per cent tomato ketchup, a dash of Tabasco and a few drops of lemon juice.

How much profit will I make from this dish?

Time to get out your calculator. Most of us hope we left maths behind at school, but managing the profitability of your food, expressed as gross profit percentage, is easy to work out with a bit of practice, and will become a vital tool. The amount of profit that you can make will be determined by:

  • How much the dish will cost you to prepare
  • How much you can sell it for.

The selling price is by and large up to you and is determined by what your customers will pay and your competitors are charging. It is well worth doing some market research on this, as the decisions you make will affect the whole profitability of your business.

The cost price

Start with working out the cost price of the dish. Check the price of the ingredients from the receipts and invoices, which should always be kept for reference.

Work out how much of each product you used in the recipe - e.g. If the lettuce cost you £1.50, and each lettuce has 10 usable leaves, then the lettuce cost for the recipe is £0.30.

Be very careful here to work out the true cost.

For example, prawns often come frozen in 450g bags. We know that the recipe uses 80-100g, so there should be four or five portions to a bag.

However once the prawns are defrosted there may well be less, so the price of each portion will go up.

Work out the true cost of each product in the recipe, add them together and include an additional 10p for wastage, and this will give you the true cost price.

The true selling price

The price that you have on your menu includes VAT, and as a result is not the true amount that you will receive. To deduct the VAT, divide by 1.175. As an example, on a £6.50 portion of chicken curry, the price after VAT is £6.50 divided by 1.175 = £5.91, which is the true selling price.

Calculating the profit

Once you know the cost price and the true selling price you can calculate the profit. The cash profit will obviously be the true selling price minus the cost. To express this as a GP percentage, follow this formula:

  • Divide the cost price by the true selling price
  • Multiply the result by 100
  • Subtract the second result from 100.

Example

The ingredients for a dish cost £1.50, and your menu price is £6.95. To calculate the percentage GP:

  • Calculate the true selling price: 6.95 divided by 1.175 = 5.91
  • Then divide 1.50 (the cost price) by 5.91 (the true selling price) = 0.2538
  • Multiply 0.2538 by 100 = 25.38
  • Subtract 25.38 from 100 = 74.62

Rounded up to the nearest whole number, GP on the dish is 75 per cent

Creating a pub menu from scratch is a daunting task, but there is help at hand.

Information for this feature was supplied by menu development consultants Food Solutions and wholesaler 3663.

Contacts:

  • Food Solutions:​ 01225 852908
  • 3663:​ 0870 3663 000

Related topics: News

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