Manage COGS without affecting Menu Prices

How to Manage Cost of Goods Sold Without Affecting Menu Prices?

‍

Cost of Goods Sold (COGS) for a restaurant refers to the direct costs of ingredients and supplies used to produce the menu items.

‍

To Calculate COGS:

COGS=Beginning Inventory  inventory left from last month) + Purchases (inventory bought  this month) - Ending Inventory (inventory left at the end of the month)

COGS = Beginning Inventory (inventory left from last month) + Purchases (inventory bought this month) - Ending Inventory (inventory left at the end ofthe month)

COGS=Beginning Inventory (inventory left from last month) + Purchases (inventory bought this month - Ending Inventory (inventory left at the end of the month)

‍

‍

COGS is important because it directly affects your restaurant’s profitability, helping to determine gross profit and guiding pricing and cost control decisions.

6 Short-Term Strategies to Manage Cost of Goods Sold Without Affecting Menu Prices:

• Analyze Menu Performance: Identify the items that perform the best. Focus on promoting high-margin items.
  • Example: If you are selling 5 burgers and discover that Burger X is selling the most, then try to promote that one burger.
• Adjust Portion Sizes: Slightly reduce portion sizes of high-cost items to manage costs without significantly affecting customer satisfaction.
  • Example 1: If you're selling pizzas and the increase in cheese prices is affecting your margin, then reduce its quantity by a very small amount that is affordable and still not noticeable by customers.
  • Example 2: If you cannot afford to reduce the quantity of a particular ingredient, then reduce the second higher-cost item that can be reduced without losing customer satisfaction, like olives.
• Reformulate Recipes: Substitute expensive ingredients with more affordable alternatives where possible without compromising quality.
• Daily Specials: Use daily specials to feature dishes made from ingredients that are currently less expensive or surplus.
• Reduce Waste: Implement strict inventory management and portion control to minimize waste.
• Optimize Labour: Provide your staff with cross-sectional training. Hire high-schoolers or junior staff for front-of-house (FOH) positions, as they typically have a lower minimum wage. Schedule staff to match customer demand, reducing labour costs during slow periods.