The value of a product mix report
One of the greatest barometers of a how a restaurant’s menu is performing is the product mix report. The product mix report is a great tool to see what products are selling and which products are not. and it offers insight well beyond that. It shows sales, costs (if theoretical food costing is being used), cumulative sales for any product , and also category sales. The product mix report also provides insight into a restaurant business in ways that are often overlooked.
Let’s take a look.
Menu item level profitability
When a restaurant has an inventory and recipe costing system tied into the point-of-sale system, the product mix report will pull in theoretical cost information as well, giving the restaurateur insight into how much money he is making at the item level and on an aggregated basis (a burger, for example, and collectively on all the burgers sold). There are restaurateurs that can spend a lifetime in the business and may never look at menu item profitability on an in-house report.
Imagine if you went to Target (or any other big box retailer) and toured a store with a vice president of operations. Imagine that while on tour, this person was unable to tell you which aisles of the store were the most profitable, or point to specific items that are the most profitable? Of course, this would be something that just wouldn’t happen.
Food cost is always in flux due to seasonality, price changes in raw ingredients and preparation methods. That’s why it’s important to have what’s called a theoretical food cost system. This is based on restaurateurs costing recipes in each restaurant at least once per year.
An inventory and recipe costing system will provide that type of information and can be automated to take in the inputs from new supplier invoices.The result is a report that gives you an idea of how much each menu item brings in profit to the restaurant. Each menu item needs to deliver the profitability needed to run a successful restaurant. Ideally, this item profit, excluding labor expenses, should be between 25 and 30 percent, at most. Beverages of all kinds, especially coffee and adult beverages will typically have a range that starts at half of that.
On the product mix report, this item profitability, or contribution margin, is a number that helps restaurant owners make better decisions in many areas, including menu design, which items to place on special and which items should be re-examined or renegotiated with vendors.
Sales, insights and training
In smaller restaurants with compact menus, a restaurateur may know instinctively what is being sold in their restaurant based on experience and overseeing operations. However, as the menu grows, or likewise, in concepts that can have dozens of menu items and menu variations, this becomes much more difficult. Restaurateurs can use the product mix report to elevate their working knowledge of what is selling and what isn’t.
In addition to that, the product mix report provides a means to catch mistakes and outdated information. As an example, remember that (hypothetical) chicken salad sandwich that was never removed from the POS and now employees are ringing that item up instead of its more expensive replacement? The product mix report serves as a good training tool for restaurant operators and employees because it captures all menu items being rung up. It can also form the basis of that much needed POS cleanup that the restaurant needs.
Additionally, when you review a product mix report, you can spot menu items and their (modifiers) that aren’t selling. This is a way not only to learn which menu items are losers, but to review why. Restaurant owners don’t work on one-dimensional actions in a restaurant. There is a force and reason behind every decision. With a past client, I learned that a certain product of his restaurant wasn’t selling as well as it needed to. The staff recalled a change in the recipe, as well as seasonality, that had caused a downturn in sales. Rather than remove the menu item, management decided to re-engineer this item and set another review period in the future to make a (better) decision.
So, these are three big reasons to review a restaurant product mix report. Try pulling a product mix report today and reviewing the information there. If you have faulty information, it’s probably because of the inputs (set up of menu items, categories, etc.). You can address those today with your team and with an expert. Remember the phrase garbage in, garbage out? If there is enough good information in the POS and it’s sufficiently organized, then take the next step and use the product mix report as a tool to increase your restaurant's sales and profitability.
Need help with your reports and with training? Recipe costing is a great way to get started on better-understanding your profit opportunities. For any of these, reach out today: firstname.lastname@example.org