A smart strategy for managing food costs

Sponsored by Tyson Foodservice Teams

If only excellent food were a signifier of a profitable menu --- unfortunately, it’s simply not enough, which explains why more than half the restaurants that open fail within three years.

With profit margins so razor thin in the foodservice industry, it’s vital that great menu items also generate a solid profit. According to the National Restaurant Association, the issue is not how high or low food costs are, “but rather how many gross profit dollars your menu items generate.”

This idea suggests that you should not examine your menu merely as a whole, but also as a sum of its parts. Each menu item is a profit center that can become more powerful when one or more of its ingredients are shared with other menu items. A single, versatile ingredient can customize a particular menu item, and help keep your SKUs in check.

One of the fastest-growing areas in foodservice is the fast casual pizza segment. It’s exploding because it takes the concept of shared ingredients to the highest level. Using the build-your-own concept pioneered by Chipotle Mexican Grill, fast casual pizza restaurants allow customers to select from a carefully refined list of ingredients.

One of the most successful brands from this category is Seattle-based MOD Pizza. Unlike many concepts in this category which offer a side salad, MOD took the build-your-own idea to another level with build-your-own salad. So the chicken, salami, sausage, olives, roasted peppers and other ingredients that adorn pizzas can also make a simple salad extraordinary.

Another clever MOD idea was to offer a create-your-own pizza salad. Customers can choose to eat a salad of their own creation on an asiago pizza crust. There are no special ingredients only for pizzas or salads at MOD. They are all available for use across the menu, and the tactic has proven to be very profitable.

The birth of a menu

Back in 2012, Starbucks realized that at least half of its customers were arriving after 11 a.m., so it decided to include a “warm lunch” as part of its offerings. Known as a coffee company, Starbucks played it safe and smart by creating a menu which features a number of chicken-based sandwiches. According to research firm Datassential, 95.5 percent of all restaurants offer chicken, making it one of America’s most popular ingredients.

So, on its menu, the coffee giant offers 14 sandwiches, with six of them featuring chicken. Standouts include an Ancho-Chipotle Chicken Panini and a Chicken Artichoke on Ancient Grain Flatbread. The chain offers only one salad bowl and it includes — you guessed it — chicken. This spring Starbucks is expected to add soup to its menu, and an early rollout in Seattle featured a chicken noodle soup. That’s how you cross-utilize menu items to create a variety of exciting offerings.

On the university level, Tom Allen, chef de cuisine of Vanderbilt Campus Dining in Nashville, Tennessee, uses a versatile cut of beef called chuck flap for several menu items. He slowly braises it for pot roast and serves it as a fork-tender short rib. Allen also cuts it into smaller pieces for a rich stew. An inexpensive, underutilized cut of beef has proven to be both versatile and profitable.

The Ohio State University’s Wexner Medical Center produces 3.5 million meals a year with limited storage space, “so we need to create multiple products from one SKU,” says Drew Patterson, culinary director of nutrition services. For its several foodservice outlets, a 400-pound pork shoulder is cook-chilled with a neutral seasoning base so it can be used in retail, patient foods, catering and other areas.

“We use that product for barbecue pork sandwiches, pulled pork, Caribbean pork tacos and much more,” he says. “It’s one product that we finish at various points of service.” 

Patterson adds that all soups and sauces have been cooked for full flavor, but with low sodium so they can be used in all of its retail outlets as well as for feeding of patients. “Our latest and greatest new idea is to create smoothie bases, which are all made in house.” Flavors can then be mixed and matched at the various service points to create signature drinks, he says. 

Cross-utilizing ingredients is top of mind when creating new menu items, says Howard Katz, president of Wildfire and Big Bowl, two Lettuce Entertain You Enterprises restaurant concepts. 

“When we’re putting a new special on a menu, we first look at how many ingredients we can use that are already on hand,” he says. “But to create excitement, we’ll also use some new ingredients. It’s a balancing act of keeping costs down and creating excitement with a new menu item.” 

For example, a decision was made recently to offer red grouper as a special menu item. To take it to the next level, crab meat was used to create an Oscar-style dish. The idea to add crab meat was an easy one, says Katz, noting that crab cakes have been a long-standing menu favorite.

“To keep costs in line when creating a new menu item, you have to be careful,” he says. “Every new ingredient and sauce you add contributes to a higher cost and requires a skilled worker to make it happen. Using existing ingredients makes it so much easier.”

In an industry where profit margins are so thin, a smart plan to create any menu item begins with the idea of using as many of the same ingredients as you can across the board. That’s a tip you can take to the bank.