Lance's thoughts!

Cost vs Contribution

Long has there been an argument with which is more important, the cost of a menu item relative to its sale price or the dollar value that's leftover after the item cost.

Well, they are both important but both very different.

You need to watch your costs, and you need to make sure that your menu is producing enough money from sales to cover all of the other variable expenses.  

If you sell a prime rib sandwich for $20 @ 25% cost, you have $15 leftover.

However, if you sell a prime rib dinner for $30 @ 35% cost, you have $19.5 leftover.

Just because the prime rib dinner has a higher food cost still makes it a profitable menu item.

So how much should you invest in your marketing?

Well, it's not the cost of the marketing; it's the contribution.

Spending $100 on marketing that brings in 5 new guests is a lower cost than $1000 on marketing that brings in 100 new guests, but your marketing dollar contribution has doubled.

A marketing system is an investment into your restaurant's future, do it well, and it will pay dividends for years to come.

Tuesday, January 26, 2021