Operations

How restaurants can make margin improvements that improve the bottom line

Photograph: IFMA

As the cost of goods increases and restaurants grapple to grow foot traffic, optimizing profits and margin are at the forefront of most operators’ minds. Raising menu prices is a concern, as that can alienate customers who are in search of value. As a result, businesses are looking for additional opportunities to gain an edge and raise the bottom line.

With multiple challenges in mind, restaurant chains that are part of IFMA’s Foodservice Leadership Councils (FLCs) came together to zero in on this core issue: where are the opportunities to optimize margin?

“Working together to address something as universal as margin optimization really brought out the creativity in our Council,” said Phil Altieri, Vice President of Purchasing at Buffalo Wings and Rings, LLC. “Many of our brands can be viewed as competitors out in the marketplace, but we know that it’s a win for all of us when we take a breath and share valuable insights from our different perspectives.”

The group created a concise, yet comprehensive resource called the Restaurant Optimization Model that outlines actionable strategies and provides a framework for focusing on improving margins and strengthening overall business models. The guide dives deep into eight “dig sites” for chains to consider, ranging from supply chain to marketing to labor efficiencies and supplier collaboration.

These “dig sites” also include ideas such as renegotiating contracts to longer terms and to include regional pricing; reengineering menus to reduce SKUs and utilize items with longer shelf-life; focusing more on building operational efficiencies through adding more pre-prepped products to recipes; and increasing opportunities for consumers to use mobile/self-ordering options.

A focus on marketing efforts can also improve the bottom line. Consider:

•       Optimizing menu placement to maximize sales of the most profitable items.

•       Making the most of loyalty programs—personalize promotions.

•       Using LTOs and seasonal promotions (they work!) to build a profitable mix.

Don’t forget to address changes that improve team performance, too. Share labor between the back- and front-of-the-house through cross-training, shift prep labor to less busy times of the day and get software to help with scheduling shift coverage.

At IFMA’s Chain Operators EXchange (COEX) conference in March 2024, three operators representing large- and medium-sized chains joined a cross-functional panel to share how their organizations are focused on optimizing margin. The desire to meet ever-changing consumer demands was a key thread in the conversation, whether through R&D or marketing initiatives.

“We know that value and discounts can be real drivers,” said Jodie Conrad, Chief Marketing Officer at Donatos Pizza. “We're using our database to test ‘smart offers’ targeting individuals and we’re always asking, ‘What motivates this particular consumer?’”

Consumers are growing weary—and wary—of menu prices that keep going up and up. “Everything cannot involve menu-price increases,” said Aaron Weedy, Chief Financial Officer of Ledo Pizza and Chair of the IFMA Restaurant FLC. “Item placement on a menu can improve sales of products that are more profitable. Simplifying recipes and the pantry can also contribute significantly. If we keep uncovering nickels and quarters, we can end up with a big return.”

The Restaurant Margin Optimization Model is available free of charge to IFMA members and is one of five resources recently developed by the IFMA Foodservice Leadership Councils. For more information and to get involved with IFMA, click here.

This post is sponsored by IFMA

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