Recipe Management for Profit Mastery

Recipes can be more than just a set of instructions – when integrated into an inventory and recipe management system, they become a powerful tool for maximizing profits. The most successful restaurant teams analyze recipe item costs and margins, evaluating each item’s performance based on its profit contribution.

The Foundation: Recipe Item Profitability

Creating recipes for your prepared and menu items is where margin optimization begins. Once you enter ingredients and portions, COGS-Well automatically calculates the cost for each recipe item. Unlike a spreadsheet, the system continuously updates ingredient costs as vendor prices change – ensuring your recipe costs are always current.

For menu items, COGS-Well calculates the cost as a percentage of the selling price, along with the profit (price minus cost). You can also enter a target cost %, and COGS-Well will suggest the appropriate selling price – or, if you’re testing a price, it will calculate the cost % and profit for that option.

For example, if a Cheeseburger costs $4.00 to make and your current price is $12.50, COGS-Well will calculate a food cost of 32% ($4.00 divided by $12.50) and a profit of $8.50 ($12.50 minus $4.00). If your target food cost is 25%, COGS-Well will suggest a price of $16.00.

If increasing the price of a menu item isn’t an option, you can model the impact of substituting ingredients or adjusting portion sizes. For example, swapping margarine for butter or using one less strip of bacon. In short, without cost and price modeling focused on profitability, achieving consistent margins is very difficult.

Ingredient costs are constantly changing, so it’s important to continually track menu item costs and profitability.  COGS-Well provides a Menu Item Cost Trends chart to help monitor these changes. The cost associated with each ingredient is isolated, and you can drill down on an ingredient to see its cost trend in more detail.

“When it’s time to cost out new menu items, COGS-Well makes this seamless. We save a lot of time with costing exercises because back in the day, we just did everything by hand over and over again.” – Peyton Strait, Director of Procurement, Lure Fish House.

“We use the Item Cost Trends chart in COGS-Well to analyze our recipes. We can look at the trends for the overall recipe item, as well as for each ingredient.” – Noah Kopito, Director of Kitchen Operations, All Parts Considered (Mamahuhu) 

Menu Analytics: Turning Data into Decisions

COGS-Well takes recipe costing and modeling to the next level by interfacing directly with your Point of Sale (POS) system. By combining your sales data with your recipes, we provide Menu Analytics – the ability to evaluate each menu item’s performance based on its total contribution to profit.

The Profit from Sales report shows your total profit contribution from sales and breaks down how much each menu item contributes. The calculation is based on the quantity sold and the cost of each item. For example, if a cheeseburger has a profit margin of $8.50 and sells 100 times, it contributes $850 to total profits.

COGS-Well also includes a Menu Engineering report as part of its menu analytics tools. Menu Engineering combines the profitability of a menu item with its popularity to rank performance relative to your other items. For example, a “Star” is both popular and profitable. 

COGS-Well’s ranking system makes it easy to evaluate menu item performance. A “Workhorse” is high in popularity but low in profitability, so you may want to find ways to improve its profitability. A “Challenge” is the opposite – high in profitability but low in popularity. And a “Dog” is neither popular nor profitable, so you may want to consider removing it from the menu.

“Since day one, we have been using the menu engineering reports on a quarterly basis. Before COG-Well, we had to handle this internally with a spreadsheet we created, but there was a lot of labor required to maintain it, and it was prone to errors.” - Emir Aydin, Director of Operations, Impact Kitchen

Key Takeaways

Understanding the cost and profitability of your menu items is essential. COGS-Well provides restaurants with the recipe management tools needed to improve margins and maximize performance, from automated recipe modeling to menu analytics.