Menu Engineering: When Is the Right Time to Change Your Menu Price List

The food and beverage (F&B) industry, valued at $19.98 billion USD in the United Arab Emirates in 2024, is known for its dynamic nature, influenced by economic, political, technological, or social factors, among others. This article delves into the relationship between ingredient cost fluctuations and restaurants’ menu price list, exploring their impact on businesses and offering recommendations for managing these fluctuations to optimize menus.

How Is Restaurants’ Profitability Affected by Ingredient Costs

Restaurants’ profitability is intricately linked to ingredient costs, shaping both its composition and pricing. Fluctuations in ingredient costs directly affect production costs, especially when the price list or dish compositions remain unchanged. Tracking ingredient cost changes in real-time is challenging for restaurant owners due to the complex supply chain and rapid market fluctuations influenced by external factors like weather conditions, geopolitical events, and global economic trends.

Moreover, restaurant owners often lack visibility on ingredient price changes because they do not utilize advanced technology that automates and monitors these costs. Not taking measures fast enough for dealing with the ingredient cost fluctuations will affect restaurants’ profitability on both short and long term.

How Polaris ERP Identifies Fluctuations in Ingredient Pricing

Polaris ERP, a restaurant management software, addresses this challenge by providing precise visibility into profits and losses, raw material consumption, analysis of item-wise sales vs. cost, and offering recipe and cost control management for strategic optimization of ingredient costs, and a lot more.

The uniqueness of Polaris ERP lies in its integration with AI, functioning as an instant business advisor. This AI-enabled software identifies specific ingredients with price fluctuations and provides suggestions for menu engineering to manage increased ingredient costs effectively.

How to Optimize the Menu Pricing with Menu Engineering

Menu engineering, a powerful tool in Polaris ERP, analyzes profitability and popularity, sales figures and cost data to instantly offer menu optimization solutions. These solutions may include reducing the use of specific ingredients to create smaller portions, adjusting menu pricing, introducing combo or bundle meals, or changing suppliers.

Reducing portions’ size

One strategy to manage the ingredient cost fluctuations is reducing portions’ size. For instance, if a supplier increases the price of cheese by 2.5%, Polaris ERP guides restaurant owners on reducing the quantity of cheese in various dishes to maintain production costs. However, caution is advised, as such changes may affect the overall dish quality and customer satisfaction.

Increasing prices

Another strategy to cope with rising ingredient costs is to apply a natural price increase to menu items. While such increases might impact customer visit frequency, the ongoing trend of “going out” and the desire for dining experiences currently outweigh concerns about costs, fostering continued clientele.

Changing or negotiating with suppliers

Changing or negotiating with suppliers in response to ingredient cost increases involves a strategic evaluation to ensure optimal operational efficiency. Restaurant owners may explore alternative suppliers offering competitive pricing or negotiate better deals while considering factors like product quality, reliability of deliveries, and the overall impact on menu consistency.

In conclusion, the F&B industry’s dynamic nature, influenced by fluctuating ingredient costs, demands strategic solutions. Polaris ERP, with its AI-driven capabilities and menu engineering tools, helps restaurant owners adapt proactively to changing costs, ensuring profitability and providing an excellent dining experience in an ever-evolving industry.

Find more information about Polaris ERP’s features.

Related posts: