gross margin model

How to optimise your gross margin?

10/06/2020

We all have products on our menus that sell better than others and some products with great margins and others with tighter margins. Optimising your menu margins can help you add to your bottom-line. Our Gross Margin Calculator can help you identify products to keep on your menu to make it more cost-efficient. Moreover, increase your sales and keep consistent margins.

Quick reminder

Cost Price: The cost price represents the sum of the costs incurred for the production and distribution of a good or service.
Gross Margin: The gross margin represents how much margin is retained once the cost of goods is taken into account. Margin Rate: The margin rate refers to the percentage gain or loss of a business for a product or service, relative to its cost of purchase or production. Margin coefficient: The margin coefficient gives a clear idea of ​​the relationship between the cost price and the selling price

➡️Saving money on menu cost 💰

Having healthy margins are vital to the success of your business and keeping people employed during recovery. The Margin calculator will help your team by simplifying the maths and enabling them to understand exact margins on each menu item. From here you can optimise your menus by highlighting the most profitable dishes on your menu and either increasing the price or removing the least profitable dishes.

Marc, Brigad's CFO has modelled an easy to use tool to calculate your margins helping your teams to keep a close eye on the costs of their delicious creations.

ACCESS THE GROSS MARGIN CALCULATOR

➡️Influencing the margin of your products

What products should you prioritise on your menu? Once you’ve identified your margins and prioritised selling the high margin items and consider raising the prices or eliminating the low margin dishes there are a few other things you can do to impact the cost.

  • Check with your suppliers if you can negotiate the cost of products (while bearing in mind that they might be struggling too)
  • Analyse the number of ingredients in and complexity (man hours + skill) of your recipes: are your recipes too complicated taking up too much high skilled labour time? Simplicity often wins the day and the margin!
  • Think about the selling prices - are they too low? What products can I sell more of and how to highlight them on your menus?

➡️Identifying ways to increase sales and volumes 📈

Once you have decided on your menus and products, you can finally think about ways to sell them and increase your margins.

  • Brief your team on which dishes they need to upsell to customers and which ones can be easily sold together.
  • Define products whose prices can be increased and those that need to be handled more delicately (best-sellers products and more specific products)

Our rota tool 👌

Once you have done the Gross Margin Analysis, made some optimisations in your menus and selling methods, your profitability should feel better :)

And regarding the financial results of your business, the second expenditure item you should look at is the staff cost. To improve yourself in this area, check out our advice on staff management and try our rota tool