Enhancing Profitability in a Full-Service Mexican Food Chain
Background
A large-format, full-service Mexican food chain with 5 locations in the Southwest U.S., was experiencing a paradox. While the chain boasted some of the highest revenues expected for its segment, its profitability was significantly low in comparison. High food and labor costs were undermining financial performance, and the brand had never utilized menu engineering to address these issues. To turn the situation around, they decided to implement the Menü Engineer application, team, and service.
Objectives
The primary objectives for the initiative were:
Increase Profitability: Achieve substantial improvements in profitability measured in basis points.
Reduce Food and Labor Costs: Identify and address the factors contributing to high food costs and labor expenses.
Menu Optimization: Conduct a thorough menu analysis to remove unprofitable items and optimize pricing strategies.
Streamline Alcohol Pricing: Create a consistent and trackable plan for alcohol pricing to improve margins.
Implementation
Menu Analysis: Utilizing the Menü Engineer application, the management team reviewed an extensive analysis of menu items. Several “dogs” on the menu were identified—items that were not selling well and were contributing to low profitability. They organized and bundled menu offerings for maximum customer satisfaction.
Labor Cost Review: The application revealed high back-of-house (BOH) labor costs, prompting the team to evaluate staffing levels and operational efficiencies in the kitchen.
Alcohol Margin Consistency: The team discovered inconsistent margins on beer, wine, and liquor. They implemented a standardized pricing strategy to ensure consistent profitability across alcoholic beverages.
Discount Strategy Reevaluation: The analysis showed that comps within discounts were twice the national average. The team revised their discount strategy, reducing the comps and improving overall profitability.
Results
The turnaround initiative yielded impressive outcomes:
Profitability Increase: The chain achieved an additional combined profit of 413 basis points annually, significantly enhancing financial health.
Reduced Menu: The streamlined menu not only simplified operations but also increased the contribution margin per item, improving overall profitability.
Consistent Alcohol Pricing: A consistent and trackable plan for alcohol pricing was established, contributing to higher margins.
Enhancing Profitability in a Full-Service Mexican Food Chain
Background
A large-format, full-service Mexican food chain with 5 locations in the Southwest U.S., was experiencing a paradox. While the chain boasted some of the highest revenues expected for its segment, its profitability was significantly low in comparison. High food and labor costs were undermining financial performance, and the brand had never utilized menu engineering to address these issues. To turn the situation around, they decided to implement the Menü Engineer application, team, and service.
Objectives
The primary objectives for the initiative were:
Increase Profitability: Achieve substantial improvements in profitability measured in basis points.
Reduce Food and Labor Costs: Identify and address the factors contributing to high food costs and labor expenses.
Menu Optimization: Conduct a thorough menu analysis to remove unprofitable items and optimize pricing strategies.
Streamline Alcohol Pricing: Create a consistent and trackable plan for alcohol pricing to improve margins.
Implementation
Menu Analysis: Utilizing the Menü Engineer application, the management team reviewed an extensive analysis of menu items. Several “dogs” on the menu were identified—items that were not selling well and were contributing to low profitability. They organized and bundled menu offerings for maximum customer satisfaction.
Labor Cost Review: The application revealed high back-of-house (BOH) labor costs, prompting the team to evaluate staffing levels and operational efficiencies in the kitchen.
Alcohol Margin Consistency: The team discovered inconsistent margins on beer, wine, and liquor. They implemented a standardized pricing strategy to ensure consistent profitability across alcoholic beverages.
Discount Strategy Reevaluation: The analysis showed that comps within discounts were twice the national average. The team revised their discount strategy, reducing the comps and improving overall profitability.
Results
The turnaround initiative yielded impressive outcomes:
Profitability Increase: The chain achieved an additional combined profit of 413 basis points annually, significantly enhancing financial health.
Reduced Menu: The streamlined menu not only simplified operations but also increased the contribution margin per item, improving overall profitability.
Consistent Alcohol Pricing: A consistent and trackable plan for alcohol pricing was established, contributing to higher margins.
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