Nation’s Restaurant News: Restaurants Re-Work the Food-Cost Equation

For the past few years, brands operating in the restaurant segment of the franchising industry have been struggling with rising food prices. However, now that those prices have stabilized, they’re facing another financial dilemma. As a recent article in Nation’s Restaurant News notes, the cost of labor and occupancy have risen.

In an interview with Nation’s Restaurant News, Kelley Jones, President and COO of Hospitality Alliance, said, “Food cost used to be your highest cost. Now it’s occupancy cost, followed by labor cost, followed by food cost.”

These rising prices mean that there’s more for restaurant franchises to consider when determining the cost of menu items. Instead of tracking the percentage of food cost that makes up a menu item’s final price, brands now need to keep an eye on the total overall profit that each dish makes when the food cost percentage is taken out. That then means that restaurant operators need to be vigorously tracking the cost of everything that leaves the kitchen, including the cost of washing dishes, plating, and clearing tables.

It’s also why boosting value perception, eliminating waste and embracing helpful technology trends are more important decisions than ever before.