Menu decisions: Percent don’t pay rent

Is there a pill for what ails you, or a concrete “food cost” formula? No. So don’t make hasty decisions when thinking about dumping a menu item.

I had someone ask me a question about ideal food costs the other day, and I went into my usual frothing tantrum. After three decades of questions like that, you’d think that I’d have learned how to give a calm, professorial response—one that does not, for instance, involve involuntary twitching or the spontaneous growth of talons and fur. I’m still working on it.

It seems that everyone wants a pill for what ails them, and in a grim hospitality market, the pill is frequently a formula. Rent should be 5 to 7 percent of gross. Food costs should be 30. Labor should be 29. String enough of these together and you make a rosary that can be used for comfort in a time of stress, and you can repeat it to yourself in the quiet hour in which you Z-out the register.

This tendency betrays a fundamental confusion about the nature of the Almighty. The repetition of certain phrases to induce a meditative trance has a long history, and its mechanism is the same across many traditions: the words lose their earthly meaning and become a vehicle for the spirit to rise. The phrase “Food Cost,” I would suggest, is an inelegant vehicle for transcendence.

It is also a phrase which ought to keep meaning something, so the idea of turning it into a mantra or a minor deity worries me. We’ve all met people whose devotion to a target number has made them slightly irrational—they’ll dump an item for coming in three points over, whether or not it has a labor impact or makes a huge contribution to margin. In the cult of the Almighty Dollar, this is idolatry. Only profit is worthy of worship, not its numerical acolytes. Would you really rather have an $8 pasta with a $2 food cost than a $35 lobster with a $15 food cost? One has a great percentage, and the other puts twenty bucks in your pocket as opposed to six.

Percent don’t pay rent. Similarly, you may have decided to make your smoked salmon and goat cheese ravioli by hand, thereby achieving a tolerable food cost at the price of astronomical labor. You should probably have done a more critical analysis of the decision to smoke your own salmon and milk your own goats.

So none of these iconic ideas exists unconnected to the others, and none is worth a week-old haddock without looking at the total picture. Going back to the pasta versus lobster: If current conditions apply, you may lose that lobster if you try to sell it every day. I don’t see a lot of big spenders on Tuesday. Given the circumstances of your own menu, brand identity (I have gone almost six months without using that phrase. What a time to fall off the wagon), and the financial health of your clientele, the $8 pasta might make you more money. And you may decide to add a freezer-to-fryer appetizer with a 50-percent food cost to take the pressure off that kitchen full of goats. This is an idea which should make sense even to an accountant, since there’s minimal labor involved, and you’re going to explain that total production cost—food plus labor—is the real place to begin pricing.

And that’s not the end of it. Each item on the menu affects the others. You can discount an item to sell another bundled with it, to drive traffic in a specific daypart, as a marketing hook, or to encourage the responsible guzzling of beer. All of these require numerical analysis and careful planning, but none needs the absolute approval of any given ratio.

Having said that, here’s a formula I do like: If total food cost plus total labor cost is 60 percent or under, and you’re not making a profit, something is terribly wrong. Find it and fix it.