Your Supplier Just Put 18p on Your Burger. Here's the £11,250 Decision
Your supplier has just put 18p on the cost of your burger.
Absorb it, and it costs you £3,240 a year. Model it before you change anything, and a 75p menu price change is worth £11,250 a year.
This final part is about making better decisions before they cost you anything. For the underlying theory, the four-quadrant model, food cost % and contribution margin, see my Menu Engineering: The Operator's Guide to a More Profitable Menu.
This is Part Four of a four-part series on where food margin actually goes wrong.
Part One looked at how a target margin can be wrong before service even begins.
Part Two looked at the hidden cost of convenience.
Part Three explored how portion control drifts without anyone noticing.
Most menu changes happen in the wrong order
A supplier increases a cost, a chef wants to introduce a new dish, sales are disappointing. A price rise feels necessary. The menu gets changed.
And only afterwards does somebody ask:
"What did that do to our margin?"
By then it's too late. The wheels are in motion... menu printed, team trained, stock purchased, the decision's already been made.
The clued up operators work the other way around - They test the decision first.
Then they decide whether it's worth making at all.
The Spreadsheet That Answered The Question
At both Hilton and Marco Pierre White restaurants, we used an Excel-based menu engineering model. Neither operation had an EPOS system packed with forecasting tools and advanced analytics. So we built our own process.
Sales data was imported into the model, dish costs were maintained, and the file generated a theoretical sales-at-cost figure which could then be measured against actual performance.
It wasn't glamorous. But it answered the most important question in hospitality:
"What happens if we change this?"
Before changing a price, launching a dish, removing an item or committing any real money.
That's where menu engineering earns its keep.
Not as a reporting tool, but as a decision-making tool.
Cutting What's Dragging The Kitchen Down
Sales volume and cash contribution are primary. A dish has to be underperforming on both before considering if it gets the chop. You will find dishes sitting right on the borderline, these are the difficult ones to evaluate - That's where operational reality becomes the tiebreaker.
Imagine two dishes generating similar sales and similar cash profit.
One uses ingredients already found elsewhere on the menu, the other requires a specialist product that nothing else uses.
Every week a small amount is delivered, every week some of it ends up in the bin and every week stock is ordered just in case somebody orders it.
That dish isn't just underperforming, it's creating complexity, it's creating waste and damaging your margin.
Sometimes the decision isn't about which dish generates the highest profit.
It's about which dish presents the fewest hurdles.
Model The Menu Before You Print It
One of the most useful applications of the menu engineering model was menu development. Quarterly sales figures weren't simply used to review performance, they also became the foundation for testing future changes.
Potential new dishes could be substituted into the model with existing dishes being removed. Prices could be adjusted. Cost increases could be applied. Alternative products could be costed.
Every scenario could be measured before a single menu was printed.
Rather than asking:
"Will this work?"
The question became:
"What do the numbers say will happen?"
That's a much safer way to do things.
Protecting Margin Against Rising Costs
This is where the model really earned its keep.
Take a burger selling at £16.75 (incl. VAT) and costing £4.25 to produce.
Current Position
• Selling price incl. VAT: £16.75
• Selling price excl. VAT: £13.96
• Food cost: £4.25
• Cash gross profit: £9.71
GP calculation: (£13.96 - £4.25) ÷ £13.96 = 69.6%
Now a supplier cost increase lands on your desk. Food cost on the burger rises by 18p, to £4.43.
Price Held
• Selling price excl. VAT: £13.96
• Food cost: £4.43
• Cash gross profit: £9.53
GP calculation: (£13.96 - £4.43) ÷ £13.96 = 68.3%
At 1,500 burgers per month, that 18p is £270 a month. £3,240 a year, straight off your bottom line.
Most operators immediately ask:
"Can we increase the price?"
That's actually the wrong question, it should be:
"How much does the price need to move to protect the position we're already in?"
Let's model a new selling price of £17.50 including VAT.
Revised Position
• Selling price incl. VAT: £17.50
• Selling price excl. VAT: £14.58
• Food cost: £4.43
• Cash gross profit: £10.15
GP calculation: (£14.58 - £4.43) ÷ £14.58 = 69.6%
The GP is now back exactly where it started. The increase wasn't picked to boost the margin, it was set to protect the position the dish was already in.
That's an important distinction. Compared with holding the price, the excl. VAT value of that 75p increase is 62.5p per burger.
• £0.625 × 1,500 = £937.50 per month
• Per annum = £11,250 per year
One decision. One dish. Tested before implementation - rather than explained afterwards.
It Works In Reverse Too
The same process works when costs need reducing.
What happens if we change supplier?
What happens if we switch cuts?
What happens if we introduce an alternative dish?
What happens if we simplify a garnish?
What happens if we remove a poor performer entirely?
You don't need to guess, you can model it.
Change one variable, measure the outcome, make a decision based on evidence.
That's the difference between managing a menu and reacting to one.
The Percentage Trap - You Can't Bank a Percentage
One of the biggest mistakes operators make is becoming obsessed with GP%.
GP% obviously matters, but it isn't the whole story.
Take the burger.
At 69.6% GP it generates:
£9.71 cash profit per plate.
Now compare that to a steak.
A steak selling for £30.00 ex VAT at 60% GP delivers:
£18.00 cash profit per plate.
The percentage looks worse.
The cash contribution is nearly double.
That's why chasing GP% in isolation can become dangerous.
You can end up pricing dishes solely to hit a percentage target.
The percentage looks fantastic, then your sales disappear.
Or you focus on high-GP dishes that contribute very little actual cash.
Percentages don't pay wages or pay rent - Cash does.
A wise man once asked me:
"What's 75% of sweet F.A.??"
It's not exactly textbook finance. But the principle is spot on!
The Thread Running Through All Four Parts
The businesses that protect margin best aren't the businesses that react fastest. They're the businesses that measure most often.
Every issue we've looked at in this series came down to the same thing: a lack of measurement.
A target that wasn't validated.
A supplier cost that wasn't benchmarked.
A portion that wasn't checked.
A menu decision that wasn't modelled.
None of those problems required a complicated solution, they simply required somebody to stop assuming and start measuring. That's because most margin losses don't arrive as dramatic events, they creep in slowly, hidden inside routines, habits and decisions that nobody has challenged for a while.
The target GP that looked fine in a spreadsheet.
The supplier relationship nobody had benchmarked for years.
The scoop that drifted beyond specification.
The menu change that "felt right" but was never tested.
Individually, none of them look particularly dangerous but combined, they can quietly strip tens of thousands of pounds from your bottom line.
Once you start measuring properly, most margin problems stop being mysteries.
They become visible. And once they're visible, they become manageable.
Margin isn't something you manage at month end. It's something you measure every day.
Stop Guessing Where Your Margin Is Going
Over the last four articles we've looked at:
Incorrect GP targets
The convenience premium
Portion control drift
Menu decisions made without modelling the impact
Different problems. The same outcome. Lost profit.
I'm David Holden. I've spent 30 years working across hospitality audit and operations, helping hotels, pubs, restaurants and bars identify where profit is being lost and put practical controls in place to stop it.
A 75p price rise on one burger was worth £11,250 a year, once it was tested before it went to print. If your menu decisions are being made on gut feel rather than modelled first, get in touch. I'll help you test the numbers before they cost you anything to find out. Every pound of profit recovery starts with measuring what matters.
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