Constructing a restaurant menu can be done by either creating all menu items as end products only, or by building end products from component items. While there are advantages and disadvantageous to each method, many restaurant managers and owners may find more value in building from low level items as part of a process to help better manage cost of goods sold and inventory levels.
An “end product” is the item as it is listed on your menu for a customer to order. For example, a restaurant may offer the following items:
- Veggie Burger
- Chicken Sandwich
The “end product only” approach to menu construction would create an item in the menu for each of these items and assign a price to them. Some more advanced approaches using this method would have an estimate build cost with each of these items.
“Build Items” are lower level items that are used to construct menu items. A hamburger, for example, may be made up of the following items:
- Burger Patty
- Slice of Tomato
- Leaf of Lettuce
- 2 Slices of Pickles
- 1 Slice of Onion
- ½ Teaspoon Ketchup (Approximately)
- ½ Teaspoon Mustard (Approximately)
In the manufacturing world, this would be called a “Bill of Materials”, a list of items needed to create an end-product.
The build item approach to menu management starts by creating individual non-menu items in your point of sale for each of these. Each build item would have a per-unit cost that can be calculated from the packaging cost and package yield (e.g., a box of hamburger patties costs $5.00 and contains 10 patties, so the per-unit cost is $0.50)
When creating the menu level item- in this example, a hamburger, the item is created as being a combination of the build items needed to construct it.
Many build items can be shared between multiple products, so it is not necessary to create unique build items for each menu item if a low-level item is already in the system.
Using the hamburger example above, every item in the bill of materials for a hamburger may be the same as those for a veggie burger except for the patty. A cheeseburger is identical to a hamburger except it adds a slice of cheese. A chicken sandwich uses most of the same items as the hamburger but replaces ketchup and mustard with mayonnaise.
The build items for those four menu items may look like this:
- Hamburger Patty
- Veggie Patty
- Chicken Patty
- Tomato Slice
- Lettuce Leaf
- Pickle Slice
- Onion Slice
What to Track and What Not to Track
Not everything may need to be included in a build item list. Conversely, there may be situations where it is better to include absolutely everything used, up to and including wrappers, cartons, napkins, and cutlery.
A store can be as detailed as they wish the build item approach. However, some smaller stores and franchises may find it is not worth the overhead to track some low-per-unit-cost items like wrappers, cartons, or condiments.
Conversely, larger organizations may prefer the more detailed and complete tracking because the benefits across the entire organization outweigh the cost at the store level. For example, by requiring all stores in a franchise to carefully track and monitor condiment usage, the average store may only save $10 per month. To the franchise chain, however, that $10 per month per store can aggregate across hundreds of stores in the chain and increase the franchise profitability by thousands of dollars per month.
Advantages of the Build Item Approach
Creating the build items for every item in your menu can be time consuming to set up, but the ongoing maintenance time to track changes in cost of goods is substantially less. Using the examples above, if the unit price of buns went up $0.10 per bun, a manager using the end-product only method would need to increase the build cost of each item on their menu that uses a bun to reflect the increase in costs. Using the build item method, only the price of the bun needs to be increased, and that cost change will automatically flow up through the system for all items that use the build item.
Another important reason for restaurants to consider building the menu from low level items is to help better manage food costs. By using low-level items to build end-product menu items, a store can project food orders more easily at the item level because the sales data for the order items is already being tracked.
Additionally, a restaurant using the build item method for constructing the menu will be able to generate an inventory usage report, which is a key part of a strategy to track and manage shrinkage. In order for a store to know if they are wasting inventory by over-provisioning, they need to know not just how many of an item they bought, but how many they should have bought based on sales. As an example, cooks may be consistently putting three pickles on an entrée instead of two, and two slices of cheese instead of one. With the build item method, a report can be generated that shows the theoretical usage of these items, which can then be compared to the actual purchasing and inventory levels.
Finally, using the build item approach allows for detailed menu optimization by creating a modifiers report based on additions and subtractions to menu items. For example, understanding what percentage of hamburger sales are sold as “no pickles” versus those that are sold with pickles can help a store decide if they should change their menu from including pickles by default and giving customers the option to remove them versus not including them and letting customers add them.
Multi-level Build Items
Some menu items can be constructed from other menu items. This may sometimes be referred to as a “multi-level bill-of-materials”.
Multi-level build items can happen at various levels in the point-of-sale system. For example, a cheeseburger from above is nothing more than a hamburger with cheese added, so a cheeseburger could be constructed with a hamburger as a build item with the one additional item of a slice of cheese. This isn’t typically needed but depending on the restaurant there may be situations where this is a more desirable method to build some items, most often when the restaurant starts with a finished multi-ingredient base item and then adds items to it.
The more common approach to multi-level build items would be menu combo items. For example, a hamburger combo may include a hamburger, French fry, and drink. A build item can be constructed from the hamburger menu item and grouped with menu items for a drink and French fry side.
Restaurants that which to carefully manage their cost of goods sold should ensure that their menu is built from low level items as part of a strategy to tightly manage cost of goods sold. In order to effectively do this, the restaurant point-of-sale system should allow for this functionality and contain support reports capable of quickly delivering the relevant information to the store manager on a timely basis.
For further reading on this topic, please see the following other related whitepapers:
- Optimizing Menu Items to Reduce Waste
- A Data Driven Approach to Managing Cost of Goods Sold
- Nimble Menu Building Best Practices