Why is profit margin so important for restaurants? 

You likely got into the industry to make delicious food and deliver great customer experiences, but even so, you have to maintain a baseline profit margin to stay in business.

It’s especially important these days, with food inflation roaring and recession looming. Restaurants must do whatever they can to protect their profitability — with the toolbox consisting of tactics like monitoring and controlling costs and raising prices.

How can restaurants gain control of costs and optimize menu prices?

Consistent tracking is the key to managing profits.

This includes keeping up with cost changes to all restaurant products and ingredients — everything from meat, dairy, produce, and pantry staples to packaging and paper goods, alcohol, and more.

It also includes tracking how menu price changes impact sales. There needs to be intentionality in your pricing strategy and processes. That can only come from understanding price thresholds and where your guests are most likely to purchase.

Accurate profit margin calculations start with invoice automation 

Invoice automation is the unsung hero in consistently tracking restaurant performance metrics. If you’re wondering what invoice automation is, here’s a brief article as well as an in-depth guide to get you started.

In short, the detailed data contained within your invoices is the foundation of your costing process. Invoice automation digitizes these details, processing them for your accounting system while uncovering ingredient level insights within the system itself, such as with xtraCHEF by Toast.

These foundational insights power recipe costing and real-time food costs reporting, which can empower you to set accurate prices that unlock your target profit margins.