Minimise the risk of poor results by focusing on contribution margin

Learn how to minimise the risk of poor results in your restaurant by focusing on contribution margin, cost analysis and optimising your menu to improve profitability.

Contribution margin, challenges and opportunities in the low season

In low-season periods it can be hard to move both guest flow and the average check. Such periods can come during the summer months or in economic downturns. Even if your restaurant is fully booked, the average check can drop by 20-30% because of factors like interest-rate rises and inflation, which means guests spend less. By focusing on contribution margin and optimising your menu, you can minimise the risk of poor results.

1. Steer guest buying behaviour towards high-contribution-margin products

Contribution margin (CM) explained

The contribution margin is the difference between the selling price and the purchase cost of an item. To work effectively with contribution margin, you should first carry out a careful cost analysis for each item.

Example of product pricing:

• Large draught beer: purchase price 8 kr, selling price 70 kr – contribution margin 62 kr.
• Bottled IPA: purchase price 18 kr, selling price 75 kr – contribution margin 57 kr.

If, for example, 40% of your guests choose the IPA and 60% choose the large draught, an analysis tool like Guestrix can show how the choice affects your result. This information is valuable for optimising your menu's composition and pricing.

2. Menu design and marketing

Visually highlighting certain menu items with a high contribution margin can significantly increase their sales.

• Visual presentation: place dishes with a high contribution margin in a prominent part of the menu, perhaps with a distinct background colour or a decorative frame.
• Recommendations: pair dishes with drink options that enhance the guest experience and raise the average check.

3. Set clear sales targets and follow up

Set concrete goals to increase the share of sales from high-contribution-margin items. For example, if these items account for 30% of your turnover today, set a target to raise that to 50% over the coming month. Guestrix can help you track these targets and give you insight into which strategies work best.

4. Implement adjustments and evaluate results

Decide which changes suit your restaurant best. If you can change your menu quickly and digitally, that's a cost-effective option. Regularly evaluating the results of your changes is essential to understanding what works.

Conclusion

By carefully analysing and optimising the contribution margin, your restaurant can improve profitability even in challenging periods. Tools like Guestrix make it possible for restaurant managers to get deeper insight into the business's finances and adapt quickly to minimise negative financial effects.