Is Your Menu Ideally Priced Correctly to Maximize Profits and Not to Reduce Guest Counts?
Industry Information | 10.21.2011
Proper Menu Development must include RRM to maximize profits.
What is Restaurant Revenue Management?
Revenue management is the application of information systems and pricing strategies to allocate the right capacity to the right customer at the right place at the right time. The determination of “right” entails achieving both the most contribution possible for the restaurant while also delivering the greatest value or utility to the customer.
The application of revenue management has been most effective when it is applied to operations that have relatively fixed capacity, demand that is variable and uncertain, perishable inventory, appropriate cost and pricing structure, and varying customer price sensitivity. Those attributes are found in the restaurant industry.
What is Pricing an why is it so important?
In simple terms, pricing is a group of activities by which a company determines what its customers will pay for its products and services offered. But if you don’t think pricing is a critical component of your business that requires unique concepts, practices, and tools, then you will miss out on its tremendous power to increase your bottom line. Improving pricing is, in fact, one of the most strategic and powerful ways for you to improve your business and financial performance. According to a 2006 Gartner Research report, on average a 1% improvement in price translated to an 11% increase in profitability.
Pricing for Optimal Profit, Without Sacrificing Transactions or Customer Traffic
Grounded in state-of-the-art databases and statistics, IRHC Group uses a analytical process that enables us to identify menu prices that yield optimal gross profit without negatively impacting customer traffic. IRHC Group consultants use sophisticated statistical inference to analyze demand patterns and elasticity and determine specific trading relationships between products.
It is a revolutionary and quantitative approach to pricing that enables you to uniquely manage the long-term brand value on a granular level – by letting the consumer set the right price. Price strategies are developed with a blend of consumer needs and business rules and conditions that drive brand strategy and financial plans.
IRHC Group consulting teams use the insights gleaned through this analytical process to develop demand-based pricing strategies that are brand-specific, actionable and highly effective whether on a market, tier or store level.
The most comprehensive Restaurant Revenue Management System in the Industry. We utilize our experience of over 30 years to evaluate and create a multi facet restaurant revenue management system. Which includes but not limited to the following: No other company can offer these services below.
Menu Development: and Design: based upon concept design, consumer preference revenue and profit maximization.
Recipe Development: to maximize Return to Net (RTN) profits and increase speed of service standards.
Menu Item Placement: a scientific approach to help influence consumers spending habits that maximizes revenue and profits.
Price Evaluation Systems: a comprehensive evaluation of your menu pricing to ensure maximum profit without jeopardizing guest counts or customer traffic. IRHC Group clients experience on average gross profit gains of 2% of sales without deterioration of transactions, customer traffic or perceived value.
Duration Management: a systematic approach based upon Revenue Per Available Seat Hour (RPASH), Using RPASH allows managers to capture more of the restaurant’s actual performance in their analysis than does average check or typical food- or labor cost percentage.
IRHC Group RRMS has helped many organizations raise millions of incremental revenue.
Contact IRHC Group at www.IRHCgroup.com
Offices in London UK, Orlando Fl, Dallas TX, Henderson NV
Ken Hoffman, author of multiple articles published on many websites and several industry trade publications, has been cited in multiple news stories as an authority in Restaurant & Hospitality Consulting. He has also been a feature speaker for many associations including the National Restaurant Association and is the founder of IRHC Group.