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Call us for a free FastStart Consultation: +64 4 488 7035

Call us for a free FastStart Consultation: +64 4 488 7035

by Justin Guinn,
Market Research Associate
Last Updated: February 16, 2017

Few industries have thinner margins than the restaurant industry. Operators must ensure their recipes and menu items are optimized to generate the most revenue. How can operators do this, though?

We know from our research that a majority of restaurants are operating without any type of point of sale (POS) system in place, so they may be using separate food costing software. These businesses can kill two birds with one stone by using restaurant-specific POS software with a food management system built-in.

To help you determine which system is best for you, in this guide, we’ll take a look at:

(Click on a link below to jump to that section.)

What Is Food Costing Software?
Benefits of Using a Food Management System
Common Features of Food Cost Software
Typical Hardware for Restaurant POS Systems

What Is Food Costing Software?

As you probably know, each of your menu items has a ton of different ingredients. This is where food costing software shines. It’s a helpful tool that enables restaurant operators to:

  • Manage individual ingredient costs
  • Record recipes and track ingredient usage
  • Determine optimal menu item costs

The purpose of food cost software is to ensure restaurant operators properly balance the price of items to maintain both profitability and affordability. Setting the margin too high might lead to customers feeling ripped off—too low and the operators will be left without any capital.

While stand-alone food costing software options are available, you’re better off going with a food management system built into a restaurant POS. Why? An integrated system allows you to manage inventory, sales, employees, and customers, alongside food costs. Full-suite restaurant POSs also offer a seamless experience for collecting, transferring and analyzing data from the various features.

Benefits of Using a Food Management System

Using a food management system can have a real and immediate impact on your restaurant’s revenue. This is primarily attributable to the transparency these food management systems provide about the true costs and profit margins for each menu item.

With this information, as the Nation’s Restaurant News describes, you can adjust dishes accordingly and engineer a high-profitability menu:

“Recipe and menu engineering includes many other variables beyond profit margins, from product mix to the physical design of the menu. But, the ability to keep tabs on profit margins, and better yet to predict them, is the basic building block of profitability.”

Source: Nation’s Restaurant News

Not only will this benefit your day-to-day menu, it can be used to see how margins might fluctuate with price adjustments. For example, if you lower prices for certain items during happy hour, you can quickly determine the new profit margin for those dishes. Likewise, if you want to run a prix fixe menu (e.g., for a New Year’s special), you can determine the profit margins per person, based on the combined costs of the various menu items.

Common Features of Food Cost Software

Of course each software system is a little different, but food costing systems or POS systems with a food costing module tend to share some common functionalities.

When evaluating food costing software options, look for the following features to meet your unique requirements:

Recipe costing The primary capability of food costing software. It takes into account food and even labor costs to calculate the spend per dish.
Recipe database Particularly important for multilocation restaurants, a recipe database stores lists of ingredients, their cost and the target margin and selling price for each.
Menu management Along with recipe cost management, these systems can also track prices and sales to optimize the menu for highest margin items.
Inventory management Enables you to track food on hand, manage orders and deliveries from suppliers and ensure correct portions.
Spoilage reporting Restaurants must track and document dates and usages of perishables. This reporting system manages expiration dates and notifies users when inventory needs to be thrown out.

In addition to these many capabilities, choosing POS-driven food cost software provides the full force of features typically offered by restaurant POS systems. These include:

Reporting and analytics Food costing isn’t the only thing you’ll want detailed reporting on. Most POS systems feature in-depth sales reporting and easy-to-use dashboards to quickly convey the takeaways from the data.
Customer relationship management (CRM) Restaurants live and die by their ability to sustain repeat business. Loyal customers provide dependable revenue and work as marketers, bringing others into your restaurant. This begins with a CRM for storing and leveraging customer information.
Employee management Most POS systems offer built-in scheduling features as well as time clocking and payroll management to expedite distribution of your employees’ earnings.
Mobile POS (mPOS) Added conveniences such as table-side ordering and payments are making mPOS systems highly beneficial options for restaurants.

Typical Hardware for Restaurant POS Systems

If you’re considering meeting your food management system needs with a full-featured restaurant POS system, there are some specific hardware items you'll need to have in place. Think of the table below as a sort of checklist of hardware you'll need to have squared away in order to utilize the software.

Cash drawers Cash drawers are affordable and necessary if your restaurant accepts cash—and it definitely should.
Receipt/ticket printers Printers are hugely important for restaurants because they’re the main channel for servers to get orders into the kitchen or bar.
PCI compliance Avoid preventable card data breaches by putting proper PCI compliances in place, including secure and compliant card readers, POS systems, networks/routers and more.
EMV card readers While not as important as PCI compliance, you should at least consider adopting an EMV-enabled chip card reader. It could save you from potential inconveniences down the line.

In today's restaurants, POS systems that run on iPads or other mobile devices are becoming increasingly popular. If you're considering such a system, you may also need additional hardware—most obviously a tablet or mobile device, but also other items such as stands or mounts for said device.

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