Restaurant Sales Mix is the foundation on which restaurant revenues are generated and while profitability concepts between a hotel and a restaurant are broadly similar, they are not the same.

A restaurant’s profit model is different from a hotel’s in the sense that the former has to deal with higher direct variable costs per u it than the latter. The foundation of restaurant profitability can be found in its Sales Mix. What is a Sales Mix?

A Sales Mix is the combination of products and services that a restaurant offers. Note the word “combination.” It is not simply the total number of products or rather menu items to be specific that are in offer.It is how each menu item combines with others that is key. You may ask what the difference is between total number of menu items and combination of menu items.

This will be explained shortly. However, before that, it is important to note the similarities between the hotel (predominantly rooms department) and restaurant profit model. Hotel room revenues are generated on the foundation of market segments while restaurants depend on sales mix for their revenues. In fact, in one department of restaurant revenues too, market segments play an important role.

Sales Mix is not merely the foundation of revenue generation but is also the fulcrum for restaurant profitability. In the parts 2 and 3 of this Restaurant Sales Mix post, we will examine how profitability is also significantly influenced by a well thought out sales mix which is in sync with customer expectations and tastes.

COMPONENTS OF SALES MIX

So, what are the components of a restaurant Sales Mix? There are three components – Menu item Mix, Meal Period Mix and Market Segments.

Menu Item Mix is the foundational component considering that a restaurant’s primary offering is about menu items. You could say that the menu item is the smallest product offered. This mix is thus about how many different combination of menu items that are on offer within a food and beverage category.

Meal Period Mix, while still dealing with menu items per se (other than the concept of Buffet), categorizes menu items based on different meal periods in a day. The most popular meal periods are breakfast, lunch, afternoon tea, dinner and supper. Each meal Period is at a different time of the day.

The third major component of Market Segments is mainly related to the Banquet or Catering function of a restaurant. It targets the profile of a catering customer into market segments like local group, local individual and so on. A restaurant may or may not have this component.

The primary purpose of the components of the Sales Mix is to classify menu items (the smallest offering) into various customer target profiles and use those profiles to tailor offerings. The profile of a customer coming in for breakfast is different from lunch and similarly for dinner.

SEAT CAPACITY

One of the most critical elements of a restaurant revenue generation strategy is the Seat Capacity of the restaurant. Knowing the maximum number of seats in a restaurant is critical to keeping the restaurant full over different meal periods. Again, the seat capacity plays a different part for each meal period and more so if some of the meal periods have a buffet offering. Buffets are fully discussed in Part 2 of this Sales Mix post.

Seat Capacity plays a huge part in the profitability of a restaurant too. The current volume of covers served that is being achieved by a restaurant is always compared with the Seat Capacity. At the time of designing and conceptualizing the restaurant, it is very important that demand estimates be accurate. It may mean the difference between a largely empty restaurant (too high Seat Capacity) or one that is always full (too low Seat Capacity). This has repercussions for the stakeholder return in investment too.

Don’t forget to read Parts 2 and 3 of this Sales Mix post for powerful elements affecting the profitability of a restaurant.

About S Lakshmi Narasimhan
I am the Founder of Ignite Insight LLC (www.ignite-insight.biz) a New York City based consultancy, which specializes in Group Executive Training, Coaching and Consulting. I coach, train hotel and restaurant non-financial managers how to optimize profits in the operation. I run an online financial academy called Profits MasterClass. Visit http://www.profitsmasterclass.com for details on the courses that are offered. These courses are focused on boosting hotel and restaurant profitability. TRY FREE before you decide to purchase any of the full paid courses. I teach Hospitality Finance, Hotel Operations Analysis Graduate classes, Business Development, Financial Management, Rooms Division Management Under Graduate classes during the Spring and Fall semesters as an Adjunct Faculty member at the New York University, Jonathan M Tisch Center for Hospitality, and Tourism in the School for Professional Studies.