By deploying these strategies, you’ll have a favorable margin mix.
It’s inevitable. Beef prices are going to rise and, for most QSRs, this will negatively affect the margins on a large percentage of your business. Most of the time, you are left with a few unattractive options, such as:
- Raise prices.
- Feature a product that doesn’t sell as well, and lose transactions.
- Hold the course and take a hit in margin.
Now is when you have to rely on your store analytic and your ability to regionalize to help you determine how to selectively execute 2 simple strategies to offset the impact:
- Selective breakfast focus.
- Selective non-beef product focus.
Most of the time, neither of these alone will provide enough relief. But, they are a great combination.
Here’s a simple methodology that will identify where to deploy these strategies:
Calculate the percentage of sales that each of your non-beef products and breakfast daypart represents across your chain of stores. This is your baseline.
Then, simply index each of your markets against these percentages. Markets that index significantly over 100% (125% is a good starting point) for a non-beef product or against breakfast, represent an opportunity. The assumption being that these markets perform at least 25% better than average. Note: After you calculate your indexes, you’ll have to determine the starting point. If 125% eliminates too many stores, then adjust.
Then, index each of your stores against your baseline. It’s very possible that you may only have a few complete markets that over index, or you may not have any complete markets. No problem. That’s why going to the store level is the next step.
Group stores that over index in your best non-beef products and in breakfast.
Review the tracking on your past non-beef promotions and breakfast promotions. Find the home run promotions and repeat them against the identified stores and markets.
With this selective execution, you’ll still have a group of stores where there isn’t a good non-beef or breakfast solution. However, you will find enough markets and stores to offset the margin loss. What you don’t want to do is make a bad situation worse by moving off promoting beef in markets where you don’t have a better option.