146 – Restaurant Value Engineering

Is Restaurant Value Engineering a better way to think about profitability in your restaurant?

We look at Restaurant Value Engineering and how it can help you increase the amount of money that you take home each week.  This podcast series will provide clear examples of simple steps to increase Restaurant Profitability.

Restaurant Value Engineering is a new concept for restaurants.  In this episode, we are going to go through and apply concepts of Value Engineering to the restaurant industry. We discuss what Restaurant Value Engineering is, how it’s done, and how you are able to start seeing the components in your business that you can better manage until you are able to increase the value of your products.

What is Restaurant Value Engineering?

We define what value means as the regard that something is held to deserve. It is what a person is prepared to pay for that. For instance, your restaurant Is in the middle of the Swiss Alps, bottled water is valued a little less compared to places somewhere on the equator, bottled water would place a much higher value particularly if your restaurant is the only restaurant that sells bottled water. There’s always going to be the value that you want to be thinking about, niche down on the various people who could be coming into your restaurant potentially.

Another good example is Accor Hotels who targeted to be able to provide to everyone. Some people who are looking for a hotel are looking for certain things. Many people are going to be on a budget so how do you get the right balance of value to provide to the customer at a price point that you can provide that is profitable for the company. Accor came up with a strategy where they had a brand at each of the 5 stars. Non- competing brands, very clearly differentiated.

  • 1 Star- F1 hotels
  • 2 Stars-Ibis
  • 3 Star -Mercure
  • 4 Stars- Nobu
  • 5 Stars -Sofitel

So for each type of customer, they had a solution in the mix for and it’s not about individual customers, it’s about individual circumstances for those individual customers

Restaurant Value Engineering Defined

A restaurant is a just in time manufacturing business employing a range of skills from an often transient workforce with time and temperature-sensitive inputs delivering products to meet dynamic and changing customer demand. In a nutshell, it highlights many of the problems you have when you are trying to run a restaurant but at the same time, it also highlights the opportunities you have got in building value for your customers. The area that we want to play with is the difference between the price that it cost you to create and the value that your customers put on that item. We will look for ways in decreasing the cost of the item that we are producing and increasing the value that people put on that item. Either make things cheaper and/ or increase the price that we can charge for them.

Fine Dining

Fine dining is one of those industries where there is a huge amount of Value Engineering that goes into creating something that is really high value. There’s a lot of things that you can take from a  fine dining restaurant and apply them to your restaurant to increase the value of the perceived experience. There’s a lot of areas in fine dining where an expensive product is put in there and you would have to argue what is the value that it’s putting in there. Usually, an argument between owners and the chefs, arguing about the cost of the menu. Labor costs are also significant and there is a much bigger cost on a per table or per seat component than in your average run of the meal restaurant.

What’s the difference between Menu Engineering and Value Engineering?

Menu Engineering as we all know is a multi-disciplinary approach towards maximizing the profit of the menu. Value Engineering sees Menu Engineering as a component of the process but is much wider and it is complemented by Experience Engineering. You have to identify what your customers are really paying for.

Stay tuned for our next episode and we will go through 10  simple and quick examples of Restaurant Value Engineering and hopefully they will give you ideas to increase the revenue in your restaurant and increase the value your customers are getting.

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