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GrammiðGrammið

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Introduction
Chapter 1 : Fundamentals of Restaurant Operations
Chapter 2 : Ingredients and Yield Loss
Chapter 3 : Cost analysis and ingredient valuation
3.1 Cost of goods sold (COGS)3.2 Contribution margin and mark-up3.3 Menu planning and guest behaviour3.4 Menu engineering : Star, Puzzle, Plow Horse, Dog3.5 Menu layout3.6 Exercises and assignments3.7 References
Chapter 4 : Inventory management
Chapter 5 : Technology, Automation, and Artificial Intelligence in Kitchen Operations
Chapter 6 : Pricing, Contribution Margin and Cost Control
Chapter 7 : Sales, Marketing and the Psychology of the Menu
Chapter 8 : Inventory Management, Internal Controls and Food Safety
Chapter 9: Standardisation and Description of Ingredients and Dishes
Chapter 10 : Service, service processes, and service quality Service as the foundation of the guest experience
Chapter 11 : Digital reviews and online visibility
Chapter 12 : From Concept to Operation
Chapter 13 : Operational Metrics and Performance Management
Chapter 14 : Process Design and Service Flow
Chapter 15 : The future of restaurant operations: challenges and opportunities
Chapter 16 : Glossary
Closing worda

3.2 Contribution margin and mark-up

The contribution margin is the amount remaining after direct ingredient cost has been deducted from the selling price.

Example: If the ingredient cost of a chocolate cake is ISK 100 and it is sold for ISK 150, the contribution margin is ISK 50. This margin provides the room needed to cover fixed costs – such as rent, wages and electricity – and ultimately to generate profit.

To determine the selling price based on a target contribution-margin percentage, the following formula is used:

Selling price = Ingredient cost / (1 − Contribution-margin percentage).

Margin

If the target is a 40% contribution margin for the aforementioned cake, the calculation is: ISK 100 / (1 − 0.40) = ISK 167. It is vital for the operation that the margin is sufficient to cover fixed costs.

Raising prices should be your LAST move

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