Talking COGS Management with Jim Taylor

Summary

RESTAURANT STRATEGY PODCAST
Episode: Talking COGS Management with Jim Taylor
Host: Chip Klose
Guest: Jim Taylor, Founder & CEO of Benchmark 60
Date: May 25, 2026

---

Episode Overview

This episode dives deep into the complexities of Cost of Goods Sold (COGS) management for independent restaurant operators. Host Chip Klose is joined by industry consultant and Benchmark 60 CEO Jim Taylor. Together, they unpack cost percentages, contribution margin, menu engineering, and strategies for maximizing restaurant profitability, even in challenging market conditions. The discussion is candid, occasionally contrarian, and full of actionable insights for restaurant owners aiming to optimize their bottom line.

---

Key Discussion Points & Insights

1. Moving Beyond Percentages: Why “High Food Cost Is Your Friend”

Timestamp: 05:24-09:46

• Jim Taylor’s provocative LinkedIn post suggested that sometimes higher food cost can be beneficial if contribution margin justifies it.

  • Jim Taylor: “I would way rather sell a 40% food cost item that makes $18 when we sell one than a 22% food cost item that makes $4...” (08:12)
  • He cautions that writing an entire menu at one target food cost (e.g., 26%) “leaves a lot of money on the table.” (09:10)

• Sales Mix Matters: Not all items should be engineered to the same food cost percentage. Selling a blend of high and low-cost items can optimize both customer perception and profit.

• Chip Klose agrees but warns of the danger if operators misapply the theory and build whole menus around expensive, high-margin items.

  • Chip Klose: “…the danger is everyone says, ‘well, it doesn’t matter because look at the contribution margin’ … that can be very, very dangerous.” (07:55)

---

2. Practical Menu Engineering: Balancing Margin and Movement

Timestamp: 09:46–13:46

• Low-food-cost “workhorse” items (e.g., McDonald’s fries at ~7% cost) allow for higher-margin, higher-cost menu features.
• Jim Taylor: Including a variety of food cost items, but focusing on blending them into a profitable sales mix.
• Discussions on beverage programs: how classic specialty cocktails and smart vendor relations create high-margin, low-beverage-cost “favorites.”
• Chip Klose: “The whole point 20 years ago … was to make it really easy and frictionless to get a first drink on the table. And now it’s just turned into something else.” (10:46)

Memorable Moment: The Champagne Cart & Speed Bumps

Timestamp: 12:47–15:48

• Jim recounts a steakhouse’s champagne cart, noting “80% of people in the room ordered something off that cart.” (13:46)
• Chip echoes this with his client’s plan for an Italian-style aperitif cart, showing how unique service touches both enhance the guest experience and boost check average.

---

3. Sales Mix, Menu Size, and Recipe Costing

Timestamp: 19:13–22:49

• Top-Sellers Drive Profit:

  • Jim Taylor: “Only the top 10% of your items really matter if you're trying to move the needle on cost of goods from a sales mix perspective.” (19:24)
  • Focus recipes, costing, and optimization efforts on top-selling items—the “Pareto Principle” in action.

• Lean Menus Win: Both agree: streamlined menus make inventory, pricing, and marketing easier.

  • Chip Klose: “When I go somewhere, I want to know, like, what should I get here? Like, what are you famous for? And I want it to be really, really obvious.” (21:47)

• Frances Frei’s Principle:

  • Jim Taylor quotes Frances Frei’s “Uncommon Service:”
    • “If you want to be great at one thing, you intentionally have to be bad at something else.” (23:39)
  • Applied to restaurants: Don’t try to be great at everything (e.g., variety vs. quality vs. price).

---

4. Value Perception, Contribution Margin, and Price Anchoring

Timestamp: 25:26–30:59

• In tough economic times, value perception wins. Chip and Jim discuss menu engineering in a bifurcating dining market: high-end fine dining and value-focused QSR thrive, the “middle” struggles.

• Smart Pricing Strategy:

  • Not all high-margin items need to be more expensive—there’s often room to drop prices and still maintain profitability.
    • Jim Taylor: “There are… items you could easily decrease the price on and still be profitable.” (27:01)

• Price Anchoring:

  • Use one or more premium-priced items in each category to make middle-priced items look relatively reasonable.
    • Chip Klose: “[The] Opus One Effect…when a $385 wine bottle makes the $135 one look like a deal. You end up selling more of the latter.” (28:21)

---

5. Labor & Menu Design: Beyond Gross Profit

Timestamp: 31:41–33:36

• Certain menu items, even if profitable per sale, may hurt the labor model (e.g., labor-intensive charcuterie, lobster bisque).
• In seasonal downturns, adjust the menu to lower-prep, easier pickup items to reduce labor needs and control costs.
  • Chip Klose: “…tighten up labor… you need a menu that can be… easy to execute on the pickup… So you can run instead of five guys in the kitchen, you can just run with three or four.” (32:13)

---

Notable Quotes & Memorable Moments

• On Contribution Margin:
  • Jim Taylor: “If we miss the math on that part, from a dollar’s perspective, the whole menu becomes less profitable.” (08:12)
• On Menu Focus:
  • Jim Taylor: “…if you want to be really, really good at being famous for one or two things, you actually have to intentionally be bad at variety.” (24:08)
• On Value Perception:
  • Chip Klose: “People want good stuff, but they don’t want to seem ostentatious. They don’t want to, you know, feel like they’re overspending and stuff. That idea of price anchoring is so—it’s so key.” (28:21)
• Charcuterie Warning:
  • Chip Klose: “I don’t care. We’re not making money. We’re not making money on it.” (31:41)

---

Actionable Takeaways

• Focus menu optimization efforts on the top 10% of your sales mix.
• Use a strategic mix of low and high food/beverage cost items to maximize both perceived value and profit.
• Regularly review both the percentage and dollars of contribution margin; don’t sacrifice one for the other.
• Leverage menu psychology—price anchoring, speed bumps (novelty experiences), and tight brand positioning—to both delight guests and grow check averages.
• Be prepared to intentionally “be bad” at some things (variety, speed, price) to be great at what matters most for your business model.
• In slower periods, redesign menus to streamline labor and prep.

---

Connect with the Speakers

• Jim Taylor:
  • LinkedIn: Jim Taylor
  • Website: benchmark60.com
• Chip Klose:
  • RestaurantStrategyPodcast.com

---

For more insights and to join the conversation, visit the episode show page.

Transcript

[Host]

When we talk about cost of goods

[Chip Close]

sold, we're talking about a percentage, right? And ours is an industry of percentages. We live and die by our margins.

[Host]

But that doesn't mean there aren't other considerations.

[Chip Close]

There very much are. Today I'm joined by my good friend and colleague Jim Taylor. He runs Benchmark 60.

[Host]

He's here to talk all about cost

[Chip Close]

of goods sold because he sees things

[Host]

differently and I like that.

[Chip Close]

There's going to be, there's going to be a little argument back and forth, a little bit of a disagreement because I see things one way, he see things another, and neither way is wrong. But I think having a full understanding of this conversation will help you be a better owner and operator. Don't go anywhere. There's an old saying that goes something like this. You'll only find three kinds of people in the world.

[Host]

Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.

[Jim Taylor]

Foreign.

[Host]

Thanks for tuning in.

[Chip Close]

My name is Chip Close.

[Host]

I am your host here of the Restaurant Strategy Podcast. We put out two new episodes every single week.

[Chip Close]

I also put out tons of content all over the Internet.

[Host]

You can find me on YouTube, Instagram, Facebook, TikTok. All tips, tactics, strategies meant to help you level up and build a more profitable restaurant. I also host a coaching program.

[Chip Close]

It's called the P3 mastermind.

[Host]

To date, over the last five years,

[Chip Close]

we've put more than 520 people through the program.

[Host]

The program has grown because the program works. The P3 mastermind is where you go

[Chip Close]

to level up, to drill down, dial

[Host]

in profits and figure out a way to grow. So if you are struggling with profit and growth, then it's worth a conversation. RestaurantStrategyPodcast.com Schedule Grab some time on the calendar. You'll chat with me or someone from my team and let's just see if

[Chip Close]

you're a good fit again.

[Host]

RestaurantStrategyPodcast.com Schedule as always, you're gonna find that link in the show notes. Now, if you've listened to this show for any length of time, you've heard

[Chip Close]

me talk about Kickfin.

[Host]

Because they've been a trusted partner of mine for years and I genuinely believe in what they do. For restaurant operators, see, managing tips has always been a headache. There's never enough cash in the drawer at the end of the night. Managers are stuck making bank runs throughout the day and then doing spreadsheet math at, I don't know, one, two in the Morning tip pooling regulation keep getting more complex. It's just not fun. And that's exactly why Kickfin exists. With Kickfin, restaurants can calculate chip pools automatically and send instant cashless tip payouts to employees existing bank accounts. And I said cashless. No cash, no predatory pay cards, no glitchy employee apps required. Your team gets their tips fast in the account they choose, right when their shift ends. Kickfin integrates with all the major POS players. Sotoast Square, Skytap, Genius Union and many more. So you get fully automated end to end tip management. It's fast, it's accurate, and it gives you a clean digital record for accounting and compliance. Kickfin powers tip payouts for every type of concept from mom and pop shops to regional hospitality groups to national brands like Walk On Sports Bistro, Marco's Pizza and Toasted Yolk Cafe. Great hospitality starts behind the scenes when your people feel valued, when they are paid fairly and paid fast. I promise everything improves and Kickfin makes that possible. If you're ready to save hours every week, eliminate those cash runs, streamline your accounting and make tip payouts the best part of everyone's day. Visit kickfin.comdemo and yes, that link is in the show notes.

[Chip Close]

All right, so my guest on today's show, thrilled to welcome back Jim Taylor. He's the founder and CEO of Benchmark 60. He's written a couple of good books, bold operations, bold consulting. He is one of my absolute favorite people in the world. He is super knowledgeable. Another fellow coach like me, and I'm thrilled to call him both a friend and a colleague. We're talking about something very specific today. But Jim, why don't you say hello and give yourself a proper introduction. Anything I didn't get to.

[Jim Taylor]

Great introduction. I appreciate it. It's good to get a chance to come in and hang out with you again on the show. Getting invited once was special. To come back a second time is even better. So thanks for the opportunity.

[Chip Close]

This will not be the last. I've always love our conversations, both when we hit record and just in private. I think there are a bunch of people out there who know what they're doing. I think very few people who know what they're doing and can really articulate it well. And I think that's a superpower. I work very, very hard to be able to get good at articulating what I do, how I do it, how others should do it. And I think this is something you are very, very good at. I think you've got the humility and patience required to be very good at coaching, working with clients in that way. One of that we started chirping about on LinkedIn was talking about cost of goods sold. And you said something that I sort of pushed back on because I agreed with what you wrote. But I also see it a different way. Why don't you bring everybody up to speed? What was the post that you had posted? What was the point you were trying to make? And then I'll come in and sort of talk about my caution, the hazard lights, and I think we'll have a really good conversation that stems from that.

[Jim Taylor]

Well, there's probably a few different ways that we could go in this conversation in terms of the actual specifics of the post or which one it was. But I am definitely sure that it was something contrarian about, you know, high food cost is your friend, or high food cost doesn't matter, or something along those lines. Right. Because it's amazing how often people get caught up in the percentages when there's other things to consider. So, you know, it may have started a bit of a debate between the two of us, but it's healthy.

[Chip Close]

Yeah. So Jim was talking about, you know, we talk, we.

[Host]

Ours is a.

[Chip Close]

Ours is an industry of margins. And with such tight profits, we have to be mindful of the margins. Right. We have to keep labor in check. We have to keep our beverage cost, our food cost in check. We have to make sure that the lease we're signing is at a specific percentage of our targeted revenue if we want to have anything left over at the bottom. And one of the points, because you're right, it was a contrarian post, and you do that really well. And I try to try to be good at it as well. One of the things was, you know, high food cost is your friend. And you were really starting a conversation about contribution margin. And you're basically saying, hey, you know, we're targeting a 28% food cost. But I had a client who had an item, you know, we decided to, you know, go all in, and it ended up being a 42% food cost. But the contribution margin, like what it delivered in gross profit, was way more than everything else, which was quote, unquote, like in the pocket in our 26, 27, 28% food cost. But look at this. One Item that was 42% is actually contributing way more to the bottom line than the other things. And I pushed back on this and I said, I obviously agree, and there's a certain percentage of items on a menu that I think you can have there. But I think it's hard to make an entire menu of those things. And the idea is, hey, if all Your entrees are 28, 30, $32, having a $58 something at a 42% cost is still dropping more to the bottom line than any of the, you know, it's, the $58 steak is actually dropping more to the bottom line in gross profit than a $28 chicken. Which is. Right, except it begs the question, like we can't have an entire menu of $58 steaks on there because everybody is thinking about, you know, they only have so much wallet size and things like that. And so the answer can't be, I think the danger of what you were saying and what I posted, and I know you were being contrarian just to get somebody like me to take the, to take the bait, but I think the danger there is everyone say, well, it doesn't matter because look at the contribution margin because when you get an entire menu of that, it can be very, very dangerous.

[Jim Taylor]

Sure.

[Chip Close]

Talk to me where, talk to me where we go in this conversation after that.

[Jim Taylor]

Well, there's, there's two immediate things that pop into my mind. I mean the one which you touched on the, you know, $58 steak or those types of things, the, the general sort of basis of how I always think about menus is first of all, I would way rather sell a 40% food cost item that makes $18 when we sell one than a 22% food cost item that makes $4 when we sell one or $6. You know, that's, and, and if we miss the math on that part, from a dollar's perspective, the whole menu becomes less profitable. So that's just, that's one, one piece. The other piece is that we have to, and this is where, you know, I love the discussion that this type of thing creates. We have to factor in sales mix. Right. Because if, if what scares me sometimes with menus and restaurants is if we write the whole menu at 26% food cost because we want to end up with 26% food cost, we're actually doing ourselves a disservice by leaving a lot of money on the table.

[Chip Close]

I agree, I agree. So explain further there because I think I know where you're going to go. Let me pull up that thread though. Give me an example in real time.

[Jim Taylor]

Well, we see restaurants all the time actually that they, they either have written their whole menu priced at 26% food cost because that's where they want to end up or they don't understand how sales mix impacts the blend to get to 26% food cost, you know, and I'll hold myself accountable here based on the post that you're talking about. If we're going to have 40 or 42% food cost items on the menu, we also have to have 18, 19, 20 food cost items on the menu. And some are going to move more than others.

[Chip Close]

So I want everyone to hear that. So, Jim, it's okay to have a item on your menu that's 18% food cost, right?

[Jim Taylor]

Absolutely.

[Chip Close]

So I always talk about McDonald's, right. Number one item on the McDonald's product mix is the French fries. French fries sell at approximately a 7% cost. And knowing that they are making money hand over fist every time they sell you fries doesn't make you the consumer at least doesn't make me the consumer frustrated or angry. I'm not like, oh, that's a, that's a ripoff. They're not a ripoff because they're worth it. They're, that's the best part of a meal there. Not going to go get a, you know, Quarter Pounder and not get fries. Just like a psychopath sits in the corner with just a, you know, Big Mac and no fries. Like you got to have the fries. But they can lose money, not lose money, but they can lose margin on certain items because they know they're making it up with their number one item on their product mix coming in at roughly a 7.1% food costs.

[Jim Taylor]

There's, there's always opportunity to have low cost items on the menu for sure. And some of them move like crazy. Right. As long as they meet the labor model, which is another part of the conversation, then it's a good thing.

[Chip Close]

Yeah, yeah. One of the things that, that we've lost over the last, I'll say 15 years or so to take this because we're still talking about cost of goods, this, beverage programs and the way that now every restaurant needs to have a list of specialty cocktails, which I don't know that they do. I think it's nice if you want to just highlight, feature some that are quick grabs. You're giving people an idea so they don't have to think too hard about what they want. That's the point of a specialty cocktail list. Not to show off sort of the prowess of your mixologist or your bar director or whatever, which is now what it's become. And it's become multiple touches and finding really unique. Look at all the Amaros we're using in these things and finding really quirky, unique stuff, but it's not. It's meant to be a quick call sheet so somebody sees something really delicious and goes, oh, that sounds great. Yeah, yeah, I'll start with that. The whole point 20 years ago of having a list of specialty cocktails was to make it really easy and frictionless to get a first drink on the table. And now it's just turned into something else to that point. Those specialty cocktails years ago, where we'd have like 3 or 5 on there instead of 8 or 12 or 15, they came in at like an 8, 9, 10, 12% food cost, because we are. Beverage cost because we had really great deals with our liquor reps. And we say, hey, listen, man, I'm gonna put one vodka cocktail on the menu, one whiskey cocktail, one rum cocktail, and I'm gonna move a ton of it. So what can you do for me with the pricing? And so we got really, really great pricing. So not only did this make it really easy for someone to order something really quickly so me to get that drink on the table, but because I was going to move so much product because I only had a couple of these specialty cocktails, I knew I could get preferred pricing with my vendors. And so I wanted people to order these because I made more money. It was, it was more money than if they just got an old fashioned, than if they had just gotten a martini.

[Jim Taylor]

Yeah.

[Chip Close]

Does that make sense?

[Jim Taylor]

100%. You know, I saw, really, actually witnessed a really. And participated in a really interesting and, and really, you know, simple yet innovative way to do exactly what you're talking about. Just the other day we were out for dinner at steakhouse, not overly fancy steakhouse. And I hadn't seen this happen in a very long time. Every table, when they sat down, the waiter or the, the person taking care of them came over to the table with a champagne cart. Right? Old school, simple. They had the lowest end Prosecco that was on that champagne cart was selling for $12 a glass. I mean, we're not talking about having to buy hundreds of dollars worth of bubbles. They, they did have very expensive, you know, dom Perignon at 1:25 type thing in glass. But the thing that was fascinating, talking about speed of service, getting a beverage in someone's hand and, and at a good cost percentage. We watched and it was like 80% of people in the room ordered something off that cart.

[Chip Close]

Yeah, 100%. I was, Jim, I was just working with a client. It was just on site out in Ohio about three weeks ago and we talked about, they were talking, we call them speed bumps, right? That all these little things, these moments that make you go, oh, that's cool. Oh, champagne car being wheeled over to the table. You go, o, that's interesting. The best restaurants have, you know, a dozen of them so that you're not going to get them all. But over the course of the night you're going to see maybe three, four, five of them and you're going to go, that's going to be something that sticks in your brain. Just like the champagne cart. You're like, oh, that's different, that's interesting. And we were talking about, it's this Italian restaurant and the whole dance was between, you know, there's. They're in a community that has a huge population of Italian Americans and yet they don't necessarily know this like traditional, like Italian, specifically, like northern Italian sort of vibe. And one of the things they said, I said, you know, why don't you. One of the things we talked about because they do some of this cart service for different items. And I said, why don't you just get one of these carts, wheel it around and put all these aperitifs on there and say, this is like a traditional way to start a meal when you're in Florence, when you're in Milan, when you're like, that's what you're doing. Everybody's going out for a drink before they get to dinner. So just do this, wheel it over and say, hey, it's traditional in Italy. If you were at, you know, any cafe in Milan, you would go to the place next door, have a drink before you came over here. So what would you like? Would you like, you know, any of these and have eight or ten options here. So number one, culturally you're introducing people to something they would naturally do anyway and you're getting that drink. It's just, it was such a no brainer. And they said, well, I don't know if people will do. Costs us absolutely nothing to try it for 30 days and see if we can't talk them into it. If for nothing else for the novelty of it. I said, and pour them little tastes. Say, do you want to, you know, try something? If you find something, you know, if you see something you know you love, I'm happy to get you a glass of it. And if you don't know something, if you want to try it, by all means, I'll pour you a taste of it. And they're like, oh, that was like, it just Kept getting better as we. As we continue the conversation. And we just. This is absolutely. I mean, by the time I walked out the door four days later, they were like, we're absolutely going to do this. This is so, so cool.

[Jim Taylor]

And if you consider. I mean, you're talking about it from an experience and service and tradition and culture perspective, if you then could go and connect that to the business model, I mean, sure, sure. They have $125 glass of Dom on that cart. They have a $7 glass of Prosecco and three or four options in the middle. The blended average probably adds at 1 80% order 1. It's adding 2, 3, $4 to every average check of every single guest. I mean, that is substantial, at least.

[Chip Close]

And so, to be honest, we were coming at it from both directions. So we, you know, people were starting at the end of the race, coming to the middle. People were starting at the beginning of the race. So culturally, esthetically, you know, experientially, we were having the conversation, but the first thing we were trying to solve was how do we increase check average? Because we said. We looked at it, we said, if we increase check average by $6 per head, it changes the. It changes the entire economics of this model. And it was a great. Well, how do we do that? And I said, great, that's the right question. We can do this not just by one thing, but by a. By a series of things.

[Jim Taylor]

Yeah.

[Chip Close]

I said, but missing that first beat is such a. Is such a missed opportunity. Jim. This is the Olive Garden. This is what the Olive Garden did in the 90s, if you remember this Olive Garden walked over, right, with a whole bunch. You know, they had. The table was all set with silverware and glass and wine glasses, and the server walked over with a bottle of wine that they were featuring. I'm sure somebody at corporate decided what they were featuring that week, and they came down and say, hey, how's everyone doing tonight? My name's Chip. Welcome to the Olive Garden. Quick question. I would love to start you off with just a little taste of this Chianti we're featuring. Blah, blah, blah, blah, blah. It's $42 a bottle. If you decided to have it, this bottle's yours. I just opened it. And if you don't like it, at least, you know, we're just, you know, welcoming you with a little bit of wine. And they pour it for everybody. Oh, that's really good. Said, great. You want to just keep it? And I said, great. And they would just pour the rest of the wine. And it was like they made, you know, I always say first approach is about selling that beverage. But, like, they increased the check average because they really put their money where their mouth was. They walked over with. And now we. So, like, we didn't invent this. We didn't invent this. And guess what? Olive Garden didn't invent it either. Like, Uncle Giusettio in, you know, whatever, you know, casino, you know, outside of Rome. Like, they've been doing this for like 200 years. Like, you know, the best way to do this is just get somebody. Just get somebody some wine in the glass. They're never gonna turn down that free half glass. And then they'll just have more of this. Same thing.

[Jim Taylor]

Absolutely.

[Host]

Ajinimoto is your answer to every busy dinner rush spent deep in the weeds. When hungry customers walk through your door. They expect good food, right? Good food that tastes homemade. But making every dish from scratch can cut into your profits. Certainly what we're talking about today, especially with the cost of ingredients and, yes, the cost of labor. That's where Ajinimoto Foods comes in. Ajinimoto has a huge catalog of fast, easy to prep frozen Asian products that taste and look homemade. That includes classics like fried rice dumplings and onion rings and new trendy fusion plates like kimchi chicken pot stickers. See, choosing Ajinimoto is choosing over 100 years of proven expertise in the food service space. Choose to save time, choose to save money in your busy kitchen without compromising on the quality your customers have come to expect. Learn more about [e-mail] and yes, you'll find that link in the show notes

[Chip Close]

when you talk about that product mix. Right, the sales mix. How do you. Are there any hard and fast rules that you think about when we talk about sort of middle of the bunch, bottom of the bunch, top of the bunch. How do you approach it?

[Jim Taylor]

Well, you know, there's the sort of, I guess, traditional way of looking at menu engineering and menu mix around, you know, the plow horse and the dog and the, you know, the winner and all those different things. We always just try to start really simple. If you can. If you can actually print off or look at your sales mix only. I should be careful. I say this, but I will say it. Only the top 10% of your items really matter. If you're trying to move the needle on cost of goods from a sales mix perspective, because, you know, I was talking to a chef not long ago and we were encouraging them to make sure they had recipes for every item on their menu. Because they had no recipes. Yeah, their menu was costed at, let's say, 28%, but they had no recipes. So they didn't know what was happening. From a variance perspective, what was actually happening, you know, actual versus theoretical. A different conversation again. But he said, I just don't have time to get all these recipes done. You know how long that'll take me, My restaurant's busy, I'm in the mix, I'm on the fryer, whatever we said, just find the top 10 items that sell the most of your menu, maybe even top five, depending how big the menu is, and make sure you have recipes for those. And then let's work on making sure those recipes are optimized. Because you know the batch of ranch dip that gets made that you sell a few of here and there, at the end of the day, that recipe doesn't really matter that much when it comes to overall profit. And so anyway, the point that I'm trying to make here is we see people get so caught up in all of the work that it takes to try and do that whole menu. Only the top 10% matters.

[Chip Close]

Yep. Talk to me. I come from the school where the number one item on your product mix also should be the number one most profitable item in your business. Do you subscribe to that?

[Jim Taylor]

I subscribe to. If we take an approach, and I agree with you, but we take an approach of look at the average contribution and cost of goods percentage for every item of the top 10% on your menu. If an item is green in both. Right. It's good from a cost of goods perspective and it's above average in terms of your contribution. Do as as much as you possibly can to sell a whole lot of it. If it's below in either of them, you should either re engineer the recipe or change the price. If it's red in both, maybe it should come off the menu. So we try to keep that as simple as possible. But, but I do agree with you in terms of what you're saying for sure.

[Chip Close]

I think at the end of the day I don't want that much on my menu. I, I just, I feel like over the 90s and early 2000s, we got into these bigger and bigger and bigger menus. Everybody says, oh, you come from fine dining. You're used to, you know, these tight little menus, which I might be a little bit guilty of. But mostly when I go somewhere, I want to know, like, what should I get here? Like, what are you Famous for. And I want it to be really, really obvious. I don't want people. Okay, so page three at the very bottom, you'll see this. It's like. It's like, just tell me what you're famous for. Just tell me what I should get here and make it really, really easy. It's like egg slut in here in New York City. Like, what are they famous for? I don't know. The one thing that they'll sell you like that. That's what they're famous for. Just get that. Just do that.

[Jim Taylor]

So true. Yeah. Keeping the menu tight makes it easier to control the cost, the inventory, you know, your. Your pricing strategy. I mean, all of those things. It gets easier the tighter the menu. I would agree, for sure.

[Chip Close]

It makes marketing easier, too, because then you're in a category of one. Like, we're the place you come for this. Like. Like, I just. I think anymore. I think it's going to get really, really hard as we move forward if we don't have these tight, focused menus. And I don't mean so tight that there's no variety, because if you want someone to come out there multiple times in a month, they don't necessarily always want to come get the chicken. Even if the chicken is what you're famous for, it's like, ah, the chicken's so good. But I'm really in the mood for, you know, fish tonight. Like, you want to be able to give them some room to do that. But it should also be really, really clear who you are, what your point of view is, and, like, what. What you do better than anybody else. And. And why? Because really, it's. We're answering that. That question, that value prop question, right? What do you have that, you know, what makes somebody choose one thing over another? What do you have that they can't get anywhere else?

[Jim Taylor]

You know what? There's a. A quote that I love by a woman named Frances Fry, who wrote an incredible book called Uncommon Service. And she explains in really good detail, if you've never read this book, that if you want to be great at one thing, and I think this applies to restaurants so well, if you want to be great at one thing, you intentionally have to be bad at something else.

[Chip Close]

I love that. How does that. How does that play out in real life?

[Jim Taylor]

Well, I think it applies in a few ways. I think it applies to restaurants in one way, specifically about what you're talking around menu size. If you want to be really, really good at being famous for one or two things, you actually have to intentionally be bad at variety.

[Chip Close]

I think that's really great. This is. The Cheesecake Factory is the opposite thing, right? And people are like, you know, the Cheesecake Factory, their differentiator is variety. But their downside is that none of it's particularly great. Like, they're not great at anything. They're great at variety, but everything else is like, okay. Like, everything on the menu is okay. It's not, you know, you're not going to be insulted, but you're also not going to like, write a book about it, right?

[Jim Taylor]

And you know, this could, this could apply to, for example, a fine dining restaurant. If you want to be the best and be great at quality and still be profitable and run a sustainable business, then you intentionally have to be bad at price. You have to be expensive, right? It's just a different lens to look through. If you look at, you know, the in and out burgers of the world, if you want to be really, really good at quality and speed and consist, again, they're bad at variety because they want to be laser focused. So it's just, I always find it to be an interesting lens to look through. It's like, what are we trying to be great at in exchange for something we're actually okay with not being good at? Because you can't be great at everything.

[Chip Close]

I love that. The way we started this conversation was talking about that contribution margin and having. I want to loop back around because I want to have one final conversation around this before I kick out of here. The conversation around this is, you know, the people are hurting and that, you know, their dollar's not stretching as far as it did. And one of the first things that they cut out of their monthly budget is dinners out. And we're definitely seeing that. I know the people listening to this are feeling that. So, yeah, when we talk about, we talk about, hey, having this higher margin item, but it's actually dropping more to the bottom line. But now we get into this conversation of, well, people, you know, are looking at the 28 versus the 58 and they're going, yeah, actually, but I can't, I can't justify spending that. So I'm just going to get something lower. How do we apply that? Same way of thinking, like, you know, how do we take the learnings from this? Which, yep, you actually make more money from it, but you have to ask people to spend more money on that item. So dinner out is more expensive. And we're watching people, you know, really lean more into these, like, value meals. And I think I think things are bifurcating. Been saying this for the last 18 months. I'm watching it in real time. Cheap convenience, fast food, quick service. It's like it's exploding. And then also fine dining, I think has never been more popular than it is now. And I think we're watching all this stuff in the middle is really suffering. So how do we apply or how should we be thinking about that idea of margin? Pmix contribution margin. You know, in the current climate, one

[Jim Taylor]

thing that I always encourage people to do once they look at that contribution, dollars in combination with percentage, because both are very important. If we're worried about value prop, you know, more than we ever have been, or we're worried about guest visit count or worried about, you know, those types of things like you were describing. There's a really interesting thing that can happen when you work on your menu from that perspective, and we actually encourage this all the time. There are items on your menu that you probably should increase the price on. Right. But there are also items on your menu that you could easily decrease the price on and still be profitable. So that item that's 42% food cost, that makes 18 when you sell one. If your average contribution is $10, you've got $7 of wiggle room there where you're still above average. You're not going to want to drop at $7, but you could probably drop the cost, the price of that item by $1.50, $2, and you're still going to be very profitable every time you sell one.

[Chip Close]

Yep, yep.

[Jim Taylor]

So that's an interesting exercise. And it also helps from a customer, customer service perspective, because if, if a customer walks in and says, you know what, things are expensive and it looks like you've raised your prices, think about how powerful it is. When you could say, you know what, there are certain things we've had to raise. Here are some items that we actually had. We actually lowered the price on these to make sure that we're still taking good care of you.

[Chip Close]

I love that. It's also using as good a time as any to remind people about the idea of price anchoring. Right. Is that in every category or menu, you really should have a more expensive, a meaningfully more expensive, like 40 to 50% more expensive than everything else. Yeah. Simply because human beings, and there's all this data that shows human beings are really bad at affixing value to a thing, but they're really good at comparing value, comparing one thing against the other. So this steak versus the steak I had last week this steak versus the other steak that's on the menu, that kind of thing. And so there's this famous experiment that was done, like the Opus One. They call it the opus one effect. That we have a wine list, 50 item, you know, 50 different wines on the list. Most expensive is the Stag Sleep wine. Stag Sleep Cabernet. It's there for $135. You know, consultant comes in and, you know, says, we never move this. Nobody wants to spend that much money. You know, we move like two or three every single month. And he says, wait, just watch. And he adds a bottle of Opus One to the menu for $385. So now most of the wines are between like $50 and $70. Then you get one at 135, then another one at 385. What you find is that you sell two or three bottles of the Opus One because somebody always wants to get the most expensive one. But then you move like 20 or 30 bottles of the Stag's leap simply because it looks so much more reasonable. It looks so much closer to the other ones. People are like, well, I want something really good, but I don't need to go crazy. So I'll just get this thing where 30 days prior, 60 days prior, that was the thing that they were like, well, we don't need to get crazy here. Let's just. And they made a decision based on people want good stuff, but they don't want to seem ostentatious. They don't want to, you know, feel like they're, you know, they're overspending and stuff. That idea of price anchoring is so. It's so key. It's such an easy thing to do.

[Jim Taylor]

And the price anchor item could run at 60% wine cost and still be more profitable than every other wine on the menu.

[Chip Close]

100%. I mean, this is where you get these big first growth Bordeaux or you get fancy Burgundy. When you get something on there for hundreds or hundreds or thousands of dollars, it still makes more. My bottle of $100, $135 stag sleep, that's in there for like a 25, 26% cost. And then again, my bottle of whatever it is at 60, 70% cost, that's still making so much more money off of it, right? This point of contribution margin.

[Jim Taylor]

And, and this applies, you know, we're talking about some fine dining and some, you know, hundreds of dollars for a bottle of wine or thousands. This applies to, like you said, McDonald's french fries. This applies to the $7 appetizer on your menu. This applies to the $14 burger, whatever, you know, type of concept it is. The same Math exercise applies 100%.

[Chip Close]

You know, it's funny. One of the items that I've told people to get off their menu, like, almost across the board over the last three years has been charcuterie plates, right? They put together this beautiful charcuterie plate with meats and cheeses and nuts and grapes and all of that. The problem is it's the most expensive appetizer on the table, but they get one for the center of the table. Six people just sort of, like, pick on it while they're waiting for their entrees. So the $45 appetizer divided by six people, you're like, actually, I don't want that. I want everyone to order a $14, $15 appetizer rather than 6, 7, $8, you know, for the. The check. Average people are like, yeah, yeah, but it looks so beautiful. I'm like, I don't care. I don't care. We're not making money. We're not making money on it.

[Jim Taylor]

100. You know, the. And maybe there is an opportunity to have a third discussion about this one day, because then you start to think about how does that item connect to your labor model, and is it actually good or bad for the labor model? The example we always use charcuterie is one of them. The other example we always use is an item like lobster bisque. If you have to store 100 frozen lobsters in your freezer all the time and go through all of the process to make lobster bisque, it might have good cost of goods and good contribution, but it could actually be hurting your labor model.

[Chip Close]

It's funny, Jim. I always talk about. I feel like I've been talking about this a lot over the last year. I said, does everybody here have a winter menu? I'll talk to my group. You know, the P3 mastermind said, does everyone have a winter menu? And they just sort of look at me. They're like, well, I mean, we make some seasonal changes. I was like, no, no, no, no. We're talking about a winter menu. And like, what do you mean? I was like, you make half or, you know, it's. I don't know, 40% decrease in revenue between Q4 and Q1, at least in New York City, for example. So with less revenue, you have to tighten up labor. Just, it's. It's necessary to do so. And you need a menu that can be, you know, low on prep and Easy to execute on the pickup so that you don't have all these guys coming in to, like, shave carrots and chop onions and all that stuff. And also, so you can run instead of the five guys in the kitchen, you can just run with three or four. And so you gotta have one guy running saute and grill or one guy doing saute and fry. You know, all of that is fixed on the pickup. That's fixed in prep and pickup. So that's why we get short rib. Not because we're like, ooh, short rib, hearty. It's like, no, man. Because we can have that thing sort of like cooking off all day long while I'm doing the rest of my prep. And then on the pickup, man, that's just super easy to sear up for, like, 90 seconds in the pan. It's so easy to execute for, you know, for one dude, 100%.

[Jim Taylor]

Yeah. I love it. There's so much there to unpack, for sure.

[Chip Close]

All right, Jim, we're going to do this. We're going to have another conversation. Talk about labor because it's something I'm very, very passionate about. Last words of wisdom, sort of final takeaways for the audience here based on today. Today's conversation.

[Jim Taylor]

Well, I. I think this is an easy one. Sometimes you, you know, you challenge me in other ways, but this is a good. This is an easy one. There's really simple math that you could do there. Right? Like I said, think about it in terms of green or red. Is it green in terms of cost of goods, percentage above or below average on your menu, is it green or red? In terms of contribution, dollars above or below average on your menu. That'll give you really easy indicator of which items are good, which items need work, and how to make the menu more profitable.

[Chip Close]

I love it. Jim. Where can people go to connect with you, learn more about what you do?

[Jim Taylor]

LinkedIn's the easiest place to find me. Benchmark60.com is the other place that you can locate us. Happy to connect anytime and thanks for the chance to chat again.

[Chip Close]

Perfect. Of course, we will put all of those links in the. In the show notes. Jim, I appreciate you being here to have this conversation to all of the listeners. Appreciate you guys making this part of your week. I know there's a ton of great podcasts. I probably listen to the same ones. You do a ton of really great podcasts out there. I appreciate you making this part of your mix. Reminder, if you get any sort of value from this show, I make this plea every so often go to Apple podcasts, leave us a rating and review. You don't have to lie, just let people know what you get out of the show, why you find value here, why you keep showing up, and why you think other people should show up. That more than anything would help my small business. Jim thank you very much. Everybody listening. Thank you very much.

[Jim Taylor]

Sa.