Marginal Gains, Bro!

Diversifying your investments has been the order of the day for many an entrepreneur on their rise to their respective summits. 

Although their exorbitant capital investments may appear to present more risk, a hospitality business relying on just one stream of income for their fortune may be considered just as fraught with danger.  

With countless add-ons for a hotel to offer guests, the potential for venturing into additional revenue streams leaves most other industries in its wake.

The problem however, is figuring out which of them will lead to the promised land, and which will have you regretting the moment that the “unlimited wagyu beef buffet” sounded like a good idea!

Despite the unique circumstances of each hotel, one of the more popular secondary income generators that many accommodation providers adopt is the other half of hospitality…food and beverages.

When it comes to famous power couples, Bed & Breakfast/Dinner are unrivalled! 

Appealing to the inner lazy holidaymaker in guests can make this endeavour a little too convenient if executed effectively. Taking the decision out of their hands regarding meals included in the price of the room can be just the incentive required to sway the swing vote when they are hovering their cursor over potential holiday homes, even if your overall price is slightly higher than a competitor who doesn't offer this option.

But what about those who want to pursue that big ticket return, and offer other meal options? As with the endless revenue stream options, picking food to offer guests can be equally risky.

Whichever route that is followed, ensuring maximum return whilst offering value for money is essential in covering costs without negating quality.

In order for a service to be worthwhile pursuing, it must be profitable.

Ideally, a gross profit margin of around 70% would be expected for food and beverages providers.

Here are the top marked up food and drink items that can leave a positive impact for you and your business.

Coffee and Specialty Beverages

With a gross profit margin of an outrageous 300-800%, the markup for coffee can be an incredibly lucrative additional income for you or a sublet to potentially earn while using your space.

A cafe's ability to consist solely of a coffee machine, a counter, a refrigerator, and some seating options makes it low impact for space commitment, and can be scaled back even further should the service extend to offering takeout only. 

As a universally popular product, serving coffee can be considered an extremely low-risk enterprise given the limited overheads, especially if located within an existing business with amenities and regular foot traffic, such as a hotel reception. With the addition of various specialised vending machines, staff overheads can be eliminated, as well as required space considerably reduced for operations.

Breakfast

As such a broad global concept ranging from the more conservative solitary piece of toast, yogurt, bowl of cereal or soup, to the more adventurous and somewhat obscure offerings such as Balut, the Filipino fertilized duck egg, Mongolian mutton dumplings, or Norway's very own brown cheese, the variety of potential options to offer guests is endless. 

Location and guest demographic will largely help to determine that sweet/savoury spot, however, offering the additional unique items can really put you on the map. 

Contemporary winners include; smoothie bowls, eggs in their various forms and with their many accompaniments, pancakes, and waffles, all of which deviate greatly between cost and sales price.

Italian Cuisine

Pasta is generally extremely inexpensive to produce, and with such a variety of sauces and toppings commonly accepted, your ability to get creative without straying too far from the authentic palette allows you to create a multitude of dishes with high-profit margins. Just don’t ever consider adding pineapple to any of them!

Similar to pasta, pizza ingredients are relatively low-cost, and the menu can be customized with different toppings to suit various preferences and price points, as well as giving you options based on availability.

This should only be pursued if the product can be of good quality, using suitable ingredients, and consistent standards that can be replicated. Slices of spam or cheap, processed ham are not pepperoni and people don't appreciate the mix up.

Mexican food

People tend to get very excited when good Mexican food is available. With a staple of tortillas, marinated meat, and accompanied with avocado, onion, cilantro, sour cream, and salsa, creating a number of various dishes can be achieved very easily without the need to pay a premium to import vital ingredients. 

Salads

Salads can have high profit margins since the main ingredients, such as lettuce, vegetables, and dressing, are relatively inexpensive. Adding premium toppings such as cheese, nuts, dried or fresh fruit, or protein can increase the perceived value in addition to your profit margin.

Appetizers and Sides

Items like fried mozzarella sticks, potato skins, or onion rings are often priced several times higher than their production costs, making them profitable options for restaurants, provided you are making enough of them to operate the kitchen equipment required to cook them. 

An oil vat or oven running constantly can consume high levels of power and your profits along with it, so ensure your operating costs can be mitigated.

Burgers

Although the cost of beef can start to add up, a quality burger and sides can really make a name for the establishment it is being sold at. 

Beware of producing lower quality products. As a highly competitive sector of the market, customers are aware of the quality levels that can be expected, so anything not up to standard can be easily criticised. 

Chicken, Fish, and other lower-cost alternative proteins can also be sold, and can yield positive feedback if executed well.

Ramen

Although in order to create a traditional style, preparation can be extensive and require several ingredients. Due to its popularity, ramen is an excellent crowd pleaser with its unique taste and diversity from other soup offerings. 

People also expect to pay a premium to sample this dish, in comparison to other soup options, so the markup can be extensive if planned and marketed correctly.

Dumplings

Much like other popular asian dishes, due to the ingredients required, Chinese dumplings can be produced in bulk at a relatively low cost, with an expected mark-up resulting in a large profit. 

They are considered as a sharing dish, so pushing a larger quantity towards a group makes the cuisine an appealing prospect when paired with alcohol and other sides.

Beverages

Alcoholic beverages, such as wine, cocktails, or craft beer, tend to have significant markups due to their popularity and perceived value. Soft drinks and other specialty non-alcoholic beverages, such as mocktails or kombucha, can also have high-profit margins. 

Being known for a certain signature cocktail or brand of beer can draw attention from loyal customers, with retention from regulars an excellent free marketing tool.

Desserts 

Desserts are often priced higher due to their indulgent nature and the fact that they are considered a treat. Items like cakes, pies, and specialty desserts can generate higher profits. As many desserts are dairy based, being aware of their short shelf-life should be taken into consideration, as selling 2 pieces of a 16 piece cake will result in excess waste.

Showcasing your desserts and matching supply with demand is essential to reduce waste. Combo deals including coffee and cakes can be effective marketing tools, particularly as items close in on their expiry dates.

Specials 

Daily Specials can be an excellent method to increase profit margins. As the items are not part of the regular menu, they can be upsold or discontinued to suit.

Utilizing stock, and using leftover, abundant, or discontinued ingredients, also allows a creative and fresh addition to a menu, creating intrigue and appeal from guests.

Testing, testing, 1, 2, 3

With a multitude of options available for you to increase your potential revenue with food and beverage options, finding the right balance is something which must be given considerable thought. 

While these items generally have higher markups, the overall profitability of a restaurant depends on various factors like set-up and operational costs, overhead expenses, and customer demand.

So start small, scale up, and test, test, test! Taking chances doesn’t always mean blindly throwing things at the wall and hoping they stick. 

While eggs are an extremely versatile product, being served on your face is not one that is highly recommended!