Improving Restaurants’ Profit Margins with Our New Tool

It’s no secret that restaurants run on notoriously thin margins, but there’s a lot more that goes into pricing that signature plate of pasta or sought-after special than meets the eye. Factors like rising labor costs, economic headwinds, and extreme weather events can all impact a restaurant’s profitability, and our 2025 Independent Restaurant Industry Report shows that independent restaurants are feeling these shifts—and subsequent consumer spending habits—acutely.

To help chef/operators navigate the pressing issue of profitability, we tapped the Executive MBA team at the Ross School at the University of Michigan to create a research-backed, tangible solution. Ross School MBA students engaged chef/owners in JBF’s community in interviews and round table discussions to learn more about their existing pricing practices and identify their biggest hurdles, and incorporated findings from JBF’s industry surveys and external restaurant industry surveys in their final report.

Their research showed that chefs account for direct costs like ingredients and labor, but might not factor in indirect costs such as rent, taxes, and credit card fees. To solve that, they developed the Activity-Based Costing Accounting Method Curriculum and created a free, simple tool called the Activity-Based Costing and Optimization Tool (ABCOT). This plug-and-play spreadsheet allows chefs and owners to input values for all elements of a single dish in order to correctly price it. (Download the tool here, check out our ABCOT Overview for a step-by-step guide on how to use the tool, or view our recorded tutorial.)

“It’s a priority for us to offer really practical solutions that they can immediately implement and make a real difference in their ability to make a profit and have the most accurate financial picture of their business possible,” says Anne McBride, JBF’s vice president of Impact. “The more control they have from a financial perspective, the more they can focus on leadership, and their team, and the creativity and innovation that’s at the center of their business.”

The exercise of costing a dish can also offer chef/owners a more comprehensive look at their restaurant operation. For example, in the ABCOT spreadsheet, there’s an indirect cost tab that includes things such as rent, insurance, utilities, and employee benefits, all of which factor into the cost of a dish. Plugging in different values for benefits such as health insurance or a 401K plan can help chef/owners assess if the resulting price of a dish makes sense. “It’s not only the cost of the dish but being able to play with what you really can afford in your business in terms of equipment, or what you can provide your employees, for example,” says Anna Magnuson, manager of JBF Network and Institute. “So, looking at that and being able to the understand the greater financial landscape of your business.”

Every month, JBF will hold virtual monthly office hours to share further insights on using the ABCOT tool. Anouska Biswas, JBF’s director of finance, will host the one-hour Zoom sessions to share additional instruction and answer questions live.