Many colleges and universities struggle to keep retail à la carte food service locations financially sustainable. With high food costs, excessive labor expenses, and price-sensitive students, many institutions are forced to subsidize their dining operations, sometimes by hundreds of thousands of dollars annually.
Two critical tools—Menu Engineering and Prime Cost Optimization—offer a way to eliminate financial losses and transform campus dining into a self-sustaining operation. But can these strategies truly remove the need for subsidies?
Understanding Prime Cost: The Key to Profitability
Prime Cost is the total of food cost and labor cost as a percentage of revenue. In a healthy retail à la carte operation, the Prime Cost should be between 65% and 75%. However, many campus locations exceed 100%, meaning they spend more than they generate.
This problem worsens when two fundamentally different dining concepts—a convenience store (C-store) and a full-service café or restaurant—are combined in one location without proper cost controls.
C-Store Model
- Food Cost: 45%–75% (packaged items, bottled drinks, grab-and-go)
- Labor Cost: 12%–18% (minimal staffing, cashier-focused)
✅ Prime Cost Target: 57%–93% (works if labor stays low)
Café or Restaurant Model
- Food Cost: 28%–32% (freshly prepared meals, ingredient control)
- Labor Cost: 38%–45% (cooks, prep staff, customer service)
✅ Prime Cost Target: 66%–77%
🚨 The Problem:
When both models are combined in a single location without adjusting costs, Prime Cost soars past 100%—forcing the institution to subsidize the operation.
The Power of Menu Engineering
Menu engineering analyzes and optimizes a menu based on profitability and popularity, using a Star-Plow horse-Puzzle-Dog framework:
| Category | High Profit | Low Profit |
| High Popularity | ⭐ Stars – Promote aggressively | 🐎 Plow horses – Reduce cost to improve profitability |
| Low Popularity | ❓ Puzzles – Improve placement & marketing | 🐶 Dogs – Eliminate or rework |
How Menu Engineering Lowers Prime Cost
- Strategic Pricing – Ensures each item covers food and labor costs.
- Combo Deals & Bundling – Increases average check size while balancing cost percentages.
- Eliminating Low-Margin Items – Reduces waste and inefficiency.
- Promoting High-Profit Items (“Stars”) – Maximizes revenue from existing foot traffic.
- Labor Optimization – Simplifies food prep to reduce on-site staffing needs.
The Solution: Combining Prime Cost Control & Menu Engineering
For campus dining to eliminate subsidies, institutions must:
✔ Separate C-store and café operations—track financials individually.
✔ Implement menu engineering—optimize pricing and food mix.
✔ Use technology (self-checkout, kiosks) to reduce labor reliance.
✔ Recalibrate Prime Cost targets—C-store must keep labor low, and café must keep food costs controlled.
By aligning menu strategy with cost control, campus dining can become self-sustaining, and financially viable, and eliminate the need for subsidies.
