Running a successful restaurant business requires more than just knowing how to cook a delicious meal. Every aspect of your restaurant operations must be in sync, from your restaurant marketing and omnichannel customer experience strategies to your menu design and eCommerce accounting processes.
Increasing the profitability of your restaurant business is not as challenging as you might think. While there are many expert opinions and tips on how to reduce your restaurant customer acquisition cost, one tip that never goes wrong is understanding your customers’ demands.
Key Takeaway: Imagine cooking food that nobody orders. You may end up overstocking and buying wholesale restaurant supplies in excess. This leads to food wastage and loss in profits. In a similar vein, understocking the items required to prepare your customers’ favorite meals and specials will result in bad customer reviews and decreased customer loyalty.
So, how do you solve this problem? Menu engineering is the solution you need.
Your restaurant menu and digital catalog can help you improve your profitability. Now, you may wonder how a menu can improve your sales process. This guide will help you understand what is menu engineering and tips to increase your restaurant sales with your menu design.
What is Menu Engineering?
Menu engineering is the methodical process of analyzing restaurant sales and inventory data to comprehend the appeal and profitability of the items on a menu over time. Restaurants can carefully plan their menus, assess how they perform over time, and make modifications to ensure that every item remains profitable and popular.
Although menu engineering is most frequently discussed in relation to traditional paper restaurant menus, the ideas are also relevant to menus that are available online, drink menus, deals printed on table tents, and items listed on menu boards. In other words, menu engineering can help you maximize revenue if you sell products that are popular and profitable in varied degrees.
A carefully engineered menu can boost your restaurant's profits while promoting your offerings. The process of menu engineering, which allows you to make the most of your restaurant's menu, first calls for research of the cost and customer demand for each item on the menu.
Additionally, a strong restaurant POS system is necessary for menu engineering since it must be able to provide inventory reports, calculate food costs, and do historical sales analysis. Your menu engineering and menu psychology strategies promote your high-margin products while also giving customers a comforting, satisfying experience.
Knowing the prices, food costs per serving, and contribution margin for each menu item is essential for correctly engineering a menu. With that information, restaurant owners can categorize the menu items and determine which ones generate more revenue and which ones don't measure up and should either be changed or eliminated entirely.
It is important to take into account the psychology behind how foods are presented, priced, and ordered when designing a menu. In its simplest form, menu engineering involves evaluating your menu item by item, evaluating each item's performance, and then implementing changes in response to those metrics.
Restaurant Menu Engineering: 3 Ways to Improve Profitability
Let’s look at how you can improve your restaurant profitability and engineer your menu.
- Analyze Your Menu Items
In order to create a menu that is both popular and profitable, you must first analyze the products on your menu. You will be building your menu around these things, thus it is crucial that you know this.
It makes sense for restaurants to create new seasonal menu items at the same time they change their menu to reflect the restaurant seasonality. Restaurants can revisit their menus less frequently if they don't often make changes to their menu.
However, avoid making the error of never reviewing your menu pricing. Your menu prices should reflect the fluctuating cost of food.
When analyzing your menu items, consider the following:
- Check the pricing of your menu
- Understand the profitability and popularity of your products
The simplest way to determine the ranking of your menu items is to map them out using the menu matrix. An item's popularity and profitability are tracked via the menu matrix. To track your menu items, pick a time frame.
Note both the quantity of each item sold and the revenue each menu item generated. Plot the data on a graph, with the Y axis representing the quantity sold and the X axis representing the item's profit.
It helps if you remember these menu engineering terms:
- Dogs (Low profitability Low popularity): Dogs stand for food products with low profit margins and infrequent orders. Take into account taking these goods off the menu. You might want to keep dogs on your menu in some circumstances, though. Children's menu items, like kiddie burgers and grilled cheese sandwiches, are an example of something you should maintain on your menu even if they don't sell well. If you decide to keep selling things in this category, try not to highlight or upsell them.
- Plowhorses (Low profitability High popularity): It is crucial to retain certain menu items on your menu even when they don't have a high profit margin because they are popular choices. Steak or freshly caught exotic fish are two examples that come to mind. To make it more profitable, you may think about using less expensive ingredients or reducing the portion size. You should refrain from upselling or putting the item on your menu if the profit margin on the item remains low.
- Stars (High profitability High popularity): Customer orders for these items, which have a high profit margin, are frequent. Pasta or well-known drinks like margaritas are frequent examples. You should emphasize these on your menu, advertise them, and refrain from significantly altering the components in these recipes.
- Puzzles (High profitability Low popularity): Even though they are difficult to sell, puzzles have a large profit margin. To make these dishes more palatable to guests, the recipes may need to be changed. The menu engineers would advise finding ways to promote these menu items on your menu, and staff should upsell these things as well.
- Redesign Your Menu
Restructuring and redesigning your menu is another way to improve your profitability. Customers are inclined to order one of the first meal that catch their attention, according to studies.
You can use your menu matrix to reconsider which foods to include in your new menu design and layout. Gathering qualitative data and customer and server input is just as crucial as gathering quantitative data.
Color, graphics, and attention-grabbing techniques come into play here. You can try the ‘Golden Triangle’ technique of menu design, where the items you want to sell are placed in the center, top right corner, and the top left corner.
Keep layouts simple and go for a typeface and size that are easy to read. Clearly labeled section headers and dish titles should be included. Menu engineers agree that even if your menu is longer than one or two pages, customers will still feel comfortable choosing from it provided it is scannable and offers fewer options per category.
- Consider Your Pricing
Food cost percentage, contribution margin, and menu item profitability are the three key variables you need to consider. You should be able to find the data in your restaurant's point-of-sale system, but if not, you can manually calculate it using the following formulas:
- Food cost per serving: You must specify the ingredients required to prepare a dish, how much of each ingredient you use, and how much that ingredient costs in order to calculate your food cost per serving. Include every each detail, including the garnishes and seasonings.
Food cost per serving = Total cost of ingredients per serving
- Contribution margin: The difference between an item's selling price and its cost is known as your contribution margin, or the profit from that specific menu item.
Contribution margin = Sales price - Food cost per serving
- Menu popularity: When the time comes to change your menu, having a better understanding of its performance using data fed from your point of sale will offer you an advantage. Most restaurant POS systems provide reports that display the volume of sales of a certain menu item over a specified time period.
Frequently Asked Questions About Menu Engineering
Menu engineering is not rocket science. You do not have to be a mathematician before you can make your menu work for you. With the right customer data, you can engineer your menu to increase your restaurant sales and profits.
Here are some commonly asked questions about menu engineering.
What are the Benefits of Menu Engineering?
Here are some benefits of menu engineering:
- Reducing your food costs by removing menu items that don't perform well
- Emphasizing the menu items that are the most lucrative
- Establishing a system to analyze your menu on a regular basis and keep it at its most profitable
What is Menu Analysis?
Menu analyzing (or menu analysis) is a holistic concept that involves understanding the typefaces, styles, and language used on your actual menus. It also refers to knowing the product mix of food and ingredients you choose to utilize for recipes in the kitchen.
What are the 6 Principles of Good Menu Planning?
The six principles of good menu planning are:
- Calorie (energy) control
- Nutrient density
Making It Work
Most businesses in the hospitality sector, especially restaurants, will profit from menu engineering. It is applicable to nearly every menu, including those seen online, drink menus, and specials boards.
It may seem like a difficult undertaking to create a menu, but it doesn't have to be completed immediately. Set a deadline, cost your menu, classify each dish according to how well it is selling and how popular it is, redesign your layout, and assess the effects of your modifications.