Did you know that the average restaurant customer only spends about two minutes looking at the menu? You have two minutes to capture your customer’s interest and guide them in their choice of food.
As a restaurant operator, you want to make those two minutes count.
Enter menu engineering.
Menu engineering, in which you optimize your menu for both profitability and popularity, is an essential tool for any restaurant owner looking to increase their profits. By understanding the principles of menu engineering and implementing them in your establishment, you can see significant improvements in both revenue and customer satisfaction.
First, let’s look at some of the key benefits of restaurant menu engineering.
Menu engineering involves analyzing menu items in terms of their sales and contribution margins, and then making data-driven decisions to adjust prices, item placement, and promotion to maximize overall revenue and profitability.
By strategically thinking through your menu, you’re able to identify the items that are most profitable. From there, you can make adjustments to increase their visibility and drive more sales, ultimately leading to greater profits.
How much can you increase your profitability? According to Menu Cover Depot, menu engineering allows you to boost profitability by as much as 10% – 15%.
Additionally, menu engineering allows you to understand which dishes are profitable and which drive higher costs. By identifying these high-cost items, you can make changes to reduce their costs or remove them from the menu altogether.
This not only helps improve your overall profitability but also ensures that your resources are being used efficiently. You’re not wasting valuable resources on dishes that aren’t generating much profit. Instead, you’re focused on the dishes that have higher margins, which ultimately reduces your food cost percentage.
In addition to reducing costs, the menu engineering process also helps you streamline your restaurant inventory management. When you know which dishes are most popular, you can make intelligent inventory decisions regarding what to order and how much. This keeps you from overstocking, which can ultimately lead to waste and having too much cash tied up in inventory.
When combined with highly accurate AI forecasting tools such as those offered by Fourth, you are able to manage your inventory with precision.
Better restaurant inventory management translates into lower item costs and higher profits. By leveraging menu engineering, you can fine-tune your inventory management to optimize overall profitability.
Effective menu engineering allows you to consistently provide the highest quality dishes to your customers. Restaurant inventory management software, such as MacromatiX, allows you to share a centralized recipe library across multiple locations. This ensures that all your chefs are using the same ingredients and following the same recipes, resulting in consistent and high-quality dishes.
Moreover, by regularly analyzing data on food costs, sales, and customer feedback through menu engineering, you can identify any potential issues with quality or consistency and address them promptly. This helps maintain your restaurant’s reputation for excellent food and service.
Menu engineering isn’t just about increasing profits and decreasing costs. It’s also about providing an outstanding customer experience. By understanding your menu in-depth, you can make informed decisions about pricing and portion sizes that align with customer preferences. You can also highlight popular or high-margin items on the menu to influence customer choices.
Furthermore, by regularly updating and refreshing your menu based on data gathered through menu engineering, you can keep customers interested and coming back for more. This enhances their dining experience and builds brand loyalty, ultimately leading to repeat business and a more profitable menu.
Menu engineering helps you optimize both your resources and your operations. It enables better inventory management, more effective cost controls, efficient kitchen operations, dish consistency, better equipment utilization, and more.
Menu engineering also helps you avoid menu bloat. Instead of having loads of dishes listed that are hardly ever ordered, you only keep the dishes that are popular with customers and profitable for your business. This reduces food waste, decreases prep time, and streamlines operations overall.
Data is king when it comes to menu engineering. Not gut feelings. Not hunches. Data. Tracking and analyzing metrics on sales, food costs, profit margins, and customer preferences enables informed decision-making about your menu offerings.
You can identify which menu items are profitable and which ones are hurting your restaurant’s bottom line. You can also spot trends and patterns and make adjustments to your menu based on them.
The insights gained through menu engineering can also help you negotiate better prices with suppliers or identify opportunities for upselling and cross-selling. This data-driven approach allows you to make strategic decisions that will drive greater profits for your restaurant.
To understand the process of menu engineering, you need to first understand the menu engineering quadrant.
As the name implies, the quadrant has four sections:
Let’s look at each one of the quadrants in more detail.
These are your winning dishes. They are both popular and profitable, driving significant amounts of revenue for your restaurant. They cost a relatively small amount and get rave reviews from customers. Sometimes these dishes are referred to as “stars”.
You want to draw attention to these items, both in your menu design and by having staff recommend them. The more of these dishes that you sell, the more profitable you’ll be.
These dishes are highly profitable for your restaurant but, for some reason, they aren’t especially popular. Further investigation is warranted when it comes to these dishes. They are often called “puzzles” for a reason. It’s not immediately clear why they’re not selling well.
Reasons for not selling well could include:
If you can identify the issue and make changes, these dishes could become stars too.
These dishes represent an opportunity for your restaurant. They are popular with your audience but also come with higher costs. If you can figure out ways to reduce the costs or increase profits without compromising the quality of the dishes, you can turn these “plowhorses” (as they’re often called) into “stars”.
How might you increase the profits or lower the costs of these dishes? Some options include:
You have to walk a fine line when it comes to low-profit, high-popularity dishes. You want to increase your profit margins. However, you don’t want to compromise the customer experience in any way. If you compromise the customer experience it could result in the dishes becoming significantly less popular.
These dishes are your losers, or “duds”. They aren’t ordered often and when they are ordered they aren’t profitable. Buying ingredients for these dishes is mostly a waste of money that could be spent elsewhere in your restaurant.
The best course of action for “duds” is to eliminate them from the menu altogether. This will free up space on your menu and in your kitchen for more popular and profitable dishes. However, before you make any permanent decisions, consider experimenting with different pricing strategies or marketing techniques to try and increase their popularity. You never know, they could turn into a “hidden gem” on your menu.
Now let’s talk about the specific steps involved in menu engineering.
The first step is selecting a time period to analyze. If you sell seasonal dishes, you may want to analyze your menu on a seasonal basis. Otherwise, it is recommended to analyze your menu every 3 – 6 months. This will give you enough time to gather sufficient data without waiting too long and potentially missing out on profit opportunities.
What matters most is that you analyze your menu on a regular basis, even if it’s only several times per year. Food prices change and your menu should reflect the costs involved in crafting dishes. What happens if food costs rise but you don’t adjust your menu? Your dishes become less profitable. Regularly evaluating your menu ensures that your dishes are as profitable as possible.
Next, you need to measure both the profitability and popularity of your menu items. To calculate the profitability of an item on your menu, you need to know:
If this data is not available to you from your POS system, you can calculate it manually.
To calculate food cost per serving, you need to total the cost of every ingredient in the dish. This includes garnishes and seasoning, plus associated purchasing costs.
COST PER SERVING = Total Cost Of All Ingredients
So, for example, say you serve a Bacon, Lettuce, and Tomato sandwich. Your food cost per serving might look like:
Your total cost per serving is $1.80 per BLT.
To calculate contribution margin, you subtract the cost per serving from the sales price of an item.
CONTRIBUTION MARGIN = Sales Price – Cost Per Serving
So if you sell the BLT for $7.00, your contribution margin (or profit margin), is $5.20 per sandwich.
Calculating the popularity of an item requires determining how many of the item you sold over the time period in question. This data should be available in your POS system.
To get a full sense of the popularity of menu items, also talk with your staff. What are they hearing from customers? What dishes do they serve the most? Are there dishes that customers seem to love but don’t sell that often?
By combining data from your POS system with insights from your staff, you can make intelligent menu engineering decisions.
Once you’ve calculated the profitability and popularity of your menu items, it’s time to assign them to the proper quadrant of your menu engineering matrix. Use this information to determine which items should be featured prominently on your menu and which might need some adjustments or even removal.
For example, you might be surprised to learn that a popular item is not as profitable as you thought it was. It might be worth increasing the price or altering the recipe to increase its contribution margin.
Or you might discover that you’re regularly buying ingredients for a dish that doesn’t sell well even though it’s profitable. In this case, you may want to consider promoting it more strategically so that you increase sales and profits.
The data gathered from your menu engineering quadrant should directly impact how you design your menu. High-profit, high-popularity items should be placed in prominent menu positions to drive more sales. You should also consider placing high-profit, low-popularity items in more prominent places to draw customers’ attention to them.
Low-profit items should be carefully evaluated – they may not be worth keeping on the menu at all. Or, you could try increasing the price or altering the recipe to make them more profitable. High-popularity, low-profit items should be strategically paired with other offerings to increase overall profitability.
Using this data-driven approach to menu engineering can help drive greater profits in your restaurant. It allows you to strategically design your menu, making sure that top-selling and most profitable items are front and center.
Menu engineering is not a one-and-done process. Rather, it’s an ongoing process involving consistent analysis and optimizations based on that analysis.
Regularly analyze your menu to determine whether your menu engineering efforts are successful. Are your high-profit items actually being ordered more? Is the placement of low-popularity items making a positive impact on sales?
If results aren’t as expected, don’t be afraid to make adjustments. Move items around on the menu, change prices, or try new promotions. The key is to constantly monitor and optimize in order to maximize profits.
Take the guesswork out of restaurant menu engineering with MacromatiX
Your menu should be designed with human psychology in mind. You want your menu to entice customers and lead them to order certain items. Here are some menu psychology strategies to consider.
Psychologists speak of the “Golden Triangle” when it comes to eye movement patterns. In other words, when humans consume information, they start in the center, and then move to the top right and top left.
You can take advantage of the Golden Triangle in your menu design. Place your highest profit menu items in the center, top right, and top left of your menu, as these are the areas where customers’ eyes will naturally gravitate towards. By designing your menu in this way, you can drive more sales of your most profitable items.
Beyond taking advantage of the Golden Triangle, you should look for other ways to emphasize your highest profit items. For example, price high-profit items competitively (without sacrificing too much profit) to attract more orders. Consider using “anchoring” by placing a slightly higher-priced item next to the high-profit item to make it seem like a better deal.
Or, consider using visual cues such as pictures or bolded text to draw attention to your high-profit items. This can help increase their perceived value and lead to more sales.
The way you describe your menu items has a big impact on customer behavior. In fact, one study found that well-crafted menu descriptions can increase sales by as much as 27%, as well as improve attitudes toward the food and the restaurant itself.
Use descriptive language to make your menu items sound more appealing and appetizing. For example, descriptors like “sun-dried” or “juicy” paint a picture in diner’s minds. They allow your customers to visualize what they are ordering before they see it.
Just be sure that your descriptions align with what you’re actually serving to your customers. The last thing you want is for customers to be disappointed with their order.
Don’t settle for less-than-compelling descriptions on your menu items. If you’re not a writer, consider hiring someone to help you craft your menu descriptions.
In addition to placing menu items in strategic locations, consider other ways you might improve the layout of your menu. Your menu should be both aesthetically as well as highly functional. It should make it as easy as possible for customers to choose items and order, while also being visually appealing.
Consider using the following strategies in your menu:
There is such a thing as too many menu options. Psychologists refer to this problem as the “paradox of choice”. In other words, having too many options can actually cause customers to be indecisive and feel anxiety over their choices.
Strategically limit the number of items on your menu. This is where menu engineering can help you. Don’t keep items on the menu that are both unprofitable and unpopular. You’re just increasing the number of choices customers have to make, without any benefit to your bottom line.
Train your staff on how to make menu recommendations and upsell certain items. This can drive sales of your high-profit items, especially if your staff is knowledgeable and passionate about those items.
Obviously, you don’t want your staff pushing items too forcefully on customers. That will only turn them off. But if your staff are armed with insights about various menu items, they can promote them in authentic and helpful ways.
Menu engineering isn’t easy, but it’s well worth the effort. Through planning and strategy, you can maximize your restaurant’s profits while providing a better experience for your customers. And by understanding the psychology behind menu design and making data-driven decisions, you can create a menu that not only looks attractive but also drives sales. So take some time to analyze your menu, make necessary changes, and see the results for yourself.
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