Menu Engineering: How to Make Your Restaurant Menu Profitable
Why is menu engineering necessary? A restaurant’s menu is one of the most critical ways to entice people into your establishment. Even if it only takes a glance, this tool can help seal deals.
Gallop found that customers spend only 109 seconds deciding what they want. They spend the first few moments scanning for specials, reading descriptions, and checking prices before deciding.
To maximize profits, a restaurant menu needs to be concise and well-organized. And the essential part of that is ensuring each dish or drink has been carefully considered for profitability.
Menu engineering is an analytical process that restaurateurs use to make decisions about the items on their menus.
What Is Menu Engineering?
Menu engineering is a way to evaluate a restaurant’s menu by using sales data to guide which dishes to feature and the price. It involves categorizing words based on popularity (sales volume) and profitability.
This will allow you to see which items are profitable or whether an item should be rethought or removed from the menu.
In a nutshell, menu engineering assures that your restaurant’s menu items are profitable, famous, or both.
How to do Menu Engineering and Maximize Profits
Here are the five steps involved in menu engineering:
1. Choose a period
First, you need to decide how often the menu will be adjusted. Evaluating simultaneously makes sense for restaurants that change their menus to produce seasonality. They are crafting new seasonal items for restaurants that rarely adjust and adapt less frequently.
It’s essential to keep track of food costs. If your menu prices stay the same, but you see an increase in charge, your gross profit margin and revenue will be affected.
2. Cost your menu
The metrics needed to measure the menu items are food cost per serving and contribution margin.
How to calculate food cost per serving:
Food cost per serving = Total cost of ingredients per serving
To find your food cost per serving, you need to list the ingredients used and how much each is required. Include seasonings and garnishes as well.
Let’s say you sell hamburgers. You pay $19 for 5 pounds of ground beef, and it takes you 8 ounces of meat to make one burger. That brings the ground beef per serving cost to $1.90.
Perform the same for other ingredients. For example:
- 8 ounces of ground beef = $1.90
- two slices of cheese = $0.90
- two slices of tomatoes = $0.50
- 1 sesame seed bun = $0.25
- 1 tbsp. of sauce = $0.10
One burger costs an average of $3.65 when you add up the cost for each ingredient in it.
How to calculate contribution margin
The contribution margin is the difference between the selling price of a menu item and how much it costs to make.
Contribution margin = Sales price – Food cost per serving
If your hamburger menu cost is $14.40 and the food cost per serving is $3.65, the contribution margin is:
Contribution margin = $14.40 – $3.65
So the contribution margin in this example is $10.75.
How to determine menu item popularity
Many points of sale (POS) systems have reports showing how much you sold an item over time.
Also, you can talk to your staff about what they notice customers are ordering. They are the ones speaking with people every day, so they can give you valuable insight into which dishes sell well.
3. Categorize menu items based on profit and popularity
When you know how much you sold each menu item and its contribution margin, categorize them based on popularity and profitability.
Menu items fall into one of these menu engineering categories: Cash cows, stars, duds, or puzzles. A menu matrix gives an overview of which menu items are profitable, which aren’t, which need to be reworked, and which need to be removed from your menu altogether.
Plowhorses: Low profitability, high popularity
It’s not uncommon for restaurants to create “plowhorse” menu items more expensive than others. The objective with these is either to make them less costly, raise the price of the dish, or change their recipe so they can be paired with high-profit dishes.
When serving plowhorses, be sure to pay attention to the portion size. If your customers leave a lot of food on their plates, then it might make sense for you to serve slightly smaller portions and reduce waste.
Stars: High profitability, high popularity
You can’t go wrong with the most popular, profitable items on your menu. These dishes are inexpensive to make and will sell well because guests order them often. The best way to promote these is by keeping them as they are.
Make sure that your menu design stands out to customers, increasing the likelihood of ordering Stars and maximizing profits per service.
Puzzles: High profitability, low popularity
Puzzlers are not a popular choice, but they’re profitable. The question is, why aren’t they selling? Maybe the dish isn’t noticeable on your menu or could use a more compelling description in its name and marketing materials. Is it too expensive for what you offer with this particular food type?
Any of these factors can affect a menu item’s popularity. The best way to find out what works is to experiment with them and measure your results from changing your prices.
Duds: Low profitability, low popularity
The menu items you have to put a lot of work into but don’t sell well are called duds. They take up valuable space on your restaurant menu and distract you from the famous dishes.
Re-evaluate your dishes when they are not selling well. You can either remove them from the menu, de-emphasize their presence, or rework ingredients based on customer feedback. If you choose to make changes and both sales and contribution margins remain low, consider removing them altogether.
4. Redesign your menu
In addition to the quantitative data, it’s also essential to ask your servers and customers for qualitative feedback.
A great way to get feedback from your servers is by asking them which dishes they typically sell the most, which ones are their hard time selling, and what kinds of negative responses they receive. Typeform surveys can also be a good idea if you want more data about customer satisfaction.
The only way to know which menu items are worth keeping is by using the quantitative data from your menu matrix and the anecdotal information you have gathered.
When it comes to menu engineering design, here are some advice to keep in mind:
Choose the ideal menu configuration
Gregg Rapp’s menu engineering methodology states that the effectiveness of your efforts depends on how many panels are in a given menu.
- One-panel menus make it easier for customers to order, but they end up ordering less food, resulting in lower profits per customer.
- Rapp believes that a two-panel menu is the best way to go. It creates an experience for customers while also being easy on their eyes.
- If you have many menu items, three-panel menus are an option.
- Many-panel menus are less effective because customers have more options, making it harder to influence their decisions.
Write awesome menu descriptions
A study by The Association for Consumer Research found that a well-written menu description can increase sales of an item by up to 27%.
A great menu description is not just a list of ingredients. A good descriptor should use adjectives that evoke the food’s flavor and texture without being too wordy.
Emphasize your stars and puzzles
Place eye magnets next to the menu items you want your customers to try. This will help them focus on popular dishes or new additions.
Don’t be afraid to use graphics, but don’t overdo it. Too many will make each of the highlighted items less critical, and a “sea” of them is not worth any sales impact at all.
One way to make your puzzles and stars stand out is by using eye magnets. However, the more you use them in one place, the less effective they will be.
Consider eye movement patterns
Rapp recommends that when designing a menu, make sure the dishes with high prices or higher profit margins are placed in areas where people tend to focus their eyes.
Beware of the burden of choice
It’s always better to give customers fewer options, but make sure the customer feels like they’re getting a good deal if you can’t do that.
If you offer breakfast and dinner options, it may be a good idea to divide them into separate menus that swap as one service ends and the other begins.
If you have many menu items, then try to simplify the selection. Take into account how much each item costs and see if there are any that don’t sell well enough to justify their price.
Train your staff
When we think of menu engineering, often the focus is on what goes into crafting a restaurant’s food. But in reality, there are many different ways that staff can influence guests’ decisions and ultimately boost sales.
The waitstaff is the face of your restaurant, and they’re out there interacting with customers every day. Help them understand which menu items are most profitable by teaching them what to say when a customer asks for suggestions.
5. Measure your new menu’s impact
Did more people buy puzzles and stars? Were there higher profits for that period than in previous months?
If you feel like something is wrong with your restaurant, it could be as simple as changing the menu or rearranging.
As you test, keep track of what does and doesn’t work.
Final Thoughts on Menu Engineering
It can be challenging to make changes in your menu engineering strategy, but it doesn’t have to happen overnight. Select a time frame, cost your menu, categorize dishes based on popularity and profitability, redesign the layout, and measure the impact of changes you make.