The Secret to a Profitable Restaurant Menu
Home Restaurant Trends Restaurant Menu Menu Engineering- Secret to a Profitable Restaurant Menu
Great thought and effort go into tailoring a Restaurant Menu. Your restaurant menu is so much more than a beautiful design and a list of food. It is also one of the most powerful yet underrated Sales & Marketing tools. Apart from all the hospitality and services you provide, the foremost reason customers come to your restaurant is for the food you offer. And your menu is where your food gives its first impression.
A Gallop poll found that an average customer spends only 109 seconds looking at a menu, Which is less than 2 minutes. During that time, they scan the menu, read descriptions and check prices before making a decision. So how can you make the most of that time?
Strategically design a Restaurant Menu that is concise, easy to read and understand, well organized, categorized, and thoughtfully laid out. And the best way to design an effective Menu is through MENU ENGINEERING.
In simple words, Menu engineering means studying and evaluating Food cost and sales data in order to determine item price on the Menu. After analysing that, the next step is categorising all menu items into one of four menu engineering categories, according to their sales volume(popularity) and profitability.
In order to achieve favourable results, it is important to study each menu item’s prices and food costs per serving and contribution margin very closely.
How to do Menu Engineering?
Below we outline steps to engineer your menu and increase your profits.
First thing’s first, you need to select a time frame to analyse your menu. If there’s one constant in the universe, it’s change. Like in every other industry, things are always changing and evolving in the restaurant industry. And, in order to keep your restaurant growing, you must constantly change.
One element of your business which needs to be reviewed on a frequent basis is the restaurant menu. Depending on the restaurant’s scale of operation, it can be done seasonally or quarterly.
Though this analysis is a little time consuming, it is a time investment that definitely pays off. However, many restaurants do the mistake of not revisiting their menu pricing on a regular basis. With time, the food cost fluctuates and your menu prices need to reflect that. If you don’t revisit your menu, your profit margins will shrink as the food cost goes up and the item price on the menu remains the same.
2. Measure Profitability and Popularity
The important metrics used to measure menu item profitability are Food cost Calculation and contribution margin.
Food cost is basically the cost of preparing an item, per serving. This includes each and every ingredient that goes into the preparation. Don’t forget the cooking oil, seasonings, and garnishes. Also, add the delivery fees, interest, return charges, or other expenses related to purchasing foods and inventory. Do NOT include labour costs.
Food Cost = Cost of Each Ingredient per serving + Purchasing Costs
Note, the cost of serving includes only ingredient costs and does not include other expenses like equipment, electricity, staff salary, etc.
Contribution margin or individual item profit is the difference between an item’s selling price and its cost.
Contribution Margin(Profit)= Menu Price — Menu Item Food Cost
Determining the menu item popularity
The popularity of an item is another important thing to consider when assessing your menus. This can be done by asking your servers about what are the dishes that sell often or by gathering the count of each item sold in a given time period. Popularity is also determined by comparing sales of items to expected popularity.
3. Categorize your Menu
On the basis of popularity and profitability, Menu items can be categorised into 4 categories. This can be done, once you know how much of each menu item you sold over a particular period of time and its contribution margin.
a. Stars: High Profitability and High Popularity
Menu Items that are most popular amongst your customers and most profitable for you. They are inexpensive to make and ordered more often. These are the items you want to sell the most. Typical examples of such items include pasta or popular cocktails, like margaritas.
b. Puzzles: High Profitability and Low Popularity
Puzzles are menu items that are profitable (have a high-profit margin) but are hard to sell. They are literally a puzzle to solve! It is important to understand why they are not popular or selling much. Steps must be taken to highlight these items while doing menu engineering. Additionally, servers should also try to upsell these items.
c. Plowhorses: Low Profitability and High Popularity
Plowhorses are solid performing items, which are very popular among customers but have high food cost. Menu items that fall under this category are crowd-pleasers. The objective should be to make them more profitable by either reducing the food cost, or slightly reducing the portion served, decreasing food waste or pairing it with high-profit sides and cocktails.
d. Dogs: Low Profitability and Low Popularity
This represents items that are not ordered frequently or are profitable. They occupy space on your menu and ultimately distracts your customers from stars and puzzles. These items should be evaluated to determine if dogs are to be eliminated totally from the menu,
de-emphasised or change the pricing or ingredients based on customer’s feedback.
4.Redesign your Menu
After categorising the items into the above four categories, now it’s time to use the findings from your menu engineering analysis to redesign the menu and form a layout. Along with quantitative data from your menu matrix, it is important to gather anecdotal information from your surveys and talks with personnel or feedbacks.
And the only way to find out is to inquire and learn from their feedback. What do they like the most about your restaurant? What dishes are their favourite and least favourite? Do certain dishes entice them to come to your restaurant, or is it the ambience that draws them in? Do your regulars actually read your menu or do they just order what they’ve always ordered?
There are a series of Menu engineering strategies that can be considered while redesigning
Write indulgent Menu descriptions
According to research from Cornell University, menu items sell 27% more if they’re given a nice menu description. Remember to keep it short and crisp. Long descriptions can defeat the purpose and reduce it’s effectiveness.
The more description you have the higher the value of the item and the lower the price seems in the customer’s head”
– GREGG RAPP, MENU ENGINEER
Highlight your stars and puzzles
Draw customer’s attention to items you want to sell the most. Place eye magnets – graphic elements like an outline, icon, photo or splash of color to your stars and puzzles. Make sure you don’t overdo it. It will form clutter and instead confuse the customer. While putting graphics, remember that less is more!
Choose your menu cover configuration technique very carefully. Each cover configuration has different impact on customer’s choice.
One-Panel Menu: People order faster with such menus but won’t order much. Which would result in lower profit per customer.
Two-Panel Menu: This is considered one of the best menu configurations according to Rapp. It provides customers with a feeling of a full dining experience without giving them the burden of choice.
Three-panel menus: This is a good option if you have too many items to offer at your restaurant. However two-panel menus are easy to read.
Many-panel menus: The more panels you have on your menu the less control you have over the customer’s choices. Customers have difficulty deciding what they want when there are too many options to choose from, and they are more likely to be dissatisfied with the decision they ultimately make. However, there is good news: you can prevent clients from experiencing FOMO (fear of missing out).
Depending on your Menu cover configuration, the eyes of the customer tends to focus on certain areas of the menu more than the others.
After redesigning your menu, the next crucial step is to measure its impact. The impact can be measured in terms of sales and profit. Then, depending on how your Stars, Puzzles, Plowhorses, and Dogs are doing, you can do another round of menu engineering research and make one or two minor modifications.
No matter what sort of restaurant you operate, Menu engineering is one of the most powerful tools to maximise profit. Using menu psychology techniques can also improve the experience of your guests. It can be done by completing this 5 step process. Your menu is a marketing and revenue-generating tool. Consider it this way: There’s the menu you want, the menu your customers want, and somewhere in between is the menu you need to stay in the game.
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