Menu engineering is the science of how and where to place items on your menu influenced by two factors: PROFITABILITY & POPULARITY of each item. And it’s the art of making your customers purchase what you want them to purchase. After reading this article, you are supposed to know:
- How the profit contribution of each menu item affects the bottom-line?
- What are the results of categorizing your menu items into four major categories: stars, dogs, horses, and puzzles?
- How to place items on the menu to increase profits?
- How to eliminate items with low or no profits?
As a result, you will know how to engineer your menu to raise your restaurant profit by 15% or more.
Gregg Rapp, a menu engineer who has helped restaurants create more profitable menus for the past 30+ years, says: ” The concept of menu engineering is not based on random, seat-of-your-pants decision making; it is rooted in work performed in 1970 by the Boston Consulting Group to help businesses segment their products in a way that facilitates analysis and decision making. The idea was brought to the restaurant industry roughly a decade later by Professor “Coach” Donald Smith of Michigan State University.”
According to Gregg, this concept can be applied whenever you are selling items with different levels of profitability and popularity. It is applicable to paper menus, digital menus, and online menus.
Here are the 5 basic steps to engineer your menu correctly and accurately:
STEP 1. Find out how much every item in your menu costs you:
You cannot skip this very important step. In this step, you should assign one person to cost your menu by estimating the cost of every element in your menu by knowing the exact price of each ingredient used to prepare a particular item. This person should be the one who proceeds the process of menu engineering as he owns the accurate data about food costs.
“Unfortunately, one of the biggest problems in the restaurant industry is that roughly 80% of restaurants don’t cost their menu, and another 5% cost their menus incorrectly (“correct” menu costing means that everything is costed consistently by a single person, as different people will cost items differently).” Says Gregg. Accordingly, put some effort into this step regardless of the time it may take to gain more profits of your menu engineering process.
STEP 2. Estimate menu item popularity & profitability:
This step starts with calculating the contribution margin, which is the difference between menu price and food cost of each item in the menu to find its profitability. Then you can find its popularity.
Concerning popularity, you should find out what dishes are selling the best, and which are not. Be aware to estimate every menu category separately; i.e. appetizers, salads, desserts, meat dishes, vegetarian dishes, drinks, etc… should be categorized and estimated separately since each and every item of these categories plays a role in your menu.
For example, if you have five types of salad dishes, find out which dish is the most popular (apply the same strategy on all categories).
STEP 3. Classify your menu items into four categories based on profitability and popularity levels:
In this step, the following Menu Engineering Matrix will help you to highlight the best and worst menu items based on profitability and popularity levels from the previous step.
As shown in the graph, this matrix has four quadrants; each quadrant indicates a particular meaning as follows:
- Stars: high profitability and high popularity (High-High)
- Horse: low profitability and high popularity (Low-High)
- Dog: low profitability and low popularity (Low-Low)
- Puzzle: high profitability and low popularity (High-Low)
You can make your decision to retain the item or omit it according to the quadrant it belongs to, as follows:
- The stars: these items are perfect the way they are. So keep them.
- The horses: try to make new versions of these items using cheaper ingredients to decrease their cost and increase their contributing margin, resulting in higher profitability. You may consider raising their prices on the menu but make sure to not affect their popularity.
- The puzzles: these items need to be presented accurately. They lack well marketing, so train your servers to promote these items to the customers. You also can lower their prices to create more sales volume that produces higher overall profits.
- The dogs: these items might be omitted, modified, or changed. You may produce new versions of these items or introduce totally new items, either way, customers wouldn’t notice their absence.
STEP 4. Menu design:
Here are some tactics you may follow when designing your menu:
- Don’t use the currency signs in the menu ($, €, £,…); as it would draw customers’ attention to the price, not the description and they would choose according to the prices.
- Don’t write the items’ prices in a column next to the description. Alternatively, write the price as part of the text, i.e. customer can read the price after reading the description and making his decision.
- Don’t bold the prices and use a smaller font to write the number.
- Use descriptive titles for items in dog and puzzle categories.
- Apply visualization to point out the items you want your customers to purchase through surrounding the item with a box or using photographs.
- Don’t overuse boxes or photographs, as the more you implement them, the worse impact they will cast on your menu.
- Choose the right menu panel with the right attractive spot to guide your customer’s eye through a particular pattern. This attractive spot might be highlighted by a box.
- Train your serving staff to upsell your menu items by giving the customer an appealing description.
STEP 5. test your modified menu:
The last step in this process is to ensure the efficiency of the new menu by comparing sales and profits.
If you already have an existing menu, you can evaluate its success by measuring if it is profitable with respect to the profitability of each item, and whether the most profitable items are selling the best or not. Then you can compare it to the proposed menu designed according to the above steps and make your decision.