Many restaurant companies struggle with stagnant sales, reductions in traffic, and lower margins than they’ve had in the past, all because costs never seem to go down. These companies reluctantly accept lower margins as a way of life (or death). In some cases, restaurants will blindly raise prices to try and remedy the problem, but over and over again we’ve seen that result in an even deeper erosion of traffic.
Menu engineering is somewhat complex and time-consuming, but a well-engineered menu can be a game changer with regard to increased profitability. In this post, we’ll show you how.
What Is Menu Engineering?
Menu engineering is the study of the profitability and popularity of menu items. It looks at how these two factors influence the placement of every item on a menu.
The goal is simple: to increase profitability per guest. Menu engineering can often deliver as much as an 8% to 12% increase in profit margins in the first year.
Menu engineering informs marketing and shows you which menu items to promote. It provides a pathway to eliminating under-performing items, either because they have a low margin or just don’t sell. Menu engineering guides you on where to cut costs, where to raise prices, and where to re-develop a recipe to make it more profitable.
The process is not only useful for improving the profitability of a main menu, but it can also inspire better use of limited time offers (LTOs) and can make a huge impact on beverage, happy hour, and dessert menus. Lastly, by having a well-engineered menu, you are in control when there is a huge commodity swing. You can plan ahead and know the future before it takes a bite out of your bottom line.
How Menu Engineering Works
Step 1 – Build a profitability/popularity spreadsheet.
This isn’t an ordinary spreadsheet. This is the guiding force in menu engineering. It includes every menu item along with food costs, pricing, and sales history. Here, you can categorize each menu item by profitability and popularity. Usually, there are four categories ranging from winners to losers. Here’s an example of how we do it.
Step 2 – Assess your menu items and re-develop recipes where needed.
Meet with the experts (of course, that’s the Food & Drink Resources team) along with your marketing, financial, and culinary teams to build a game plan and establish next steps, which may include reordering a menu, modifying recipes to reach a lower margin, eliminate or replace slow-moving items.
Step 3 – Price appropriately and consistently.
Pricing of each item also plays a key role in driving profitability. It may mean raising prices to get you a better profit margin or lowering prices to put an item in a better profitability/popularity category. It’s also an opportunity to eliminate unnecessary pricing tiers. Some items are incredibly price sensitive due to market conditions or competition. Knowing where to adjust prices and eliminate unnecessary price tiers can result in large shifts in profitability.
Step 4 – Re-configure the design of the menu.
Yes, proper menu design includes up-to-date logos, on-trend fonts, and new pictures, but it also means employing the proven techniques for successful menu engineering.
For example, people tend to read from left to right at the top of a menu, then diagonally down to the bottom of the menu, and then left to right again. This is called “z-shaped deliberate speed reading.” By placing the right menu items in the right place along with strategically placed photos, you’d be amazed how much you can increase tickets.
Similarly, photos sell more than a typical line listing. But you can’t have photos of everything. Choose to include photos of items that are both popular and profitable. (See step one above.)
Why Food & Drink Resources?
Food & Drink Resources has a team of experts with years of experience in menu engineering, and we can provide even more tips for maximizing profitability than we could ever write in a blog.
If you want to learn more or find out if you could use FDR menu engineering, contact us. We’d be glad to share our insights.