Menu engineering is the study of how profitable and popular your menu items are. It helps you decide which items to retain or take off from your menu. The main goal of menu engineering is simple: to increase profits for the company. However, it is not as black and white as it may seem. In every restaurant format, there will be items that will be more costly than others and not every menu item will have the same exact food cost percentage. The key is to balance the menu so both the low and high food cost items work together to help you reach your target food cost. Menu engineering also means strategically featuring or promoting items to help reach company goals.
Importance of Menu Engineering
Why is menu engineering important though? Do you really need to do this for your restaurant? The simple answer is: Yes! Don’t you want to add profits to your restaurant?
Menu engineering is important because it is the most effective way to remove the poor-performing items from your menu. By eliminating the poor-performing items on your menu, it will definitely help your food costs since some ingredients which aren’t being used that much will be removed. With menu engineering, there is also an opportunity for you to highlight items that are more profitable. Engineering your restaurant’s menu requires you to be extremely hands-on. You need to have deep knowledge of your customers and your restaurant’s profitability metrics – food cost, menu prices and profit margins. Equipped with this knowledge, it will be easy for you to identify which items contribute more profit and which ones contribute nothing.
Menu engineering is no easy task and it should not be done by one person alone. The task of engineering your menu should be done by experienced professionals who have intricate knowledge of the restaurant’s food costs and its top-selling products. These are usually the general manager of the restaurant, the owner or chief operating officer, the head chef, and the head server who usually have knowledge of changing customer preferences.
Menu Engineering To Earn Maximum Profits
Our primary goal in doing menu engineering is to redesign the menu and shuffle around some items on the page to help push the high-profit items. With this in mind, a timetable is definitely a good place to start.
Menu engineering does not happen overnight and will take time. We’re living in a world of data, data, data and to get the necessary data, it’s going to be a time investment.
There’s no exact science as to how often you should be doing menu engineering. Doing it monthly will obviously do wonders for the company but doing it quarterly should be fine too. Having some sort of menu engineering analysis is better than having none at all.
Calculating Menu Item Food Cost
Calculating the food cost for each menu item is a tedious task. However, completing this task will reap lots of rewards in the end as it will help you reduce your food waste, set your selling price right and help prevent over-ordering.
Follow these steps.
- List all the ingredients involved in a specific menu item. These may differ based on the cuisine you offer but don’t forget to add items such as packaging if you’re a takeout restaurant; seasonings and garnishes if it’s a formal dining restaurant.
- Calculate the cost for each ingredient in terms of yield/weight.
- Add the cost of all the ingredients and that is your food cost for a specific menu item.
The Menu Engineering Matrix
The menu engineering matrix is a categorization method where you’ll put menu items into one of these four categories: Stars, Puzzles, Plowhorses, and Dogs. It is a scatter chart where the Y-axis is the item’s popularity (number of items sold in a certain timeframe) and the X-axis will be the item’s profitability (the item’s profit margin). See the image below.
Stars: High Profitability and High Popularity
Stars are the cream of the crop. They have a high-profit margin and are very popular with the customers. These menu items are the ones that should remain constant. Keep them consistent and try to do promotions for these items.
Puzzles: High Profitability and Low Popularity
Puzzles are items on your menu that have a high profit margin but are very difficult to sell. The goal for these items is to find out why they aren’t selling. Could they be priced a little too high for the value of the item? Is the item not being promoted enough on your marketing channels? Is the description not enticing? Analyzing your Puzzles can help you come up with suitable combo offers and drive sales.
Plowhorses: Low Profitability and High Popularity
Horses are items on the menu that are very popular with your customers but are quite expensive cost-wise. The goal with these items is how to make them more profitable. Some ways include reworking the recipe to create a more profitable item – just make sure you’re not completely compromising the quality of the item.
Dogs: Low Profitability and Low Popularity
Dogs are the items on your menu that are high on food cost and not really popular amongst your customers. These items on the menu are the ones that should either be re-invented, re-branded, or removed altogether.
How To Know Whether A Menu Item’s Profitability And Popularity Is High Or Low?
Once you have compiled all the data on food cost & selling price, you will be able to tell whether a specific menu item’s profitability and popularity are high or low.
To measure a menu item’s profitability, see if the total profit margin is higher or lower than the average profit margin for all items in a certain timeframe.
|Avg. Profit Margin||500|
|Total Profit Margin||Profitability|
To measure a menu item’s popularity, see if the total items sold are higher or lower than the average items sold for all items in a certain timeframe.
|Avg. # of Items Sold||300|
To conclude, menu engineering should be an ongoing process to help boost restaurant sales, cut costs and food wastes, and improve overall profitability. This task cannot be completed by one person and should be done by a group of people with the same goal and mindset: increase profitability.