Menu engineering can help you improve profitability by up to 15% if you follow these 5 steps today.
What is Menu Engineering?
Menu engineering studies the profitability and popularity of all menu items and how these two factors impact the placement of the items on a menu. We have put together the ultimate guide to engineering a better menu for your restaurant.
To successfully engineer your menu, there are 5 key steps you need to work through:
Menu engineering is a time-consuming and meticulous process. Menu engineering is not something you do in the middle of 30 other tasks. Set aside time and focus on this to ensure you achieve the desired results.
2.Cost Your Menu:
To start building a new menu you first want to compare your costs and gross profit against each menu item. Completing a food cost analysis will help make sure you aren’t losing money or overcharging on menu items. A quality point of sale will take the headache out of this task by doing it for you or you can perform the menu audit manually. To do the menu audit manually, follow the below steps:
Calculating Menu Item Food cost:
- Break down each menu item into individual ingredients
- Calculate the cost of each ingredient
- Determine costs of purchasing, including all expenses related to purchasing foods and inventory (delivery fees, interest, return charges etc.) Note: Do not include labour costs
- Add costs of each ingredient to the costs of purchasing, and this will give you the gross cost of each menu item.
Calculate your Food cost and Percentage:
- Food cost = Cost of Each Ingredient + Purchasing Costs
- Food cost % = Food cost / Menu Price
Calculate your profit on each menu item:
- Sales Price – Food cost = Profit (gross)
Once you have done your calculations, its’ time to move onto the fun part – identifying your best sellers from your worst sellers, and then plotting them on a graph called a Menu Engineering Matrix.
Menu Engineering Matrix
Your Y-axis represents the number of items sold in in a particular time-frame (Popularity) and the X-axis represents profitability as depicted below:
3 Steps to Plot Menu Items
1) Split your menu into Categories and Sections:
Keep distinct types of menu items separate from each other by splitting them up into categories (e.g. Appetizers, Entrees, Desserts, and Drinks) then further break down them down into sections (e.g. Vegetarian Entrees, Seafood Entrees, Meat Entrees).
Use a spreadsheet to help separate menu items and assign each item a unique number, to help identify items when plotting them on your graph.Continue Reading | Inventory, Shminventory...
2) Place each item onto one of for quadrants:
Using data from a recent period (e.g. Last month) and plot them on one of the four quadrants according to numbers sold and profitability.
3) Determine the fate of each menu item:
Based on where menu items fall on your graph you can determine how they will appear on your new menu
- Stars: Should be highlighted
- Puzzles: Need to be promoted, in the menu and by your staff. It is important to investigate why they are not as popular so you can make changes to the recipe if needed.
- Horses: Keep them on the menu, but try to make a more profitable version of the item.
- Dog: Your first instinct might be to cut all these items entirely, but err on the side of caution when doing this. You could de-emphasize their importance by simply listing their title and prices on your menu, don’t put any further effort into their promotion.
4.Design Your Menu:
To start building a new menu you first want to compare your costs and gross profit against each menu item. Completing a food cost analysis will help make sure you aren’t losing money or overcharging on menu items. A quality point of sale system will do this calculation for you but you can also do it manually by following the previously mentioned steps.50 Restaurant Menu Designs That Look Better Than Food
5.Test Your New Menu:
You’ve spent a lot of time re-engineering your menu and now it is time to take it out for a spin! You could go ahead and launch the menu or you could hold a couple of tasting evenings to test run the new menu before you commit. You could also quietly introduce the new menu without all the fanfare.