Connections for Success

 

09.28.12

Menu Engineering to Improve Your Restaurant’s Bottom Line
James Pellino

When restaurant owners think of all the different hats they have to wear in their day-to-day business operations, an engineer’s hat probably isn’t one of them.   However, many restaurateurs are finding that adding this skill set can dramatically improve their bottom line.   Menu engineering is an effective tool for evaluating the profitability and popularity of your menu items.   Using this approach can be effective for engineering a menu that is both responsive to customers’ wants and needs which, in turn, increases a restaurant’s profits.

To begin the menu engineering process, review your menu and separate it by meal type:  Breakfast, lunch and dinner, and then by category:  Appetizer, main course, dessert, etc.  Next, track your weekly sales for all menu items.   Most point of sale (POS) systems will allow you to run a weekly report with all the necessary information.  At the end of the week, create a spreadsheet listing all menu items sold, the total number of each menu item sold (i.e., 65 cheeseburgers), the food cost per portion (all restaurants should cost out their menu items) and the sales price for each item.  Next, you will calculate each item’s gross profit, food cost percentage and popularity (divide the total amount of one item sold by the total number of menu items sold during the week) of each item.

Now, separate your menu items into four groups:

  • A items – The top 25% of items that are most popular and most profitable;
  • B items – The next 25% of items that are most popular, but not the most profitable;
  • C items – The next 25% of items that are not popular but are profitable when sold; and
  • D items – The remaining 25% of the menu items, which are neither popular nor profitable.

Why is this analysis important?  Because this analysis will allow you to refine the menu items you offer to your customers in many ways.  For instance, it will help you determine:

  • If certain items should be eliminated from your menu altogether.
  • If new menu items could be substituted for some of the unpopular and non-profitable items.
  • If a price increase may be necessary for certain menu items, although customer sentiment and price elasticity of a menu item should always be considered before raising a selling price.

This analysis could also help you think of different – or possibly more cost efficient – ways to prepare some menu items to increase their profitability (thereby turning a B item on the menu into an A item).  If you are about to update your menu design or if you print your menus weekly, this analysis could also help you determine where to place menu items on the actual menu.

Also, don’t be shy about sharing your results with your staff.  Having servers know which dishes are most popular and profitable is great way for them to suggest your best dishes to indecisive customers.  Customers enjoy receiving menu recommendations and usually take a server’s recommendations to heart.

Menu engineering is a simple, proactive tool that can help restaurateurs analyze and adjust to meet the needs of their customers, as well as maximize profitability.  If you have questions about using menu engineering to improve your bottom line, the ORBA Restaurant Group is happy to discuss your needs.

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