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Menu Engineering Your Way to Restaurant Profitability

Posted by Brady Thomason, NetSuite Solution Manager, Restaurant & Hospitality

Menu engineering is by far the most critical ongoing cost-saving initiative in a restaurant, yet nearly 60% of restaurants don’t do it at all according to Menu Cover Depot, and 30% don’t do it effectively enough. Many restaurant operators spend too much time scratching their heads, wondering what operational efficiency they can implement next to reduce prime cost, but if their menu isn’t engineered correctly, they’re destined for failure from the start.

Menu engineering is the art and science of how a menu is designed, positioned, priced and maintained to improve restaurant profitability. It’s instinctive for a restaurant operator to address items that are within their control, like food and labor costs. But without providing the right foundation for profitability in a restaurant through menu engineering, managers will unintentionally degrade the guest experience by cutting labor and skimping on food quality and portions, and their restaurant will ultimately fail.

Many interpret menu engineering as strictly psychological—a manipulation of their guests’ subconscious by rearranging items on their menu to encourage them to order the profitable items and discourage them from ordering the others. And while that’s certainly part of it, it’s imperative to dig further and make informed decisions about what action to take to improve your menu’s performance. This starts with an analysis of your menu using the menu engineering matrix, which requires simple inputs like menu item sales by quantity, food cost per item and sales price per item, all of which can easily be provided by a back-office restaurant software solution. With this data, menu items are grouped into one of the following four categories on the matrix below.

  • Star: high popularity, high profit

These items are winners! Keep them. You may even consider a modest price increase on your next menu rollout, which, out of all four categories, will make its way to your bottom line fastest due to the high popularity and profitability of these menu items.

  • Plow horse: high popularity, low profit

You’ve figured out how to sell these items, but due to low profitability, you should think about how to reformulate them to improve margin. This can be achieved through a price increase, ingredient change, portion variation, or all the above.

  • Puzzle: low popularity, high profit

Puzzles are the items you wish you could sell more of because they make you money. Consider highlighting or repositioning these items on the menu or incorporate them into a promotion to increase sales volume. If the menu description of the item isn’t tantalizing enough, guest won’t order it. Which of these sounds more enticing?

Burrata with tomatoes, basil and toast

-or-

Creamy burrata cheese with roasted heirloom cherry tomato jam, hand-torn basil, grilled garlic bread and sea salt

  • Dog: low popularity, low profit

Every day that you keep dogs on your menu, you’re leaving profit on the table. These must be identified and removed from the menu immediately. It doesn’t matter if it’s your chef’s signature dish or a staff favorite, your guests don’t order it and it’s too expensive to make—dump it.

Menu engineering is not a one-time process. It’s ongoing and never finished. Ingredients get more expensive, food trends come and go, and guest preferences change over time. In that sense, maximum profitability is a moving target in a restaurant, but not a mystery to achieve. If you let your menu work for you, you’ll drive bottom-line profit faster than any other initiative and save your entire team from endless frustration later.