Know Your Food Cost Percentage. Know Your Restaurant Profits.
Live Calculator
If you think your restaurant's menu is merely a list of dishes, it's time to rethink. A well-engineered menu does more than display what's for dinner.
With food costs on the rise, a smartly designed menu can help you fight against inflation. This approach, known as menu engineering, goes beyond basic listings to crafting dish descriptions, strategic pricing, and psychological tactics to influence customer choices.
In this blog, we'll learn about restaurant menu engineering with practical tips and insights to help you price right and sell more. Get ready to see your menu in a whole new light and watch your profit margins grow!
Menu engineering is a tactic to craft your menu strategically so that it helps boost your revenue. You do so by analyzing cost and sales data. This data gives you a crystal-clear picture of which dishes are stars and just take up space on your menu.
You categorize each menu item based on two key factors—popularity and profitability. For this, you pick dishes that bring financial benefits to you and attract the crowds to spotlight them.
But there's more to it than just numbers. Understanding menu psychology plays a huge role. How you describe your dishes, where they're placed on the menu, and even what the menu looks like can sway customers' choices.
To begin, you need three basic components:
Menu engineering has many benefits, more than just increasing your revenue. Here's how focusing on restaurant menu engineering can transform your business:
The purpose of menu engineering is to pump up your profit margins. For example, prominently placing a high-margin seafood pasta could naturally lead to higher orders of that dish.
Your menu is the first conversation you have with your guests. Make it count. A well-organized menu with clear descriptions helps customers easily choose from the best dishes.
A cluttered menu can be as confusing as a crowded street. Streamlining your menu's design makes it easier for customers to navigate. You can make simple tweaks like grouping similar items, using readable fonts, etc.
When you understand what sells and what doesn't, you can make smarter decisions about what to stock up on and what to scale back. Inventory management not only cuts costs but also makes your operation much more efficient.
By now, you must be wondering how the menu engineering process works; here's a detailed explanation:
The key step in revamping your menu is to analyze your current menu performance. In this process, you figure out which dishes sell well and which don't. To get a better understanding, you need to track sales data and customer feedback.
To kick things off, you need to be familiar with several critical financial terms:
Menu Item Food Cost
This is simply the total cost of ingredients for each dish.
Total Food Cost Percentage
The food cost calculator tells you how much of your sales go towards the cost of the food itself.
The sum of ingredient costs per item
Menu Item Food Cost Percentage
This shows what percentage of the price of a dish goes towards the ingredients.
Food cost per item/selling price per item*100
Total Contribution Margin
This is what you have left from sales after paying for the food.
Total Sales - Total Food Costs
Portion Contribution Margin
It helps you understand the profitability of each portion you serve.
Selling price per item - food cost per item
How well do your dishes sell? Get into the restaurant analytics to understand menu item popularity better.
A menu engineering matrix is a method that lets you spot which dishes aren't pulling their weight and which hidden gem could bring in more money. With the cost and sales data in hand, you can categorize your menu items into four types:
Regularly checking in on these details helps you determine why your top sellers might be losing their luster. Are you dealing with ingredient waste, theft, or fluctuating prices?
Understanding the psychology behind your menu design can enhance how customers interact with it. Here's how you do restaurant menu optimization:
It's tempting to offer a wide variety of dishes, but did you know that most of your sales likely come from just a few items? About 80% of your sales might come from just 20% of your dishes.
Offering too many options can overwhelm your guests, which may slow down decision-making and affect your table turnover.
When it comes to listing menu prices, subtle tweaks can make a big difference. For instance, leaving currency symbols next to prices can lessen the pain of parting with money, at least psychologically. Also, avoid listing prices in a column; this makes it too easy for diners to scan and choose the cheapest option.
People generally scan menus in predictable patterns. Some might start at the top left corner and read like a book, while others might glance first at the center or top right. Placing your most popular or profitable items in these strategic spots can catch the eye faster.
A great description does more than list ingredients; it sells the experience. Use descriptive language to evoke taste and aroma, and don't shy away from mentioning the origin of ingredients or unique preparation methods.
Don't forget to spotlight dishes popular or personally recommended by the chef. These callouts can guide new customers towards tried and tested favorites.
For this, you need to focus on the below restaurant menu engineering tips.
Menu covers come in various styles, impacting how customers interact with your offerings.
Understanding the essentials, begin outlining actionable steps to refine your restaurant's menu. Keep your notebook, current menu, and cost details handy to enhance your dishes as you proceed.
Conducting a menu audit helps you ensure your offerings align with customer preferences.
To redesign your menu layout, begin by:
For this step, consider not just the cost of ingredients but also the perceived value of each dish. For example, a high-quality, innovative dish can command a higher price if it enhances the dining experience.
When engineering your menu, avoid common pitfalls that can hinder your restaurant's success.
To make things easier, here's a guide to show you how to implement menu engineering:
OneHubPOS's menu management system is a platform that revolutionizes how you control your restaurant's menu. Here's how it benefits you:
For effective menu engineering, collaboration helps you go a long way. Connect with your chefs and kitchen staff to get their thoughts on which dishes are hits, how long they take to prepare, and what ingredients are available. They will give you insights that you might otherwise have.
Menu engineering is not a set-and-forget process. Continually monitor your menu's performance through the analytics your menu management system provides. Look for trends in item sales to identify what dishes are stars and which are underperforming. Adjust your menu periodically to respond to these insights.
AI streamlines the entire menu planning process, from initial design to ongoing updates, saving you time and money. Less manual labor and more efficient food use mean lower costs and smoother kitchen operations. It also helps ensure your menu features high-demand, profitable items priced just right.
Here's what AI brings to the table:
Menu engineering might seem overwhelming, but it's not something you have to rush through. Start by setting a timeline, pricing out your dishes, and sorting them by popularity and profit.
Next, work on enhancing your menu's look. Then, see how these updates affect your business.
Now is the perfect time to start refining your menu, leveraging these insights to maximize efficiency and revenue.
Consider adding technology like OneHubPOS to get real-time data analytics, automate mundane tasks, and reduce human error.
Ready to see your profits soar with smarter menu pricing? For just $1, you can optimize your menu with our advanced menu management system with the least effort. Connect to our experts to learn more.
Menu engineering boosts profitability by highlighting high-margin dishes, optimizing menu layout, and strategically pricing items to encourage higher sales of profitable dishes.
The main components of menu engineering include:
The golden triangle in menu engineering refers to the menu area where customers' eyes naturally go first, typically the center and top-right, where high-profit items are best placed.
A restaurant should conduct menu analysis at least quarterly to adapt to changing customer preferences, seasonal ingredients, and market trends, ensuring the menu remains fresh and competitive.
Yes, menu engineering can be applied to any restaurant type, from fast food to fine dining, to optimize dish placement and pricing for better profitability.
Restaurants can integrate digital menus by offering QR code scans alongside printed menus, combining the efficiency of technology with the tactile familiarity of traditional menus.
To incorporate customer feedback in menu analysis, regularly review customer comments and sales data, conduct surveys to gauge preferences, and then adjust the menu based on these insights.
Satheesh Kanchi is the Founder and CEO of OneHubPOS, He is the restaurateur behind several popular Indian restaurants in California and India. He started his career as a technology CEO, bringing that same level and learnings innovation and drive to the restaurant industry.
