Turn Your Menu Into a Profit Machine with Menu Engineering

Restaurant menu engineering isn’t just about tweaking a few dishes; it’s a strategic approach that can dramatically increase your restaurant's profitability while simultaneously enhancing the dining experience for your customers. Here’s why it’s essential:

By analyzing each item for cost versus popularity, menu engineering helps you identify which dishes generate the most profit and which might be draining your resources. This information is crucial in deciding what stays, what goes, and what needs a price adjustment.

In today’s economic climate, where inflation and operational costs are at an all-time high, knowing precisely what each menu item costs you and how it performs can be the difference between a struggling or thriving business. Menu engineering enables you to make informed decisions that keep your costs in check without compromising quality.

With 52% of restaurant professionals citing high operating and food costs as their top challenges, having a strategy that directly addresses these issues is more important than ever.

A well-engineered menu does more than just improve margins—it enhances the overall dining experience. By strategically placing popular and profitable items, you guide customers towards choices that they’ll enjoy and that are economically beneficial for the restaurant.

To better explain how to do menu engineering, I will illustrate it with a fictional story about a restaurant owner named Margaret. Through her experience, we will go through each step of profitable menu planning so you can gain a better understanding of how to implement menu engineering in your own business. Let's start!

Margaret, who owns a vibrant casual dining restaurant that serves a mix of dishes like pizza, tacos, and nachos, decides to enhance her menu's profitability. With prices ranging from $11 to $31 and options that cater to quick, flavorful meals, she needs to understand when her offerings perform best. 

To start the menu engineering process, Margaret picks the summer months for analysis, anticipating it's her busiest season due to the influx of tourists. This period gives her a comprehensive view of what works and what doesn’t, allowing her to find the most profitable menu items and make informed decisions about menu adjustments.

Using her total ingredient cost, she calculates the ideal selling price:

• Selling price formula: (Ingredient cost / Desired food cost percentage) x 100
• Selling price: ($2.50 / 30%) x 100 = $8.33

• Profit margin: Menu price − Cost per Item
• If a pizza sells for $8.33 and costs $2.50 to make, the profit margin is $5.83.

She then assesses the popularity of each item by comparing its actual sales to its expected popularity. Expected popularity is an estimate of how often items would sell if all menu items were equally popular—a concept also known as the menu mix or sales mix.

• Expected popularity: (Total sales of category/Number of items in category) 
• If Margaret's category of main dishes (pizzas, tacos, and nachos) has 300 total sales in a month and includes 3 types of items, the expected popularity for each type is 100 sales.

Then she can determine the actual popularity index.

• ​​​​​​Popularity index: (Actual sales/Expected popularity) x 100 
• If Margaret sold 120 pizzas, the popularity index is 120% - (120/100) x 100, indicating it is more popular than expected.

By analyzing both profitability and popularity, Margaret can make informed decisions about which dishes to highlight or adjust. Dishes that are both popular and profitable are prime candidates for promotion, while less successful items might be reworked or phased out to optimize the menu’s overall performance.

Once Margaret has analyzed the profitability and popularity of her dishes, she organizes them into a menu matrix. This matrix is a visual tool that helps categorize items based on their performance, making it easier to decide their fate on the menu.

The matrix consists of four quadrants, with popularity increasing along the Y-axis and profitability increasing along the X-axis. This layout allows Margaret to quickly visualize where each menu item stands.

The quadrants are labeled as Stars, Plowhorses, Puzzles, and Dogs, each representing a different combination of popularity and profitability:

• Stars: These items are both highly popular and highly profitable. They are the ideal menu items, delivering both customer satisfaction and strong margins.
• Plowhorses: Popular among customers but less profitable. These items are often well-liked and sell in high volumes, but their lower profit margins make them less ideal.
• Puzzles: Highly profitable but not as popular. These items have good margins but are not as frequently ordered, which may suggest a need for better promotion or perhaps a reevaluation of how they are presented on the menu.
• Dogs: Neither popular nor profitable. These items are candidates for removal as they do not contribute positively to the restaurant's performance.

By applying the menu engineering matrix, Margaret can strategically decide how to promote, adjust, or phase out dishes based on their quadrant placement. This organized approach helps streamline the decision-making process, ensuring that every item on the menu has a clear role in contributing to the restaurant’s overall success.

Following the categorization within the menu matrix, Margaret takes strategic steps to adjust her restaurant menu, optimizing each category for profitability and popularity:

• Stars: Highlighting these items is straightforward. They are both popular and profitable, so they should be prominently featured on the menu. Margaret ensures these items are the first ones seen on the menu and instructs her servers to recommend them enthusiastically.

• Plowhorses: For items like soup-and-salad specials that are popular but less profitable, Margaret explores ways to enhance profitability. She might experiment with a three-salad sampler that maintains customer interest while increasing the dish's margin.

• Puzzles: These are profitable but less popular items. Margaret encourages her staff to actively promote these dishes. She also considers adjusting the pricing or even reinventing some of these items to increase their appeal without sacrificing profitability.

• Dogs: Items in this category do not perform well in terms of popularity or profitability. While it's tempting to remove them completely, some, like the classic grilled cheese sandwich, are essential for certain customer segments, such as children. For these, Margaret opts to de-emphasize them on the menu—simply listing them without promotional efforts or prominent placement.

By meticulously analyzing her menu and making strategic adjustments, Margaret successfully enhanced both the profitability and appeal of her restaurant offerings. If you want to follow her steps, start by gathering data on your current menu performance. Analyze the popularity and profitability of each item, categorize them using the menu matrix, and make informed decisions on how to adjust your offerings. Remember, menu engineering is an ongoing process—regular reviews and adjustments will keep your menu fresh and your profits growing📈

By embracing this strategic approach, you can transform your menu into a powerful tool that contributes significantly to your restaurant's success. Just like Margaret, you have the opportunity to revitalize your menu and see tangible improvements in your profitability!