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Unleashing The Potential of Menu Engineering

Overview

The menu is the most important marketing tool for restaurants. Despite being so important, it is often overlooked by both management and guests. On average, customers spend 109 seconds looking at the menu. Successful businesses maximize customer attention through well-designed menus, concise descriptions, and transparent pricing.

Financial data is vital for determining menu items. Collecting data on performance for each menu item allows restaurants to make informed decisions for maximizing profit without impacting the guest experience.

Why Menu Engineering is Necessary

Menu engineering combines psychology, marketing, and design to influence customer decisions. It serves as a strategic approach to maximize profitability and cut costs while maintaining the guest experience. Menu engineering creates a variety of opportunities for improving operations.

Benefits of Menu Engineering:

  • Analytics for identifying and removing underperforming items from the menu
  • Strategy for standardizing meal portions and addressing price changes in ingredients
  • Platform for marketing and pricing the different menu items
  • System for comparing past performance and determining future goals
  • More informed staff with an understanding of menu strengths and weaknesses

Engineering a Menu that Maximizes Profits and Excites Guests

Menu Engineering is best described as a 4-phase cycle

  1. Evaluate a Time Period.
  2. Understand Menu Costs and Item Popularity.
  3. Redesign the menu.
  4. Measure the impact of menu changes.

Evaluating a Time Period

It is essential to revisit the menu at least 4 times per year (once per quarter). For businesses that change menus in response to seasonal price fluctuations, it is beneficial to revisit the menu more frequently (once per month).

Analyzing menus on a quarterly or monthly basis helps to establish a standardized time period for comparing current and past performance. Actively accumulating menu data helps businesses make informed, necessary changes based on popularity metrics and profit margins.

Businesses that neglect to implement these practices are often burdened with increasing costs as input prices increase over time.

Some of the key benefits of evaluating a defined timeframe include:

  1. Accurate Comparison of Performance:
    A defined duration allows for comparison across consistent timeframes. Evaluating the menu on a quarterly or monthly basis provides insight on market trends, seasonal changes to performance, and guest preferences.
  1. Data-Driven Decision Making:
    Monitoring period over period performance helps with predicting future changes in the market a business operates in (take-out, sit-down dining, quick service, etc.). Referencing historical data provides information for adjusting with seasonal trends and changes in guest preferences.
  1. Control of Inventory:
    Analyzing historical periods illustrates inventory needs at defined points in time. With this data, inventory levels can be raised or lowered in response to changes in market trends, demand, and sales volume.
  1. Lower Food Waste:
    Historical period data provides insight on underperforming recipes, which creates opportunity to adjust ingredients and portion sizes. Data provides cooking staff with quantitative metrics for creating uniform portion sizes, ultimately increasing profit margins without impacting the guest experience.

Understanding Menu Costs and Item Popularity

The most important metrics for understanding costs are sales volume, input prices, and profit margin. This information is typically stored in POS systems. POS reports provide metrics such as number of items sold, average cost of inputs, total profit margins, and profit margin per unit sold.

In addition to POS data, it is worth communicating with waiters and bar staff to understand what customers are purchasing. Communicating with staff provides a more wholistic view of guest preferences. After analyzing the data and consulting with staff, operators can determine the best and worst performing items to redesign the menu.

The menu matrix (pictured above) is a popular tool for assessing performance of menu items. The matrix is a chart in which one axis represents sales volume and the other represents profit margin. Menu items plotted on the chart fall into one of four categories:

  1. Stars: These items rank high in popularity and high in profitability. “Stars” benefit from waiter promotion and strategic placement on the menu. Placing these menu items towards the highly visible, top portion of the menu maximizes customer attention.
  2. Puzzles: These items rank low in popularity but high in profitability. Menu items that are efficiently prepared and/or contain low-cost ingredients fall into this category. Restaurants can rework these items through menu redesigns and staff promotion.
  3. Plowhorses: These items rank high in popularity but low in profitability. Restaurants can improve the success of these items through price increases or ingredient changes.
  4. Dogs: These items rank low in popularity and low in profitability. Restaurants can consider removing these items from the menu; however, this is not always optimal. Planning price changes or upselling can improve both the marketing of these items and profit margins.

Constructing a menu matrix improves decision making for menu redesigns. By categorizing menu items, businesses create more concise, organized menus with clear pricing. These minor changes have the potential to drastically improve the guest experience and financial performance.

Redesigning the Menu

A well-designed restaurant menu is the most powerful tool for driving customer satisfaction and profitability. Redesigning a menu combines data analysis, customer feedback, and virtual design to create incremental value while maintaining the guest experience. Below are steps to consider when redesigning a menu:

  1. Simplicity:
    Guests decide quickly and are easily overwhelmed with cluttered menus. Concise descriptions maintain guest attention and provide clarity regarding menu items. Clear pricing creates transparency and simplifies waiting staff interactions with customers.
  1. Emphasize Profitable Items:
    According to eye pattern studies, guests focus most on the top of the menu for single paged menus, and the top-right for two sided menus. Restaurants benefit from placing profitable items in this area.
  1. Account for Seasonality:
    Implementing low-cost, locally sourced ingredients substantially improves financial condition. When ingredient costs are high, consider changing ingredients, menu items, and/or adjusting prices in response to fluctuating costs.
  1. Maintain a Balanced Menu:
    Catering the menu to different dietary preferences and restrictions is essential for creating a welcoming environment for guests. Menus with clearly labeled dietary restrictions provide necessary information for guests to make decisions.
  1. Streamline Pricing:
    Use POS data to make price changes were necessary. Make sure pricing is clear and easy to understand. Take advantage of upselling opportunities by offering add-ons and combinations that complement dishes.
  1. Collect Customer Feedback:
    Use surveys, social media, and direct comments for input. Customer reviews, comments, and preferences hold invaluable insights that help for adjusting menus for maximum appeal and profitability.

Measuring the Impact of Menu Changes

At this point, businesses should monitor the effects of menu changes and prepare to conduct quarterly or monthly analysis of menu changes. Businesses can utilize various metrics and tools to evaluate the impact of menu changes and make informed decisions that optimize customer satisfaction and profitability.

  1. Sales Data: Tracking sales for each item, menu category (i.e. Desserts), as well as overall financials provides insights on item popularity and profitability. This data can be compared quarter over quarter to illustrate the effect of menu redesigns. Average check/tip size is a valuable data point obtainable through the POS system and conversations with waiters and bar staff.
  2. Repeat Visits: Tracking frequency of visits illustrates how menu changes influence guests. An increase in the frequency of visits and repeat customers suggests that menu changes were received favorably.
  3. Profitability Analysis: The menu matrix helps compare profitability and popularity of menu items both for the business and relative to  industry standards. The redeployment of the menu matrix allows businesses to determine how menu item performance has changed quarter over quarter or month over month.
  4. Competitor Analysis: Businesses can measure the impact of menu changes by analyzing the performance of competitors. It is important to understand the menus and pricing of comparable businesses to determine prices and preferences in your geography.

Successful menu engineering is categorized by (1) the collection of data from guests, (2) developing an understanding of key financial metrics, and (3) discovering customer preferences. This information provides businesses with the ability to make inferences on operations and construct an actionable playbook for future menu redesigns. Every iteration of menu updates contributes towards creating a dining experience that is both enjoyable for guests and more profitable for the business.