When a customer encounters your restaurant in person or online, the menu is the first thing they look for. This simple tool is one of your biggest assets — the design and dish selection affects everything from the average order value to the sales volume for each item. Menu engineering is a data-driven way to create a menu that makes the most of your resources and boosts your bottom line.
What is menu engineering?
Menu engineering is the process of designing and optimizing your restaurant menu in a way that maximizes profitability. The process starts by collecting data for each menu item:
- Calculate food costs
- Identify contribution margin
- Analyze sales data to determine popularity
This data enables you to categorize items based on how popular and profitable they are. With that information, you can create a menu that strategically increases the profit for every diner.
In some cases, the process is as simple as writing a more compelling description or altering the menu design to promote profitable items. For others, you might need to take more drastic steps to boost profits, such as switching to lower-cost ingredients, increasing the price, reducing the portion size or altering the side dishes.
How to calculate your food costs
The first step in menu engineering is calculating food costs for everything on your restaurant menu. To start, write down all the ingredients, including garnishes, condiments and seasonings. Then, assign a quantity to each ingredient and calculate its cost based on the price.
For example, imagine a recipe calls for a 15-ounce can of tomato paste. Your restaurant pays $45 for a case of six cans, which means each can costs $7.50. The recipe makes 25 servings, which means every serving uses $0.30 in tomato paste.
Add up the individual ingredient costs to get the food cost for each dish. Use this data to calculate your contribution margin, or the amount of money you make by selling each dish. To do so, subtract the food cost from the menu price. If you sell a serving of lasagna for $15 and the food costs are $6.50, the contribution margin is $8.50.
You may already have key menu engineering data on hand; many restaurants use food cost percentage and profit margins when setting menu pricing.
Creating a menu to maximize profits
Once you have the food cost and profit margin for each restaurant menu item, it’s time to bring in the sales data. For every item, note the number of sales over a given period. The higher the sales volume, the more popular the item.
Next, use your contribution margin and sales volume to plot each item on a menu engineering matrix. The x-axis should show profitability (contribution margin) from low to high; the y-axis should show popularity (sales volume) from low to high. Based on the placement of items on the matrix, you’ll be able to visualize how they fall into four categories:
- High profitability, high popularity
- Low profitability, high popularity
- High profitability, low popularity
- Low profitability, low popularity
Reworking your menu based on profitability and popularity
Now, it’s time for true restaurant menu engineering: identifying concrete ways to maximize profits in each of your four categories.
1. High profitability, high popularity
The items in this category are the most important — they have high profits, and customers love them. There’s usually no need to make changes to the dishes themselves. Instead, find ways to increase sales by altering the menu design:
- Place items near the top or center of the page or section
- Create a special section delineated by a colored box or frame
- Highlight popular dishes with a “customer favorite” icon
- Showcase dishes with food photography
A powerful, visibility-focused menu design can boost profits, even when the price and ingredients stay the same.
2. Low profitability, high popularity
These dishes are popular with customers, but they use high-cost ingredients. To boost the profits, you have a few options; each one comes with benefits and risks.
- Raise menu price. This strategy maintains the existing quality and taste of the dish and increases profitability. It can be effective if your customers aren’t price-conscious; if diners are on tight budgets, you risk a drop in sales.
- Adjust ingredients. Ask your kitchen staff to swap in cheaper ingredients. If you can do so without changing the flavor and texture of the dish, you can boost profit while keeping prices the same.
- Change portion size. When portions are too big to finish comfortably but not so big that they produce leftovers, consider reducing the size. Your customers will still be satisfied, you’ll make more money and you’ll reduce food waste.
- Create more profitable specials. Take your popular dish and add high-profit items to create a special. If customers love a low-profit appetizer, for example, you could create a happy-hour special that includes the appetizer and a cocktail with a high contribution margin.
3. High profitability, low popularity
When you have dishes that are profitable but largely ignored by customers, it’s time to do some digging. To start, offer the item as a freebie to select customers and ask them about their experience. Is the dish too expensive? Is the flavor unappealing? Are they turned off by the ingredients? If so, you can adjust accordingly.
If you find that customers like the food and the price, it’s time to change the menu design. It could be an awareness issue — a problem that’s easily solved by putting the dish in a more prominent position on the page. You can also consider writing an appealing menu description that whets customers’ appetites and describes why the dish is special. This strategy uses the psychology of menu design to create curiosity and appeal to the senses.
4. Low profitability, low popularity
It might seem alarming to find menu items that have high food costs and low sales volume, but it’s actually a valuable opportunity. After all, this category tells you a great deal about what your customers do and don’t want.
In most cases, your best bet is to remove these items completely. You’ll free up space on the menu and create an opening for new, more popular dishes.
As a restaurant owner, it can be difficult to give up menu items. If you’re passionate about the dish, you can try to salvage it by improving the flavor or using ingredients with higher profit margins.
Get your menu in front of customers
You’ve analyzed menu items and invested in the menu engineering process — now, it’s time to get your new, profit-focused restaurant menu out to customers. For in-house diners, all you need to do is replace old menus with the updated versions. To avoid the costs of printing new menus, you can replace physical copies with a QR code menu. Print the QR code on table tents, stickers and signs so customers can find it easily. Make sure to keep a few paper copies on hand for tech-averse diners.
Keep in mind that many customers check out your menu online before making a reservation or ordering for delivery. To ensure they’re seeing the newest menu, follow these steps:
Do you use a food delivery platform? You’ll also need to update the menu in your profile. Grubhub for Restaurants streamlines the process with a simple update system — edit the menu after closing and it will be visible to customers during the next shift. Any changes you make automatically flow through to your Grubhub Direct branded ordering websites, saving time and ensuring every menu is consistent.
When you’re a restaurant owner, the menu is your most important marketing tool. Menu engineering is an effective way to streamline and refine the menu to ensure every item is pulling its weight.Ready to get your menu in front of more customers? Partner with Grubhub today to gain access to 33+ million hungry diners.
