How Menu Engineering Can Increase Restaurant Profitability?

Menu engineering is a management concept applied in the restaurant business to determine how to construct menus effectively and set prices so that the business can achieve its goals. Menu Engineering helps restaurant owners determine how popular and profitable certain dishes are so they can make better decisions regarding the menu layout, item placement, offerings, and prices.

It involves segregating menu items into different categories. Some items are called stars, which are high-profit, high-popularity products, and the other is called dogs, which are low-profit, low-popularity products. The aim is to bring out and market the most profitable products while enhancing or eliminating the less profitable ones. 

Menu engineering is the process of changing a restaurant’s financial results which define its effectiveness. Through effective menu construction, restaurants can boost their revenues, improve customer satisfaction, and work at maximum efficiency. Utilizing advanced restaurant management software can further streamline this process by providing valuable insights and tools to optimize menu offerings and overall operations.

Some of the key aspects are strategic positioning of the high-margin product, use of signs and symbols, and constant updating of the menu. In this article, we will try to describe the principles of menu engineering and show how they can increase restaurant profitability.

What is Menu Engineering? 

Menu engineering is a managerial procedure for constructing a restaurant’s menu to attract customers and ensure maximum profit. It was first expounded by Michael L. Kasavana and Donald J. Smith in the 1980s. They classified menu items based on the frequency of orders and their returns, which is a fundamental concept in restaurant operations. For a deeper understanding of these principles, explore our guide on Restaurant Operations Management: Unveiling Effective Principles, Practices to enhance your approach.

To know in detail what menu engineering is, you must know its principles. The principles behind menu engineering involve categorizing menu items into four groups:

• Stars (high profitability and high popularity)
• Puzzles (high profitability but low popularity)
• Plowhorses (low profitability but high popularity)
• Dogs (low profitability and low popularity)

This categorization assists those involved in the restaurant business in deciding on the price range, promotion strategies, and menu layout.

Menu psychology is a significant component in menu engineering. Strategies like positioning profitable products, using captivating language to describe meals, and pointing out certain products with the help of signs are all examples of psychological approaches that are employed to make customers make more profitable decisions.

Key Concepts in Menu Engineering

Menu engineering includes several important concepts that can profoundly enhance the restaurant’s financial efficiency. Here are some  menu engineering concepts for your reference: 

1. Menu Item Categorization

Menu engineering classifies dishes into four categories: Stars, Plowhorses, Puzzles, and Dogs. Categorize the dishes in your menu according to these criteria, and here’s how you can place them then:

1. Stars are very lucrative and loved by consumers; thus, place them in a highly visible position on the menu. 
2. Puzzles are profitable but they are not popular, so either you can decrease its price or reposition it by placing it in more popular location. You can even change the dish name or advertise it by adding on the chalkboard or suggestive selling. So, overall you need to think of a better way to sell the puzzle dishes. 
3. Plowhorses are the items that allure customers in, but do not contribute much to profits. So, you can either increase the prices (be careful while doing that, and always test for negative effect on sales), reduce the portion size without making the difference noticeable, shift them to a lower-profile section on the menu, or merchandize the side by packing it with side items to increase its contribution margin.
4. Dogs are dishes which are less popular and contribute less profits, so it is best to eliminate them. You make the space for new dishes this way. Also, there is another way for dog dishes that have market potential. You can increase the prices of such dishes and convert them into puzzles.

Also, another thing to consider is that sometimes foodservice operation wants the managers to carry the dog items on the menu. So, you can keep it in the inventory if it has the shell life and not in the menu. You can offer the special guests to cook that item on their request, and you can charge more. 

2. Contribution Margin

Menu engineering relies on the contribution margin as one of the critical ratios. It refers to the amount of money earned from a particular food item on the menu after excluding the cost of production. Higher contribution margins mean that the more an item makes towards covering overheads and generating profits, the more it directs a business on what items to push or alter. 

3. Menu Mix

Menu mix is a strategy where you create a menu with a mix or combination of higher-selling items and less popular food items. Sales  Mix Analysis is a method that allows us to determine which food items are popular and contribute the most to the profits. You will have to create a chart that mentions the cost price of a dish, the selling price, and others. Here’s how it should look. 

Source

Now, you can look at the chart and point out dishes that are doing great and bad. Accordingly, you can make a decision whether to increase or decrease the price, which dish to promote more, or which dish needs to be eliminated. 

4. Psychological Pricing

Psychological pricing is a way of presenting prices in a manner that directly affects the buyer’s perception and decision-making. Here are some psychological pricing tips that you can use to design your menu:

1. Make the prices appear shorter. Restaurant menus have prices in smaller font and omit the currency sign and additional zero. The shorter the price appears, the better it is.
2. Use the charm pricing method, where the price of dishes ends with “9”. Prices ending with 9 create an increase in customer demand. People read from left to write, so when you write $1.99, the people will consider the price to be close to $1.  
3. End the prices with “0” if you want your dishes to be perceived as high-quality, as prices ending with 0 convey a prestigious price.
4. You should promote the dishes in a positive way, for instance: “Try out our new dishes, which will surely tantalize your taste buds.” This will create a halo effect on the people, and they will definitely try the new dish.

Another common pyschological strategy is giving your customers a limited-time offer. When people feel like they will miss out on something, they will definitely act out and order it while it is still available. 

What Strategies are Effective in Menu Engineering?

Menu engineering strategies are very effective and can greatly improve a restaurant’s productivity. Here are key approaches.

1. Design and Layout Techniques

The placement of your meals should be done in such a way that the customers’ eyes are first drawn to the most profitable meals. Based on these results, it is suggested that the boxes, borders, and the top right corner location should be used to place these items.

2. Highlighting High-Profit Items

Use icons, large fonts, and high-contrast colors to highlight high-margin foods to customers. It was also preferred to put high-profit products in areas that are more easily noticed in the menu format.

3. Implementing Menu Changes

It is important to stress that menu changes are a multi-faceted process that requires careful planning and execution to ensure that the outlined goals are met. Updating your menu too many times will frustrate the kitchen, and keeping it as it is for too long will look monotonous to customers. It is best to update the menu twice a year.

4. Follow a Procedure to Plan and Test Menu Changes

First, one must consider the existing menu performance and identify potential issues. Then, one must develop new recipes and cook them in a trial kitchen to try out the food before presenting it to the clients. After getting ready with the product, one must prepare a taste test for the staff and some of the most loyal customers and make corrections if needed.

5. Train the Staff on New Menu Items

It is important to ensure that all staff members are conversant with the new products offered on the menu. Educate them well on the various ingredients used in the meals, the appropriate method of preparing food, and how to serve it. Ensure the staff has adequate descriptions to answer the customers’ queries.

6. Monitor and Adjust Based on Customer Feedback

Once a new menu is introduced, it is important to track customer responses and the sales that are generated. Some of the ways to promote feedback include comment cards, surveys, and face-to-face communication. Engage this feedback to determine best-selling products and areas of weakness. Be ready to make changes to the plan at a moment’s notice depending on what the customers want or the analysis of the operations taken at the business.

Common Mistakes to Avoid

Menu engineering is a strategic process and failure to observe certain mistakes is key to the success of the process. Here are key menu engineering mistakes to watch out. 

• An overly complex menu may overcrowd the options and make it difficult for customers to make a decision and reduce the efficiency of the service.
• Ignoring the needs and wants of the customer implies that some products are likely to be produced, and no one will buy them.
• The appearance of the menu and its organization may contribute to either the positive or the negative experience of eating out. 

Menu engineering helps in reducing choices, positioning menus to suit customers, frequently revising the menu, and incorporating clear designs. It is now time to start deploying these strategies to increase profitability and, more importantly, customer satisfaction. 

FAQs Related To Menu Engineering

1. How often should I update my menu?

It is advised to change the menu at least twice a year so the food offered is as seasonal as possible. This way, the patrons will be continuously engaged and will remain interested and excited about what you are offering.

2. Does menu engineering generate good ROI for a restaurant?

Yes, menu engineering can make a great difference and enhance a restaurant’s ROI through effective item positioning, appropriate pricing tactics, and focusing on the high-margin dishes that customers desire.

3. Can restaurants add images to their menu?

Yes, in fact, one image per page can increase the sales by upto 30%. Creative photography can evoke a sense of warmth, and depict the food quality and service.