Restaurants can offer delicious food and provide the highest quality of ambiance and yet their profitability seems to remain stagnant.
A loyal customer base may suggest the establishment to friends and family, but it is still difficult for the owner to attract new patrons and upsell expensive items to existing ones.
For these diners, employing menu engineering techniques to redesign and reevaluate their sales menu is one of the least-remembered solutions.
A well-curated menu that accentuates the most profitable and popular items do wonders to improve the bottom line and increase brand awareness.
Here is an overview of menu engineering techniques and how to best leverage them to increase sales and build a profitable menu.
What is Menu Engineering?
Menu engineering is the process of judiciously examining and designing a menu to boost profit. It requires in-depth psychoanalysis that markets every item that will best promote a restaurant's brand and generate revenue. By utilizing effective engineering techniques, owners curate and finalize a menu functionally and effectually.
Menu engineering uses historical data from POS systems and menu analysis to put each item into categories that are ranked in terms of profitability and popularity.
Data stems from an in-depth analysis of customer behavior, purchase history, food prices, menu item costs, and how much an item is worth after paying expenses to make it (contribution margin).
Once items are categorized, engineering data is applied to design a menu in a way that influences a customer to choose the more expensive items.
This is an on-going process that uses trial and error to increase profitability and optimize a brand over time. Both small and large restaurants have employed menu engineering tactics to improve performance levels and enhance customer satisfaction.
How to Utilize Menu Engineering to Build Out a Menu
Utilize engineering techniques by taking the following steps to build a profitable menu-
1. Analyze Menu Items
Study menu items and research historical data to determine which items have low profitability and low popularity and vice versa. The restaurant should construct its menu by focusing on the items that correlate to high profitability and high popularity.
Make sure that food costs are priced accurately according to industry standards. Research how much the competition charges for a similar menu item and choose a justifiable and reasonable item price that takes labor costs, contribution margins, and ingredient cost into consideration.
Use a restaurant menu matrix to discern item profitability and popularity ranking. Pick a time frame to record the information and then document the number of items sold coupled with the profit generated by the item sold. Use a graph with an X and Y axis; the X-axis represents the volume and the Y-axis represents the quantity.
2. Use Terminology to Group Items
The menu engineering field uses certain terms to group items together based on their level of popularity and profitability. Using these groups can help to further analyze items before implementing a design-
- Plowhorses- The items tend to be well-liked by customers but generate a low to average contribution margin. Because their popularity makes it essential to continue selling them, consider using less expensive ingredients or decreasing portion sizes to minimize costs.
- Dogs- These items are rarely ordered and also have a low-profit margin. Think about taking these items off the menu completely or avoid upselling and accentuating them on the menu design.
- Stars- These items are popular with a high selling price. Focus on promoting, accentuating, and upselling them to patrons.
- Puzzles- Puzzles typically have a high contribution margin but are more difficult to sell to customers. Consider changing the recipe slightly to make the item more palatable to guests. Find ways to highlight these items on a menu design, and continue upselling them to patrons.
Menu psychology encompasses a set of strategies to encourage customers to spend more money by accentuating items with a high-profit margin. Take the following steps to restructure and redesign the menu in this fashion-
A- Design Menu so High-Profit Items Stand Out
Draw customers in by including a photo, visual, shaded box, uniquely designed border, or an extra amount of white space. All of these design techniques are proven to capture the eye and catch a person's attention.
B- Placement Matters
Put the items that need to be sold in the center of the menu, the top left corner, or the top right corner. Studies performed by psychologists have shown that a person's eyes move in these directions when first opening a menu, book, or newspaper.
C- Place Profitable Items Appropriately
Experts assess that placing an item at the top or bottom of a list tends to capture a viewer's attention. Take advantage of this by placing one profitable item on top of the list in one section of the menu and another on the bottom of the list in another section of the menu.
D- Include a Decoy Menu
Place a decoy menu within the menu near the high-profit items. Though the items are probably already reasonably priced, they will seem even more attractive when positioned next to a decoy menu filled with more costly choices.
E- Implement Bracketing
Try bracketing by placing two-portion options for one item without listing the exact size. The patron won't know precisely how much smaller the less costly portion is, but will most likely order it because it's cheaper.
Realistically, the smaller, less costly portion is the one that the restaurant wants to sell in the first place. As a bonus, those who order the more expensive, larger portion are also spending more money and generating profit for the restaurant.
F- Employ the Nesting Method
Discretely list menu prices by using the same font for the price and menu item description. Instead of highlighting the price by using a different font, this design tactic minimizes the price so it doesn't stand out to the viewer. Other nesting tips include-
- Don't end prices with.99 because it sounds unsatisfying and low-end.
- Avoid using a dollar sign as the indicator will remind guests they are paying for something.
- Don't include price trails or connecting lines between the item and its cost because it accentuates the price as opposed to its description.
- Stay away from price columns that place costs in a column across from an item description. Customers will use this to compare the cost between items, often choosing the least expensive option.
Here are the key takeaways for the restaurant business to remember about menu engineering-
- Menu engineering utilizes effective decision making and psychology to design a menu that accentuates items that generate the most profit.
- Employing effective engineering techniques will increase customer satisfaction, improve the total contribution margin, increase the bottom line, optimize a restaurant's brand, and demonstrate menu profitability.
- Helpful engineering techniques include properly analyzing menu items, grouping items according to terminology, and restructuring and redesigning the entire menu continuously.
- Other tactics and tips include proper item placement, implementing a decoy menu and bracketing, trying a nesting method, effective menu pricing, and accentuating high-profit items by listing them appropriately.