By David Hopkins
Menu engineering is one of the most crucial yet often overlooked aspects of restaurant operations. Restaurateurs place so much value on a menu’s taste, ease of execution, and customer satisfaction that they may forget to engineer for profit. Few restaurants understand the importance of properly pricing and costing out their menus and the impact that has on their bottom line.
Menu engineering is a strategic review of your menu that identifies popular and profitable items to make the most of your offerings and capitalize on incremental revenues. Proper menu engineering allows operators to maximize menu profits, improve the guest experience, and streamline their inventory. In the current climate, with restaurants facing labour shortages and inflation – just to name a few challenges – menu engineering should become a common practice. If you’re not engineering your menu, you’re leaving money on the table.
Menu engineering is sometimes conflated with menu development in the industry. While the two share a lot of common ground, there are key differences between them. Menu development involves building and writing incredible recipes that will be successful with your concept, adhere to your brand, and appeal to guests, followed by naming them and creating physical or digital copies for guests to enjoy.
Conversely, menu engineering is the process of determining the profitability of each item and pricing dishes accordingly to optimize your bottom line. How does it work? First, the whole menu must be properly recipe’d and costed, then plotted on a Quantity vs. Margin (QuaM) graph. A QuaM graph visually depicts a menu item’s popularity relative to its profitability over time. This helps operators understand how the menu items contribute to profit. For example, star items should be promoted often as they are popular and highly profitable, whereas dogs should be reworked and/or price adjusted. Effective pricing and positioning follow from there.
This exercise involves an initial investment of time and resources but significantly benefits restaurant operations. These include:
Maximizing menu profit: Menu engineering starts with ensuring your entire menu is properly recipe’d and costed, and that it converts into bottom-line profitability. You’ll get the most bang for your buck while establishing a pricing system that suits the needs of your operation as well as your guests. Generally, a menu that is engineered for profit maximization will add three to four per cent additional sales to the bottom line. For an operation with $2 million in sales, that equals up to $80,000 per year of additional profit.
Improving guest experience: Engineering your menu based on items that generate a strong margin and have guest appeal will allow you to curate a menu that your guests love, encouraging repeat visits as they come back for more. In doing this, you’ll be confident that whatever they choose will be of excellent quality and properly prepared, while building your profitability.
Streamlining inventory: Rather than having an endless list of menu items or keeping around dishes that don’t perform, menu engineering allows your team to hone your offerings for ease of execution. This will ensure your kitchen can run more smoothly and efficiently and help you better manage inventory. Especially in the current climate, with supply chain challenges and various shortages, this practice will save your team time and money managing a smaller list of items. This can also have positive environmental impacts, such as helping to reduce food waste in the kitchen.
Restaurants sometimes question whether it’s worth it to carry out engineering their menu, especially if they are just a small operation or have limited offerings. Menu engineering is necessary for everyone – it is essential for a restaurant of any size or concept to optimize its profit model and general profitability. It may be even more critical for smaller restaurants than larger ones as smaller operations tend to have fewer menu items, so if you’re selling several units of a popular item that has a low margin, the potential impact on your bottom line could be even greater.
Menu engineering can seem daunting to those new to it or have a long list of menu offerings to work through. The good news is that restaurants are not alone in this; there are many tools available to streamline and simplify the menu engineering process. There are incredible restaurant inventory management platforms and industry tools that make executing and maintaining menu engineering techniques simpler. Used by restaurants of all styles and sizes across North America, these tools provide a centralized and streamlined way to track inventory and food costs, cost out recipes, and more.
All in all, menu engineering is an unavoidable practice for restaurants that hope to succeed in the industry. Done correctly, it requires dedicated time and effort to evaluate each offering individually but will pay off in terms of profitability, operational efficiency, and guest experience.
David Hopkins is the president of The Fifteen Group, a hospitality management and consulting agency that works with hundreds of restaurants across North America.