How to do Menu Engineering to improve restaurant profitability?
What is Menu Engineering? Is it something an Engineer does in the hotel? How should we go about doing this?
A process of identifying what dishes sell and what don’t in our menu and combining it with which is most profitable and which is not to get the top dishes in your restaurant
A menu engineering helps you to understand which dishes to retain on the menu and which to remove or make some changes to.
In this post, let us look at how to make menu engineering and what to do with the results the tool throws out
Before you Begin
In order to begin with the process of Menu Engineering, you need to have a few numbers ready with you,
- No of items sold for every dish on the menu for the period of the review
- Selling Price for the dishes
- Cost Price for the dishes
- Profit for the dishes
Understanding the basics
Contribution:
You probably know how to calculate the food cost for the dishes you sell. You would have heard of many benchmark food cost percentages from the industry experts and strive to keep the food cost under control using many strategies. However, the biggest danger in only considering food cost is like having a high ARR but very low occupancy. You can still be bankrupt if your food cost is under control if you don’t sell enough to cover the overheads. That is why you need to calculate contribution.
Selling price – Cost price is Contribution margin.
You need some dishes that put more money in the bank which may have a high food cost, however, are bringing in more Contribution. That will ensure that you have enough money to pay your overheads.
Popularity:
The popularity of dishes plays a vital role in menu engineering as it may not make sense to remove highly profitable dishes out of the menu. You can treat the dishes with extra attention since they are your breadwinners.
Next Steps
Once you understand these 2 factors, the next step is to plot these on a graph in the following manner
- Popular and Profitable – STAR
- Popular but Not Profitable – PLOUGH HORSE
- Not Popular but Profitable – PUZZLE
- Not Popular and Not Profitable – DOG
What to do with this information?
STAR is the easiest thing to tackle. Retain on the menu and Increase Price
DOG is the next easiest. Drop from the menu in favour of new dishes or increase selling price to improve contribution margins.
PLOUGH HORSE: Try to increase price and also at the same time market these revised dishes so as to retain the popularity of the dishes. Sometimes, reducing the portion size can also result in increased profitability
PUZZLE: Highlight these dishes on the menu, offer incentives to servers to sell them, possibly try to reduce the price slightly to increase volumes.
What to do next?
If you have not done a Menu Engineering for your restaurant menu, do one today. If you wish to have it done for your restaurant, click here. We can help to do it for you.
That way you can improve your restaurant profitability and make more revenue per cover.