According to a Gallup poll, the average guest will only look at your menu for 109 seconds. That's all you get. Menu engineering done right will guarantee your most popular and profitable items are front and center—and everything else is on the back burner.
If you already have a good idea about what menu engineering is, and you just want to jump into the nuts and bolts of analyzing your menu, then go ahead and download our Restaurant Menu Engineering Worksheet. If you're here to get into the nitty gritty of restaurant menu engineering, then read on.
Restaurant Menu Engineering Worksheet
The best free menu engineering worksheet out there. Enter your menu item details into the Excel spreadsheet, and our tool will automatically plot them into a graph—aka a menu engineering matrix.
The state of the restaurant industry demands a more profitable menu
Over the past several months, food costs have shot through the roof due to soaring inflation. In fact, according to federal data, producer prices for food are up 13% just in the last year. On top of that, restaurants are paying 10% more to keep their staff during ongoing labor shortages.
Nowadays, determining what needs to change to manage costs and profit has become mission-critical for restaurant operators everywhere. Those changes, more often than not, will start with your menu.
When changing the menu, many restaurant owners and operators have the knee-jerk reaction of raising prices to offset inflation. While this may be necessary, it shouldn't be the first or only course of action. Poorly executed menu price increases have the potential to backfire by confusing or deterring guests.
While improving your menu can feel like a lot of decisions you should make with your gut, smart restaurant owners know that the numbers will reveal your best menu. Understanding what people want and finding the most cost-effective way to give it to them is the key to building the most profitable menu possible. This can be achieved through restaurant menu engineering.
What is menu engineering?
Menu engineering is the process of designing your menu to maximize profitability. To do this, you must first assess how well your current menu items are selling and how much profit potential each item has.
After that, you can put those items in a menu engineering matrix—a graph that shows where your menu items stand according to their popularity and profitability. Then, with this data, you can determine:
- What can be kept and featured prominently
- What items and prices should be modified
- What needs to be eliminated altogether
Here's a step-by-step guide that considers every aspect of your menu to ensure you're getting as much profit as possible.
Step 1: Assess the popularity of each menu item
Possibly, the most valuable data you need to know as a restaurant owner or operator is how well each menu item is selling in comparison to the rest of your menu. Understanding how guests spend their money at your restaurant is accurate feedback on how they feel about your menu. After all, everyone votes with their dollars.
Specifically, you'll want to find how many units of a menu item are selling over a particular period—month, quarter, or even year. You should be able to quickly pull this data from your POS's product mix report.
What is a product mix report, and how to use it?
The product mix, or PMIX, is a report that provides every data point about specific products in a restaurant or any given period. This tells restaurant owners what the best-sellers are, when they are selling, who is selling the most, any modifiers and add-ons, and order history.
For menu engineering purposes, you'll want to run your PMIX report for the past month and focus on the Quantity Sold column. Also, make sure you are comparing similar items. For instance, you'll want to get separate reports for entrées, appetizers, beverages, desserts, and sides.
You may even want to break your reports down further by breakfast, lunch, and dinner (if you serve more than one meal). Whatever categories you decide to use, all the menu items in each category should have similar price points.
Don't forget about online menu engineering
If you offer online ordering, create a separate menu worksheet for your online menu items. Many restaurant owners find that popular in-house items don't travel well and, therefore, don't sell well online. Conversely, some menu items that sell like crazy online won't get much attention in-house.
Unfortunately, if most of your online sales are through a third-party delivery app, you may have difficulty accessing your online PMIX data. If this is the case, consider setting up your restaurant online ordering with a first-party POS online ordering system. You'll not only get access to your online guest ordering information, but you'll also be able to receive online orders without high per-order commissions.
Step 2: Assess the profitability of each menu item
Next, you'll want to know how much profit every dish, dessert, or drink brings in. This is important because popular items that yield little profit could have the perception of profit while costing you more money than anticipated. To understand how profitable each menu item is, we must find its food cost, menu price, and food cost percentage. Let's break this down.
How to calculate menu item food cost
You have to get granular to find each menu item's food cost. For example, the food cost of your signature hamburger might include the price of the bun, meat patty, cheese, tomato, pickles, and onions.
And if you add your secret sauce, you must include the cost of a dollop on your burger. This means you have to break down the cost of a more significant portion of sauce and then determine the volume of a dollop to get the actual cost of the sauce on the burger.
You can calculate each menu item's food cost by adding the costs of all its ingredients. But this can get complicated as costs fluctuate, recipes change, or seasonal ingredients are out of stock.
To simplify the process, restaurants are leveraging cutting-edge inventory software like MarginEdge, Craftable, COGS-Well, or BevSpot. These platforms enable you to easily manage costs, track inventory, and analyze the profitability of your recipes and overall menu automatically. Best of all, they integrate with top restaurant POS systems like SpotOn Restaurant to give your operation a complete solution for orders, restaurant management, invoice management, and menu engineering.
Once you've determined your food costs, it's time to find your contribution margin and food cost percentage.
How to calculate the contribution margin?
What is the contribution margin? Your contribution margin is the difference between your menu item's food cost (calculated in the previous section) and its menu price. To find your contribution margin, you can use this formula:
If your hamburger's food cost is $3.65 and its price is $12.00, its contribution margin would be $8.35 (12.00 - 3.65 = 8.35).
How to calculate food cost percentage?
What is the food cost percentage? Your food cost percentage shows you what part of an item's price is food costs. To find the food cost percentage of your menu item, you can use this equation:
In our example above, the food cost percentage of the hamburger would be 30.4% (3.65 ÷ 12.00 x 100 = 30.4).
To ensure your menu is profitable and accepted by guests, your food cost percentage should be between 28% and 32% of food sales for full-service and limited-service restaurants. But there are exceptions to the rule.
Upscale full-service concepts specializing in steak and seafood could see food costs as high as 40%, while some gourmet pizza restaurants might get them down to 20% or less. Depending on the menu item, the competition in your area, and the value of your restaurant's brand, you'll want to set your menu prices somewhere between 2.5 and 5 times higher than your costs.
Step 3: Categorize your menu items
Once you've found the number of units sold for each menu item along with its food cost, you can use this information to determine how popular and profitable each item is. This is done with a menu engineering matrix.
What is a menu engineering matrix?
A menu engineering matrix is a grid that puts your menu items in one of four menu engineering categories—Star, Puzzle, Plowhorse, or Dog—based on their profitability and popularity. On the grid, the X axis represents the contribution margins while the Y axis represents the number of units sold in a month.
If a menu item is both popular and profitable, it'll be in the top right quadrant of the graph as a Star. Low profitability and high popularity items are Plowhorses which are in the top left quadrant. Puzzles are items that have high profitability and low popularity. They are located in the bottom right corner of the graph. And your Dogs, your low profitability and low popularity items, are in the bottom left quadrant.
Plotting this manually can be time-consuming. Let our free Restaurant Menu Engineering Worksheet do the work for you. Just enter your menu item details and your thresholds, and it'll automatically place your menu items in the matrix.
Restaurant Menu Engineering Worksheet
The best free menu engineering worksheet out there. Enter your menu item details into the Excel spreadsheet, and our tool will automatically plot them into a graph—aka a menu engineering matrix.
Step 4: Modify each menu item for profit
Now that you have the data behind the overall profitability of each item, it's time to explore how you can adjust your menu to bring in more profit. When doing this, one word of advice is to set aside your personal feelings and trust that the data accurately represents your guests' feelings about your menu.
Stars: High profitability | High popularity
Stars are loved by your customers and make your restaurant lots of money. Keep these recipes and prices the same. When looking at your Stars, try to identify any similarities.
Are most or all of them comfort food? Are they of a particular ethnic origin? Where do these menu items fall on the flavor spectrum—spicy, sweet, savory? Are they vegetarian or meat-based? Answers to these questions will give you deep insights into what guests like about (and expect from) your menu and guidance on future items that could bring in more profit.
Plowhorses: Low profitability | High popularity
Your customers are happy with your Plowhorses, but they need to make you more money. Consider raising their prices so that they are roughly 3 to 4 times the amount of their food costs. Or, if you notice guests often can't finish these in one sitting, try decreasing their portions.
Just beware that it's not advisable to both raise prices and decrease portions at the same time. Another strategy for making Plowhorses more profitable is to identify high-cost ingredients and replace them with a cheaper comparable option or find less expensive sourcing. Just be careful not to alter the taste so guests won't want to order them anymore.
Puzzles: High profitability | Low popularity
Puzzles are well-engineered for profit, but they aren't selling for some reason. Compare these menu items to your Stars and Plowhorses to see if they align with the flavor profile and branding your guests already like.
See if there are any ingredients that you can add that'll make these dishes more appealing. Or, on the flip side, consider removing elements of the plate that may not match the overall target profile. If you find a Puzzle that doesn't align with your restaurant's brand or flavor profile, remove it altogether.
Dogs: Low profitability | Low popularity
Menu items in the Dog category have low profitability and low popularity. Dogs are your lowest-performing dishes or beverages regarding popularity and profitability. Maybe they are staples you've had around for a while but have lost their appeal and are suffering from the recent rise in food costs.
Or you and your managers like these dishes, but your guests don't. Admitting that some dishes aren't working is tough, but what's even tougher is taking a loss from these items month after month. If you're looking to downsize (and simplify) your restaurant menu, Dogs are the first place to start slashing. Consider removing them altogether or, at the very least, modifying them to align with your more popular items.
Step 5: Get your menu in front of guests
Once you've analyzed and modified your recipes and pricing (perhaps you've even removed a few or several items), it's time to display your menu in a way that will be the most profitable. In today's day and age, that means showing it off boldly at your restaurant and online. Here's the fastest and most effective way of making this happen.
Establish your brand
Your brand represents how guests feel when they interact with your restaurant. If you haven't already, work with a restaurant menu design expert to create a logo system, brand color palette, and unique font suite.
A good designer can also develop your printed menu with wayfinding so guests can see your Stars and easily navigate your menu. Or, to avoid printing restaurant menus altogether, consider moving your entire menu online and giving guests access to it through customer-facing displays and QR codes.
Tap into menu psychology
When considering your menu design, you can utilize a few techniques to make your food more enticing and your prices more subtle. Let's explore some of these concepts.
Prices
Put prices after your menu description and remove currency signs to deemphasize pricing. Also, consider having prices end in .00, .25, .50. or .75 instead of .99 or .95 to avoid looking salesy. And for a more upscale feel, use flat prices without cents.
Design
Left-align your text for stability. Avoid using a script font in your descriptions, favoring an easy-to-read serif or san-serif font. Make your menu items considerably more prominent than your descriptions, keeping in mind guests don't want to read every word but would instead scan headers and only read what sounds good.
Text
Keep your descriptions short. Cut out unnecessary words to show you value your guests' time. Avoid overusing superlatives and excessive adjectives. Tell guests how items are prepared—grilled, marinated, sauteed, oven-roasted. Be more descriptive with higher-priced items, and leave descriptions off of simple items.
Update your website
Your website should be the first place your guests go online when they want to learn about your restaurant, view hours of operation, or order takeout and delivery. That's why it must be up-to-date, branded, and connected to your online menu. If your website needs a refresh, consider hiring an agency that can help you get it on brand and make it easy to navigate.
Plug in online ordering
As mentioned, online ordering is critical to making the most profit with your menu. It enables customers to order takeout and delivery from anywhere outside your restaurant and allows guests to access your menu in-house through QR codes at their tables or near your entrance.
When your online ordering integrates seamlessly with your restaurant POS system, guests can easily order and pay from your newly-optimized menu right from their phones with just a few taps. Even if you already have online ordering, you can use your POS's data analytics tools to improve its profitability.
Menu engineering is profit engineering
Although inflation and food costs are uncontrollable, your restaurant doesn't have to be. With precise menu engineering, you can identify what items are specifically driving profit, change your menu for a better ROI, and display it in a way that promotes more engagement from your guests.
As the restaurant industry shifts and advances in this technological era, menu engineering is the secret ingredient to harnessing the art and science of your greatest profit potential—your menu.
Restaurant Menu Engineering Worksheet
The best free menu engineering worksheet out there. Enter your menu item details into the Excel spreadsheet, and our tool will automatically plot them into a graph—aka a menu engineering matrix.
