Menu engineering is both an analytical and creative process to ensure that your menu will help your restaurant maximize profits. According to menu engineering expert Gregg Rapp, a well-designed menu can lead to a 10% increase or more in average check sizes.¹ The process of analyzing your menu prices alongside the layout and design of the menu allows you to create your menu in a way that encourages customers to order the most profitable items. It is both an art and a science. Without the right design, you may not be highlighting your restaurant’s most popular and profitable items. And without analyzing your costs and prices, a beautifully designed menu won’t help pay the bills.
Analyze your Costs
The first step is to cost out each item on your menu, recording the cost of each individual ingredient that goes into your recipes. This can be time consuming, but a good POS system can help with this task. Once you have determined all of your portion costs, you can calculate the contribution margin, which is the profit you make per item.
Selling price – Portion cost = Contribution margin
Example for an order of Garlic Knots:
Selling Price: $4.99 – Portion Cost: $0.69 = $4.30 Contribution Margin
Group your Menu Items
The next step is to categorize your menu items by high or low profitability and high or low popularity to determine where they should be placed on the menu. Popularity is based on the sell rate compared to other items on your menu. So if you sell 500 orders of Garlic Knots per week and only 50 Garden Salads during the same time period, the Garlic Knots would be considered to have a high popularity. Make sure to analyze and compare all of your menu items before determining which category they belong in. Use our Menu Engineering Template to help you analyze your menu items.
Those with the highest profitability and popularity are the items you want to feature and highlight on your menu. These are the items you want to sell the most of, so getting your customers to notice them is critical. This is where the actual menu design comes into play. When designing the menu, keep the four categories below in mind as they will guide the placement, size and treatment of the how they appear on your menu. Research of in-house menus shows that 80% of a restaurant’s food sales come from only 16% of menu items.² You may want to limit the number of items available on your menu and identifying your “dogs” is a good place to start.