Let’s be honest with the restaurant business, the margins can be tight and you are always looking for ways to improve quality, and the customer experience while decreasing cost to increase profit.
Of course, at first glance it seems obvious that one of the first things you’d look at is the menu to increase profitability.
However, adjusting the menu can also be a risky practice if it isn’t done properly.
An improperly engineered menu, therefore, could even have the opposite effect that you want and decrease profitability.
First Step: Consider Menu Engineering
To decrease the risk of adjusting your menu, let me introduce you to the concept of “Menu Engineering” which is the process of evaluating items on your menu for both popularity and profitability.
This process will help you take away the risk of losing profit, and increase the chance of greater profitability when adjusting your menu.
The key considerations for re-engineering your menu might include:
- Eliminate items
- Change prices
- Modify the layout to focus on particular items
- Change the way you prepare items
- Add new items
SECOND STEP: Evaluate Profitability
A good way to get started with this second step is to empower your cooks and chefs to do this process with you.
You want to re-evaluate the cost of each item on your menu: ingredients, cost to make, and any other associated costs.
Get your cooks to do the following process:
1. Create Recipes:
Create a digital file, or even a hard copy written down of the exact recipe for each food item on the menu.
2. Establish Portion Sizes:
For example, an 8 oz. NY Steak, generally, you can convert the price per pound that you pay to your cost. Even if this has been done before, it’s important to do it again during this menu engineering process to re-evaluate the costs associated with portion sizes.
3. Add Up Costs:
You will want to also consider shrinkage and then add up the cost of the ingredients. This will give you your cost per item on the menu.
4. Calculate Profitability:
Subtract your cost from the price on your menu for each item on the menu
5. Rank Profitability:
After you’ve done the above process for every item on the menu create a list of items from most to least profitable.
Now keeping the order of profitability from the last step organize the items into your menu categories: lunch, dinner, breakfast, desserts, whatever your categories may be.
THIRD STEP: Focus On Popularity
This next step may include yourself, management, and cooks.
Re-engineering your menu requires that you may want to add or remove some items from the menu based on profitability.
However, to avoid losing customers, ensure that you consider the most popular items in your list as well.
If you have a POS system or not it should be a fairly simple process to evaluate your most purchased/popular items.
These most popular items are going to be first on your menu, and the least popular items may be cut, or re-ordered based on popularity and profitability.
Now, considering both popularity and profitability, you might want to organize the data on your list in the following ways to determine adjustments on your menu:
- A. popular and profitable
- B. popular but less profitable
- C. unpopular but profitable
- D. unpopular and less profitable
Formatting your list this way, and maintaining a digital file of your menu that’s easily accessible by cooks, management, and yourself is important to optimize profitability.
For example, if you consider item A ( popular and profitable ) this item should be the most prominent on the menu.
If you run your menu for 6 months and realize that item A is no longer the most popular and profitable item, instead, item C is then you may want to re-order your menu item to ensure the most popular and profitable item is always first.
Tracking your menu items based on popularity and profitability and then re-evaluating on a weekly, or even monthly basis should help better manage gross profits.
There are many ways to manage gross profit in your restaurant.
Menu engineering is a simple and easy way to increase profitability, while ensuring that your restaurant is a pleasant, top-notch dining experience for your customers.
Please use this article as a guide to re-engineer your menu periodically to help improve overall gross profits of your restaurant.