Increase profits through menu engineering: Identify the big money
Have you ever walked into a department store and wondered why the jewelry counter is located in the front? Notice also that the women’s clothes and shoes are way in the back of the store. In a grocery store, have you noticed the sales items are at the end of the aisles? Also, certain goods are at eye level and others on bottom shelves.
It’s all part of strategic plan to entice consumers to buy what the store wants them to buy. Over the years, many consumer behavior studies have analyzed buying habits and retailers know exactly where to place goods to grab attention and elicit specific actions and reactions to maximize sales and more importantly, profits.
By using the process of menu engineering, your restaurant’s top line revenue can be flat while your bottom line profit grows by 3-5 percent.
Menu engineering is a sophisticated analysis that observes how restaurant patrons make item selections. These observations result in a redesigned or engineered menu, which encourages consumers to select certain items over others. Well-engineered menus sell higher gross profit items that satisfy the consumer and add incremental gross profit dollars to the restaurant operator. If you consider your menu a decorative price list, you miss opportunities. Your menu is your most powerful merchandising tool, reflecting what makes your restaurant special and profitable.
Menus perform three primary functions: first, they position the restaurant. For example, paper menus in a carryout location are appropriate and smart, as consumers can take them home for easy re-ordering. A paper menu in a white-table cloth restaurant confuses customers. Second, menus merchandise – they offers choices to the consumer, promote certain items, and finally, the best menus sell. The purpose of menu engineering is to sell the items YOU want to sell, the ones that drive the highest gross profit.
Picture you are out to dinner with family and friends. The wait staff visits the table to ask if you made your choice yet. You and your tablemates have been sipping drinks and catching up, the social pressure to “place an order” is high so you grab the menu, scan the pictures and text and make a choice. Most people dine out primarily to enjoy their time so many items will satisfy their food desires. Menu engineering encourages consumers to buy the items that your kitchen staff performs well and drives additional profit.
The first step to engineer your menu is to calculate your “Theoretical Food Cost.” The simple method is to add the value of all ingredients in a dish and divide by the selling cost. Once you determine all the items, you must rank, not by food cost percentage, but by Gross Profit Dollar contribution.
Food cost percentage is an interesting management tool, but it is not the determiner of profitable operations. You take dollars to the bank, not percentages. Excellent menu engineering that satisfies customers’ choices and delivers additional gross profit to you is the key to success.
In Part 2 of this look at menu engineering, we will discuss the purchasing and marketing changes you can make to your menu to ensure your consumers select the items you want them to pick.
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Companies: Axis Purchasing
John Krebs / John Krebs is a dynamic, seasoned executive with experience in building and growing multi-million-dollar organizations through strategic visioning, expert leadership, and strong operational expertise. Krebs has helped hundreds of foodservice organizations achieve a focus on exceptional results by using his operational and supply expertise in distribution, purchasing and operational management.