What does it mean to re-engineer the menu? The cash cow for your restaurant starts with menu engineering
What is menu engineering:
Menu engineering is a growth strategy that helps identify high-profit items that can be strategically priced to maximize revenue. It involves understanding the costs of your restaurant and strategically pricing the menu items. Menu engineering focuses on studying two key elements: the profitability and popularity of the menu and how these items significantly influence the proper selection and pricing of products on the menu.
Menu engineering does not rely on random decisions in arranging menu items. Instead, it is a rooted research process studied by the Boston Consulting Group to help companies and restaurants categorize their products in a way that facilitates analysis and future decision-making.
The key step to consider when analyzing the menu is accurately calculating the contribution margin of the products. Therefore, it is vital to use an accurate costing system to make more informed and effective decisions.
The impact of menu engineering:
Developing and improving a menu relies entirely on data analysis. It usually takes days to come up with a list of products that work to increase sales and profit margins by a range of 10% to 20%, according to studies, and the increase is continuous.
One of the critical factors for the success of menu engineering is for the restaurant owner and manager to understand the details in terms of costs, popularity, and profitability of the products. They should be fully prepared to invest the necessary effort and time to understand and implement the changes and additions to create a suitable menu.
Every restaurant has a certain amount of unrealized profit that can be obtained by making some changes. A study found that about 40% of restaurants use menu engineering to some extent, intentionally or unintentionally. In comparison, only 10% of restaurants use menu engineering deliberately and adequately. This means that more than 60% of restaurants rely on randomness and lack of study in menu development, resulting in missed opportunities and loss of profits within reach due to this randomness.
Menu engineering is a continuous process that should be practiced regularly because the more menu data is analyzed, the better the performance of menu products.
Case study:
A fast-food restaurant faced challenges in improving profit margins, so it decided to use menu analysis and engineering tools to improve profitability.
The first step was analyzing the menu matrix. The restaurant owner found that they had many products that represented “Horses.” These items were popular among customers but could have been more profitable. The restaurant also had some “Turtles” items that were neither popular nor profitable.
The restaurant owner decided to make the following changes to the menu:
- Increase the prices of “Horses” products by 10%.
- Decrease the prices of “Puzzles” products by 10%.
- Remove the “Turtles” products from the menu.
After making these changes, the restaurant's profitability increased by 15%.
- Menu engineering is a powerful data analysis tool that enhances restaurant sales growth and profit margins by analyzing the product matrix and making strategic changes. Restaurants can use it to study costs, increase the number of “Stars” items, and reduce the number of “Turtles” items, significantly increasing profit margins.
Tools for menu analysis and engineering:
- Excel: Some ready-made templates are available for menu analysis. Here is a sample Excel file for analyzing items and determining sales volume and profits (Excel file for item analysis and determining sales volume and profits).
- Point of Sale (POS) reports: Some POS systems offer reports that help understand the performance of products in general.
Business Intelligence Platforms (Ballurh): Ballurh’s systems provide an easy and quick tool for menu analysis and engineering to ensure informed decision-making based on facts and figures.
Additional resources from restaurant expert Abdulrahman Al-Qahtani:
There are multiple ways to maximize the benefits of menu analysis techniques to improve profit margins, helping restaurants enhance short-term growth. Feel free to contact us for more information.
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