9 min read

Restaurant Menu Engineering: How To Create a Profitable Menu

Lineup.ai Team
Lineup.ai TeamJanuary 8, 2024
Menu engineering in restaurants
In this article

Creating a profitable restaurant menu is both an art and a science, requiring a strategic blend of culinary creativity and savvy business acumen. Your menu is not just a list of dishes – it's a crucial tool for driving sales and maximizing profits.

Research conducted at the University of Illinois revealed that using descriptive labels on menus not only boosted sales by 27% but also positively influenced customer perceptions about the food, the overall restaurant experience, and their likelihood of returning.

According to a study, 38% of dine-in and 33% of takeout or delivery customers report that their choice of restaurant is swayed by the availability of comfort foods they desire on the menu.

A poll by Gallup found that the average customer spends only 109 seconds studying a menu. This brief window is your opportunity to make an impact.

By employing the principles of menu engineering, you can transform your menu from a mere selection of items into a powerful asset that boosts your bottom line while delighting your customers, all within that critical 109-second timeframe.

What is Restaurant Menu Engineering?

Restaurant menu engineering involves looking at your menu from a strategic standpoint, analyzing and optimizing it to maximize profitability. It incorporates everything from the popularity of menu items to menu design, layout, and descriptions. The goal is to influence customer choices and enhance the dining experience while also ensuring you limit food waste and excess spending.

Not every restaurant engages in this practice and the ones who do often don’t dive in very deep. That makes it an excellent opportunity to gain a leg up on your competition.

Key Benefits of Restaurant Menu Engineering

Increased Profitability

By strategically designing the menu and thoughtfully building recipes, restaurants can significantly boost their profit margins. A typical restaurant food cost percentage is around 28%-35% of total spending, but up to 10% of food is wasted each year. Menu engineering can cut into that. It can also highlight your best and most profitable menu items.

Enhanced Customer Experience

A well-crafted menu guides customers to satisfying choices, improving their overall dining experience. It finds a balance between things like menu price, portion size, and customer preferences, and helps them make decisions that win for both them and you.

Informed Decision-Making

Utilizing sales data for menu adjustments ensures decisions are based on customer preferences and behaviors. Not only does this help drive customer experience, but it helps you understand your customers and their behavior better, helping you optimize decision-making in the future.

Operational Efficiency

Optimizing your menu can have impacts you might not even have considered. For example, streamlined inventory, reduced waste, more efficient kitchen operations, and resource management. It’s not all driven by high profit margins, but it can still impact your bottom line.

The Psychology Behind Menu Design

Before diving into the step-by-step process of menu engineering, it's essential to understand the psychological factors that influence customer decisions in a restaurant setting. The design and layout of the menu, the strategic placement of items, and the subtleties of pricing all play pivotal roles in guiding customer choices.

A well-organized and visually appealing layout not only enhances the dining experience but also directs attention to specific items. The layout should facilitate easy navigation and group items logically.

Item Placement

Strategic placement of items can significantly boost the sales of high-profit dishes. The eye naturally gravitates to certain areas of the menu, such as the top right corner, making these spots ideal for featuring 'Star' items. For a very in-depth look at eye movement patterns and restaurant menus, check this out.

Pricing Strategies

The presentation of selling price impacts how customers perceive value. Avoiding a price column minimizes direct price comparison, and subtle inclusion of prices in the item description can reduce price sensitivity, especially when people are choosing entrees.

Descriptive Language

Engaging, sensory-rich descriptions can make dishes more appealing and intriguing, potentially increasing their likelihood of being ordered.

Understanding these psychological underpinnings is key to effectively engineering a menu that not only satisfies but also subtly guides customer choices toward more profitable options.

Step-by-Step Process of Menu Engineering in a Restaurant

Step 1: Collecting Data

Begin by gathering detailed sales data for each menu item over a significant period, typically a few months. This data should include the number of times each item was sold and its profitability. It's crucial to have accurate and comprehensive data as it forms the basis of your menu engineering efforts. This data can often be found in your restaurant’s POS system.

You’ll want to pay attention to:

  • The cost of each menu item
  • Your restaurant’s total food cost percentage
  • The food cost percentage of individual menu items
  • The hierarchy of popularity among menu items

Keep in mind that the cost of food fluctuates often. You’ll want to revisit this periodically.

Once you know the cost of each menu item broken down into the cost of ingredients, you can weigh that against the profit margin per menu item. For example, if you’re spending $10 on steak and selling it for $15, you’re making a 50% profit. But let’s say you sell twice as many pork chops, yet you’re only making 20% profit on those. You have to factor in both item costs and item popularity to figure out where you’re making the most profit.

Step 2: Categorizing Menu Items

Analyze the data to categorize each menu item into one of four groups based on its popularity (number of sales) and profitability (margin). The restaurant industry typically uses the following categories:

  • Stars: High profitability and high popularity.
  • Plowhorses: Low profitability but high popularity.
  • Puzzles: High profitability but low popularity.
  • Dogs: Low profitability and low popularity.

This categorization helps in understanding which items to promote, modify, or possibly remove.

categorizing menu items in restaurants

Your stars are fine the way they are. No need to tweak them, they’re leading your restaurant profits.

Plowhorses need a little work. Consider trying to find ways to sub expensive ingredients with something more economical without affecting popularity. Consider whether or not you can simply change the portion size. Remove garnishes. It may take some experimenting to find the right balance.

Puzzles are referred to as such because they often have something for restaurant owners to solve. It can be as simple as the item’s niche—maybe it adheres to a specific diet, or perhaps the description contains a buzzword that resonates with certain people. Maybe it’s more seasonal than you realized. Or perhaps you just need to push it a little harder through marketing or staff suggestions.

Then we have the dogs. If an item is low-profit and unpopular, perhaps it’s best to simply remove it from your menu. Look at the metrics and determine if you have any items that simply aren’t providing any positive impact. If you’re still determined to make a dog work, consider making minor changes or putting it on special. If you still can’t make it work, cut your losses.

Step 3: Menu Design and Layout

While the psychology of menu design is important to menu engineering, it also goes very deep. We can really only scratch the surface here, but it’s absolutely worth taking a deeper dive for restaurant operators.

Design your menu to highlight 'Stars' and improve the visibility of 'Puzzles'. Use strategic placement, such as the top right corner of the menu, which is often read first, to draw attention to these items. Employ graphic elements like boxes, colors, or icons to make these items stand out. You may even consider removing dollar signs. Remember, the goal is to guide the customer’s attention to high-profit items.

Keep in mind that the majority of your sales are likely coming from just a few of your menu items. Keeping a slimmer menu helps guests make choices. This is true whether they’re ordering in-house, online, for takeout, or delivery. A good rule of thumb is to aim for four to eight items per category.

Make the menu easy to scan. Group items by type if you have more than one in a certain category. That means a different section for appetizers, pastas, pizzas, steak, chicken... Whatever makes the most sense.

Keep in mind that online ordering decisions are sometimes different and that customers are looking at your online menu using a phone, tablet, or computer. This could impact menu design or force you to adhere to specific platforms.

Step 4: Pricing Strategies

Review the pricing of your menu items. For 'Plowhorses', consider if a slight price increase is feasible without affecting demand. For 'Puzzles', consider whether a price reduction could make them more appealing. The pricing strategy should be subtle and always consider customer price sensitivity. There’s a tendency to get carried away during the menu engineering process. Not everything needs to be optimized for profitability, you also need to consider how customers will react to your changes.

Step 5: Crafting Descriptions

Work on your menu descriptions, especially for 'Stars' and 'Puzzles'. Descriptions should be enticing and highlight the unique aspects of the dish. Use sensory words and evoke emotions or memories. You also want to be concise and to the point—if you’re too long-winded, people will lose interest. Good descriptions can significantly influence customer choices.

Step 6: Testing and Feedback

Implement changes in a controlled environment or as a test run. Gather customer feedback on the new layout, item placement, descriptions, and any price changes. Monitor the sales data closely to see the impact of your changes. Customer feedback can be invaluable in fine-tuning your menu.

Step 7: Staff Training and Marketing

Train your staff on the new menu layout and the reasons behind it. They should be able to recommend 'Stars' and 'Puzzles' effectively. Additionally, consider marketing campaigns or promotions to highlight the revamped menu, focusing on your most profitable items.

Step 8: Regular Review and Update

Menu engineering is not a one-time task. Regularly review your menu's performance every few months. Stay updated with changing customer preferences, menu item popularity, seasonal trends, and operational costs. Consider a menu redesign periodically or adding new dishes to keep things fresh. Continuously updating your menu based on these factors ensures sustained profitability and popularity.

Integrating Technology in Menu Engineering

The integration of advanced technologies like modern POS systems and AI forecasting software has revolutionized the field of menu engineering, offering new dimensions of efficiency and effectiveness. While most technologies are not designed with menu engineering directly in mind, they can provide valuable data to assist with the process while helping drive overall profitability.

AI-Powered Sales and Item-Level Forecasting

Forecasting helps you gauge demand over a given timeframe. When you have a better understanding of your expected sales down to the item level, you can decide which menu items to highlight at which time of day. You can even start using different menus during different time periods to meet customer behavior.

Lineup.ai uses artificial intelligence to deliver dynamic and automated sales forecasting. This technology allows restaurants to make accurate predictions about demand, sales, and labor needs. By anticipating busy periods and customer preferences, restaurants can optimize their menu offerings, ensuring that high-demand items are featured and adequately stocked.

Real-Time Data Integration

The more data you have, the more efficient your menu engineering can be. It’s all about breaking down customer behavior and preferences and looking at profitability.

Lineup.ai integrates with existing Point of Sale (POS) systems, allowing restaurants to access historical sales data and real-time information. This integration feeds into the AI's machine learning algorithms, continuously improving the accuracy of forecasts. Such real-time data integration is crucial for making informed decisions about menu changes, pricing strategies, and inventory management.

Wrap up

There is no shortage of ways you can optimize your restaurant in terms of profitability or customer experience. It becomes a delicate balance and you never really stop tinkering because customer behavior never really stops changing. Menu engineering is one of many crucial practices that the best restaurateurs pay close attention to. Conduct a menu analysis, optimize all of the major menu engineering categories, and continue to monitor results and make tweaks.

Lineup.ai Team
Lineup.ai Team

The team at Lineup.ai is composed of seasoned professionals who hold deep insights into the unique challenges and pain points of the restaurant industry, and are equally skilled in artificial intelligence, machine learning, and data analytics. This fusion of expertise enables Lineup.ai to create cutting-edge AI solutions specifically tailored for the restaurant sector. The technical and analytical prowess of the team, combined with a deep understanding of the unique challenges faced by restaurants, forms the cornerstone of the company's innovation. The team at Lineup.ai also excels in communicating the benefits and applications of AI and machine learning to businesses, ensuring clients fully leverage the capabilities of these solutions.

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