Maximizing profit through menu engineering

A guide to how a well engineered menu can help in maximizing profit

Maximizing profit through menu engineering

Restaurant business has attracted many entrepreneurs to venture into it. If done right, it can result in high profits. Some significant factors that contribute to the restaurant business's success are choosing the perfect location, the right amount of capital to invest in the operational cost, and having the right team in the kitchen, creating a culinary masterpiece on the plate. But there are other factors as well that get sidelined and can impact the profitability of the business, one of them being, engineering the menu to yield maximum profit.

Well-Engineered menu can play a role in improving profitability.

Menu Engineering 101:

For a restaurant, the menu is not just a list of items but a branding tool through which customers perceive their brand image. A well-engineered menu helps in improving the profitability of a restaurant. But what is menu engineering? It’s a way to evaluate menu items based on the popularity and profitability and how these factors help in the placement of items on the menu. All items are categorized into four major categories. Derived from BCG Matrix, the menu items are placed in one of the four quadrants based on popularity and profitability:

-     Stars: High profitability and high popularity

-     Plow horses: Low profitability and high popularity

-     Puzzles: High profitability and low popularity

-     Dogs: Low profitability and low popularity

Derived from BCG Matrix, all the items can be placed in the quadrant

To identify the profitability, a restaurant needs to understand the cost of the dishes and how it should be priced, whereas popularity can be defined by looking at the historical data of what customers are frequently ordering.

Once all the menu items are placed in the quadrants, it becomes easier to place the items on the menu and tag them accordingly. For example, the item in the star quadrant can be tagged as Bestsellers, placing them on top of the menu, and items in puzzle quadrants can be tagged as Must Try. Whereas items in the dog quadrant are the ones that a restaurant can experiment with or replace them with new items on the menu.

This data can also be helpful when creating combos. Items that are less popular but yield high profit, when clubbed with items in star or plow horse quadrant can increase the sale of low-performing items and improve the profitability.

A look at the UI after configuring the combos through UrbanPiper

Helping hand with menu engineering:

Although there are professional consultants who can help restaurants with menu planning and designing, there are tools available for restaurateurs to analyze and work on their menu. UrbanPiper’s Atlas is one such tool that can help in menu planning for businesses that rely heavily on online channels for orders.

Here’s a quick overview of how Atlas can help in menu planning and improve profitability:

  • Sales projection: One of the major loss of revenue for a restaurant is due to food wastage. Atlas provides historical data on sales/orders based on the day of the week and time of the day. This helps in estimating the expected sales based on past trends. For example, business is slower for restaurants on Monday. To get the right projection of items to be prepared, one can check the ordering trends for the last few Mondays and identify the expected orders during the peak time.
  • Identifying the top-sellers: Atlas gives an insight into the performance of items on the menu. It makes it easier to identify which items are selling the most and which ones are creating high revenues so that it can be highlighted on the online platforms. Apart from menu items, it also helps in identifying top-performing categories and stores.
A snapshot of the Atlas to track top performing items, stores, categories etc.
  • Restaurant Health Index: Apart from data on items and revenue, Atlas can help maintain a good RHI so that the business doesn’t get affected due to trivial operational challenges.

While good food and a nice experience are the stars for a restaurant’s success, the above practices can help streamline operations and maximize profitability.