The restaurant industry reached $997 billion in sales in 2023. People spend a lot on food and there’s no denying that. But, we often overhear struggles that go on behind this glamorous-looking industry, and how hard it is to sustain with immense competition. This blog is a detailed analysis of menus; and how to strategize and optimize them for maximum results.

Maximize your restaurant profits through menu analysis

85% of diners look up the menu online before deciding on a new restaurant. Thus, the menu becomes your first marketing and sales channel. It is super important to optimize it according to the audience you cater to, keeping their likes, dislikes, pickup points and drop-offs in mind. The objective of menu analysis is to revamp your menu layout by strategically rearranging items to highlight your most profitable ones. Determining the frequency of conducting this analysis depends on practical considerations. While menu engineering analysis requires time, it's an investment that can yield significant returns.

Conducting it seasonally or quarterly is optimal, but even biannual reviews can positively impact sales. Remember, any level of menu engineering analysis is beneficial compared to none at all.

How profitable is your menu?

To determine the profitability of a menu item, you'll need two key figures:

  1. The contribution margin
  2. Its popularity.

The contribution margin signifies the profit gained from an item after deducting its food cost from the selling price. It essentially shows how much the item adds to your profit.

On the other hand, popularity indicates the percentage of sales a particular item contributes within its category, reflecting how frequently it's ordered by customers. You can easily calculate these metrics using the following formulas:

Contribution Margin = Selling Price - Food Cost

Popularity = (Number of Sales of an Item / Total Number of Sales in its Category) x 100

For instance, if you sell a burger for $12 with a production cost of $4, the contribution margin would be $8. If this burger constitutes 100 out of 500 total sales in the main course category, its popularity would be 20%

How profitable is your menu?

Menu engineering employs menu profitability data to categorize menu items into four groups based on their contribution margin and popularity;

  1. Stars
  2. Plowhorses
  3. Puzzles
  4. Dogs.

Stars represent high-profit and high-popularity items, which are prime candidates for promotion and emphasis on the menu. Plowhorses are items with low profitability despite high popularity, suggesting the need to adjust pricing or portion sizes. Puzzles are items with high profitability but low popularity, indicating potential for improvement in marketing or presentation. Dogs are items with both low profitability and low popularity, signalling the need for removal or replacement from the menu. Utilizing a matrix, you can visually map out these categories to inform decisions regarding menu design and pricing strategies.

Categorize your menu items.

Once you've analyzed sales data to understand the performance and profitability of each menu item within a specific timeframe, you can utilize a Menu Engineering Spreadsheet. This tool categorizes menu items into four distinct categories: Stars, Puzzles, Plowhorses, and Dogs. The spreadsheet displays all menu items on a scatter plot, with popularity (number of items sold) represented on the Y-axis and profitability (contribution margin) on the X-axis. This visualization allows you to observe the relationship between popularity and profitability for each item. Additionally, incorporating the use of a Windows kiosk can streamline the process of data entry and analysis, making it easier to keep your data up-to-date and accessible. By drawing a trend line through these items, you can determine whether your menu is trending towards becoming dominated by Stars, Dogs, Plowhorses, or Puzzles.

Think like your customer

Menu psychology delves into how customers perceive and respond to menus, considering factors like;

  • Layout
  • Typography
  • Colour
  • Wording
  • Symbols.

Implementing these principles can shape customer choices and enhance menu profitability. For instance, employing descriptive language can elevate the appeal and memorability of items. Price anchoring encourages customers to compare prices, while strategic price formatting reduces price visibility.

Data visualization through elements such as boxes, colours, icons, or images can highlight key items for increased attention. Making a good-looking menu is like creating awesome 3D product visuals. It will catch people's attention, and arranging dishes on a menu can sway what customers pick. By analyzing menu profitability and integrating menu engineering and psychology strategies, you can craft a menu that optimizes revenue and profit. Regularly monitoring and updating menu profitability data ensures ongoing performance tracking and facilitates necessary adjustments.

About the Author

Yogesh Bhagwani

I am a highly skilled link building specialist with 3 years of experience in the industry. I have a proven track record of increasing website traffic and search engine rankings by developing and executing effective link building campaigns. Email: [email protected]