By properly engineering your menu, you can raise your restaurant’s sales by 20%. Follow these step-by-step instructions for carrying out a redesign of your menu analysis and you can easily raise your restaurant revenue by 20% or even more.
This idea began with an article created by James Taylor and Denise Brown. After analysis of many restaurant menus, the authors introduced what they call the “BCG Matrix” concept. This strategic analysis was introduced in the seventies to calculate growth-share in order to help businesses decide in which areas to invest, or to disinvest.
Using this same approach to restaurant menus, and following the ideas presented by Mr. Taylor and Ms. Brown, many restaurant owners have begun to use the BCG Matrix as a basis for engineering their own menus and to analyze their sales as well as to improve their income.
The main thrust of menu engineering is to analyze popularity and profitability of each item on a menu.
In addition, the study attempts to indicate the importance of both factors in deciding on the placement of these elements on a menu.
So far this study is most often used to analyze traditional paper menus, but the concept is equally applicable to the menus published on your restaurant website, Facebook page, or Twitter profile…or anyplace else for that matter.
Menu engineering: how to boost the sales of your restaurant
If you haven’t so far heard of this concept, now is a good time for you to find out how it can help boost sales in your restaurant.
STEP #1: Calculate the costs of the menu
Calculating the costs of the menu is the first step you should take to get the fundamental data you need for your menu engineering analysis.
Here are some examples:
An onion costs you $0.25 + $1.00 for delivery ($1,25 and this normally yields 8 slices of onion at $0.30. The onion cost per plate [2 slices]=$0.30.+3 slices of tomato ($2.00=$0.30).
Let’s say you prepare a tomato soup. For this dish you’ll need a stick of butter ($1.00) + two slices of onion ($0.30) + three tomatoes ($2.00) = $3.20.
The more accurate you can calculate your food cost of each ingredient, the better prepared you’ll be when it comes time to carry out further calculations.
⨏ Food cost = Cost of each ingredient + Purchase cost
Unfortunately, too many restaurateurs don’t put this much effort into calculating more accurately the cost of each item on their menus. True, this takes time, but if you hope to bring your restaurant up to its maximum success point, you have to have the passion, the marketing strategy and be willing to go that extra mile to ensure the growth and prosperity of your enterprise.
STEP 2#: Calculate food cost in percentage
To get the percentage of food cost you have to know exactly what you’re paying for your ingredients and calculate the cost of each dish as shown above.
Having made that calculation, you divide the food cost menu by dish price on the menu and multiply that by a hundred.
⨏ Food cost percentage = Food cost/Item selling price * 100
If you sell an Argentinian steak for $20.00 and your food cost is $5, your food cost percentage is 25%. You can then check the food percentage cost either on a monthly or quarterly basis.
STEP #3: Calculate the profit each dish contributes to your total incoming revenue
In this way, you can find out which of your dishes are bringing real benefits to your restaurant. To do this it’s necessary to calculate the profit margin.
⨏ Profit margin = item selling price – final food cost.
Your profit margin is an effective way to measure the benefits, analyze how they affect sales, and, ultimately, explain how the different factors of your business react to changes. This will be, in the end, the net amount you deposit in your bank.
Knowing the percentage of food cost and profit margin can be immensely helpful to you in making better business decisions.
STEP #4: Measure the popularity of items on your menu (beyond the amount actually sold)
To calculate the amount of product sold, you simply count the number of times you’ve sold a particular item from your menu over a given period of time.
This calculation is usually to be found in your point of sales reports. Then, it’s time to identify the percentage each item has contributed to the overall popularity of your menu.
Popularity: The total number or quantity of sales of a particular product contributes to the overall popularity of that item on the menu.
In order for you to calculate this, you’ll need to collect all the information on each of the menu items to be able to determine if they’re providing the desired benefit. Too, you’ll quickly see if they’re popular with your guests or not.
Your report should be able to tell you exactly how many people have ordered tomato soup, pizza, or a hamburger, etc. during the last quarter. You can also compare this report with the report from the previous quarter.
The overall popularity of an item is a good indicator of the perceived value of a particular dish and hoists a signal that tells you whether you’re selling well or not.
STEP #5: Generate an “average” to help measure your success
When you have all the correct data in place, it’s time to stand back and evaluate your progress up until now.
Your numbers would look something like this:
⨏ Average profit margin: Sum of all items profit martins/Total of the items
⨏ Average sold: Sum of the Items sold/Total of the items
STEP #6: Place your profit margin on the axis of a chart
Now we can get to the most fun part of this process. Place your profit margin on the Y axis of a chart and-the quantity of sales on the X-axis.
You should immediately see where each menu item is. The best-selling items will appear at the top while the components that are less popular will be lower on the graph.
What will you do with these dishes that don’t perform well? Can you improve them? Can you market them differently? Or should you simply eliminate them from your menu?
Other restaurateurs who analyzed and applied these engineering principles to their menus managed to implement strategies that actually increased their revenue by 20%!
All these data should provide you with the opportunity to make swift decisions about the present and the future profitability of your menu and help you to identify all the elements most favored by your guests.
If you have any doubt, don’t hesitate to drop a question or comment in the box below and I’ll get back to you as quickly as I can.