“Engineering menu” method for your restaurant

Menu Engineering consists of a marketing approach to make the best decisions on its selling prices, the content of the plate and its cost prices. To make the best decisions on prices, we must understand: customer demand (sales), the distribution of dishes (the sales proportions of each dish) and the profitability of each dish (its margin).

Make your next restaurant menu more profitable and more attractive for your customers !

Some basic principles to get started //

At what level of price and distribution of sales, a restaurant can optimize its profits? The Menu Engineering approach allows you to make the right decisions on the prices to be set for your dishes or the cost to be reviewed (change of content on the plate or of recipes).

Be careful, dishes with a high ratio (Ratio of a dish = Cost price / Selling price), can also be those with the highest margins. The most economically interesting dishes for the restaurant owner are therefore those with the highest average margin. Margin of a dish = Selling price – Cost price. Average margin = Margin of a dish / Number of sales.

To improve profitability, there are several levers //

Raising prices is not always the right solution! We must also ensure :

1. Reduce portions
2. Negotiate the purchase price of goods down or change
3. Reduce the products offered to customers
4. Study the alternative of offering à la carte prices rather than formula or menu
5. Improve productivity
6. Strengthen preparation controls to reduce losses

Avoid reducing profitability! You have to work on :

1. Increase the number of visitors to your restaurant
2. Improve the use of equipment, materials
3. Improve the average margin of your dishes

“The customer is conditioned by a price range depending on the positioning of the restaurant”. In addition, the most critical marketing principle is the customer’s perception of value. there are some benchmarks to use :

Price level // identification of a price in relation to its value

Price range // high quality comes with a high price

Signature dish // Dish whose price cannot be compared to the competition

Psychological price // Set prices at 4.95 or 4.99 rather than 5.00

The Menu Engineering method :

#Step 1 // List your dishes from the menu by theme – Starters, Main courses, Desserts, Menus-

#Step 2 // Choose a period for the study and collect the number of sales per dish

#Step 3 // Calculate the popularity of the dishes, the “Menu Mix% = Number of sales of the dish / Total number of sales of the theme” -% of sales (MM)

#Step 4 // Calculate the cost price of each dish. Cost of the recipe + Cost of toppings + Additional costs (bread, butter, etc.)

#Step 5 // Collect the selling price for each dish (Take into account any discounts you may make)

#Step 6 // Calculate the margin of each dish (Sales price excluding tax – Cost price)

#Step 7 // Calculate the cost price of each dish multiplied by the number of sales. Calculate the margin of each dish multiplied by the number of sales.

#Step 8 // Calculate the contribution margin of the dishes, the “CM = (Cost of each dish x Number of sales of the dish) / (Total turnover of each dish) -% of margin

#Step 9 // Rank your dishes in relation to sales (MM%). “H” for best sellers. MM> the average of the dishes and “B” on the worst sales.

#Step 10 // Classify your dishes in relation to the cleared margins (CM%). “H” for the best margins in relation to the total of the CM% of the category and “B” for the worst margins.

Summary table of classifications :

Sale category	Margin category	Classification
“H” High	“H” High	Star
“B” Low	“H” High	Puzzle
“H” High	“B” Low	Plowhorse
“B” Low	“B” Low	Dog

#Last step // The analysis of your results from the engineering menu allows you to determine the actions to be taken for each dish :

Star “the most popular products with the best margins“. Maintain quality, quantity, presentation. Product to highlight in the menu. Test price elasticity by increasing slightly without losing sales volume.

Puzzle “the products are not sold much but with very good margins“. Item to remove from the menu or position them in a visible place on the map. Sometimes a name change of the dish improves its sales. Lower the selling price as it may be too expensive. Dish from the menu to be featured on the menu or by the sales teams. You must have a limited number in this category.

Plowhorse “the products are relatively sold but with smaller margins“. Test price elasticity by increasing slightly without losing sales volume. To put in a less visible place on the map. Rework the recipe with less expensive products to improve the margin. Sometimes reducing the portion improves the margin without impacting the sale.

Dog “the products are not sold and their margins are the lowest“. Item to be removed from the map. Increase the price to move the item to the Puzzle category. Sometimes the restaurant must have this product, keep it in inventory but remove it from the map.

1. Any method of pricing based solely on costs is dangerous and often misleading ;
2. The price sensitivity by the customer should always be evaluated before setting prices (If I increase my price, will I still sell that much?) ;
3. Always analyze the prices of your competition ;
4. Consider using psychological prices in your menu card ;
5. Consider high prices for high quality products on the menu ;
6. Varied price ranges are essential to optimize margins while meeting customer satisfaction (Quality / price ratio) ;
7. By carrying out your menu engineering, favor the use of a graphic to precisely position each dish and define the best actions in relation to its positioning.