How To: Menu Engineering
Improve your profitability and decrease waste with Menu Engineering for a single restaurant!
Menu engineering is the practice of analyzing the costs, popularity, profitability, and positioning of your menu items to optimize your menu performance. This is a data-driven practice performed cyclically and usually with specific goals. In this guide, we will discuss how to run a Menu Engineering cycle for a single restaurant. After completing this guide, you'll be prepared to:
- Run a Menu Engineering analysis for one of your menus
- Identify and recommend a course of action based on data-driven insights
- Monitor the progress following your changes
- Deliver an ROI on the effort (clearly explain the quantifiable improvements you made!)
If you are looking for guidance on running a menu engineering effort for multiple outlets, see our companion guides:
Let's get started!
In this guide:
- What is Menu Engineering?
- The Menu Engineering Cycle
- Before you start
- Performing a basic Menu Engineering analysis
- The Monitoring period
What is Menu Engineering?
Menu engineering is a proven framework that can put data behind your menu decisions - it requires you to know your customers and your menu, and shines a light on where you can take action to optimize your menu for profitability and guest satisfaction. Use the popularity and profitability of individual menu items to make strategic decisions about pricing, menu content, sales strategies, and more. Using the data already at your fingertips in Avero you can quantify customer preferences to drive revenue while protecting profit.
The Menu Engineering Cycle
Menu Engineering is not a one-time "set it and forget it" action nor is it something you need to perform every week or month. For the best results, menu engineering happens in a cycle consisting of two phases: Analysis/Action and Monitoring. We recommend a quarterly cycle for most restaurants as this aligns with a menu that updates seasonally. If your menu changes more or less frequently, you may adjust your cadence to match your operation.
- Make sure you are looking at a long enough time period to reduce the impact of outliers in your data and have the most robust foundation for your analysis.
- Once you have performed your analysis, you'll enact changes based on your analysis and enter the monitoring period. Once the monitoring period begins, avoid making additional menu changes that may skew the data.
- You do not need to analyze every facet of your menu at once! For the best chance of success and the lowest burden on your team, try one menu or category at a time. Especially if this is your first attempt at performing this analysis, start small.
- Make it a team effort! While one person may lead the menu engineering effort, spread the work among the team - have the kitchen perform the first steps for evaluating the Dinner menu and your Bar Manager analyze the Wine by the Glass menu, then bring the team together to suggest the course of action and start your monitoring. Report results back to the team - this spreads the work and the knowledge across the team and promotes buy-in for your changes!
- Plan for a cadence that works for you and your team and matches some of your existing habits. Food menus often change seasonally, so perform this analysis on a quarterly basis. Beverage or Dessert menus may have longer tenure, consider doing these only twice per year.
- Don't overdo it! If you are performing an analysis every month on the same menu, you may be putting in a lot of work for diminishing returns, and guests may find it very confusing to have prices, portion sizes, or menu items themselves changing so frequently. You want to avoid increasing labor expenses in an attempt to save minimal amounts in menu engineering.
Before you start
Cost information is not universally available. Avero is only able to import and read the item cost information from some POS systems. The cost information must be entered into your POS, it cannot be entered directly into Avero, so make sure the category you want to analyze has this information populated!
The following POS Systems do not supply cost information:
What will be analyzed - defining terms and creating focus
There are two main considerations for any menu engineering analysis: Popularity and Profitability.
Popularity = how commonly/frequently items are ordered.
This may be organic interest from customers, but you can also influence popularity in various ways, such as:
- Promotions featuring a particular item
- Sales contests or sales training for waitstaff
- Menu highlights - use a box-out or feature on the menu to draw guests' attention to the item
- Generally lowering a price increases item popularity while raising a price decreases popularity, but there are additional considerations
- A very high-priced item, like a Caviar Service or a Tomahawk Steak for 2 may receive a popularity bump by appearing aspirational
- The price mix of similar menu items can be manipulated to drive popularity of a single menu item
- For example - I have 2 Chardonnays available by the glass on my menu, the House Wine at $10 and a nicer option for $13. My sales mix for BTG Chardonnay is 80% House Wine and 20% Nicer Option. I want to drive more guests to order the Nicer Option. I add a third choice Extra Special For $16. After a month my new sales mix is 60% House Wine, 30% Nicer Option, and 10% Extra Special
Profitability = Sales Price - Production Cost, this is also called Contribution Margin
We also want to know the contribution margin - that is how much profit this item is contributing to your bottom line, which is determined by subtracting the item cost from the item price (don't worry, Avero does this for you!). The goal is to create a balanced menu of popular and profitable items and avoid problems and profit drainers!
Profitability is not fixed, it can be manipulated:
- Pricing - raising the price without changing the dish results in a higher Contribution Margin (more profit for the same item), lowering a price will reduce the profitability of an unchanged dish
- Portioning - Reducing the portion of a dish without changing the price increases profit, while increasing the portion without changing price will decrease profit
- Recipes - Ensure your costing and profitability data is accurate by making sure the kitchen and bar are operating on recipes and using consistent ingredients and portions to create each item
- Ingredients - changing vendors or raw ingredients can change the cost to produce a dish
Performing a basic Menu Engineering analysis
You'll use the Item Sales Report as the basis for your analysis, if you aren't familiar with this report, see our complete How-To guide on this report: Item Sales Report
Step 1: Pick a Menu or Section of Menu
To perform a Menu Engineering analysis you'll select a specific menu or section of a menu. You want to compare like items to make important decisions about the makeup of your menu, including pricing, portion sizes, and positioning. Comparing like items means you don't want to compare Appetizers or Share Plates to Entrees/Main Courses, because they are fundamentally different (a Small Pates restaurant, though, may want to compare all items on the food menu together). Likewise, you'll want to be specific to a meal period and area of your restaurant - if you have different menus for the Bar and Dining Room, analyze them separately for the best results. Don't compare Lunch entrees to Dinner entrees, etc. Pick a menu that has been in use for at least one month, ideally 2-3 months if possible. The longer the range of data, the more accurate your data will be.
- Limit your analysis to like items from a single menu or section of the menu
- Keep meal periods separate
- Separate area-specific menus, like Bar Menus vs Dining Room menus, even if there are overlapping items
- Avoid new menu items, make sure there is at least 1 month of sales data for the menu you want to analyze
Step 2: Run the Item Sales Report for your chosen Menu/Section
Reminder: You must have the costs entered in your POS and appearing in Avero for your report to power menu engineering!
Want us to walk you through it? This guide is also available as a pop-up tutorial to show you how to run and analyze your Item Sales report. To launch the pop-up guide, log into Avero and click this link:
Run your item sales report: Drive Revenue: Menu Engineering
- Navigate to Sales > Item Sales
- Set the parameters in the Report Generator:
- Business - if you have access to multiple businesses, select the one you want to run menu engineering for. We do not recommend running this program from Group reports, because this is about detail on a single menu.
- Date - Be sure to select a dynamic date if you are setting up a dashboard or emailed report! Larger time periods work best for menu engineering to minimize outliers and get a true picture of customer activity. We recommend at least a full month, or a full quarter.
- Revenue Center - You'll want to compare apples to apples, so avoid mixing Private Dining or Banquets with Dining Room. Depending on how different the menus and customer behavior are, you will probably want to run your Bar separately from your Dining Room.
- Order Type - Are to-go habits different than dine-in? You betcha! Narrow your focus to where you generate the most revenue to have the biggest impact.
- Category - Select the category you want to dive into, you can pick a wide category such as 'Food' or get very detailed such as 'Draft Beer' if you want to make a change to that section of the menu. Run Menu Engineering for both food and beverage!
- Select your metrics:
- For popularity - select Item/Cover % or Item/Check%
- Item/Cover % is how popular a menu item is with individual customers. For every guest in your restaurant, how often is this item ordered?
- Item/Check % is how popular a menu item is with tables (checks). Some things an individual guest orders, like a salad or a glass of Chardonnay but some items are ordered for the table, such as a bottle of wine or a cheese board. For items that are usually ordered by the table/check or if your restaurant does not track guest counts, use Item/Check %. For all other items, use Item/Cover %.
- For profitability - use Avg Item Profit or Total Profit
Report parameters and metrics are selected, hit go!
Avero will generate a table with all your selected metrics and a visualization that will allow you to toggle between categories and metrics. Both the Table and the Visual are powerful tools for your analysis.
For the visual, set your Vertical Axis to Profitability and your Horizontal Axis to Popularity. Items higher up in the graph are generating more profit and items farther to the right on the graph are the more popular items. At the top, you can select between the categories you included in the report.
Step 3: Analyze! Separate your menu items into Categories, Identify changes to improve profitability and optimize your menu
Here is where the analysis kicks off!
Menu Engineering usually divides your graph into four categories indicating which items should be kept, which should go, and which can be adjusted to improve. First, we will describe the categories then provide examples of actions that could be taken. Get creative!
The four quadrants are named some variation of:
Top Right - The STAR
These are items that are to the right-hand side of the graph in the upper half. These are items that are very profitable and very popular. Guests order them often and they make you money. Keep these!
Bottom Right - The PLOWHORSE
On the right-hand half of the graph are items that are very popular - your restaurant might be known for them - but they are in the lower half of the graph meaning they aren't contributing much profit. These are menu items that might need adjustment in portion size or pricing to increase their contribution.
I don't want to mess with my popular items: take a look at what makes your item popular and don't change that. Do people love it because it is tasty? Keep the recipe the same but raise the price a dollar, it will still be very popular but now add more to the bottom line. Do people love it because it is inexpensive? Don't touch the price, but perhaps adjust the portion size so the item cost is lower. Do people order it because it is in the center of the menu, at the top of the list, or in a 'Specials' section? Consider moving it mid-list and giving the prominent placement to a Puzzle item instead.
Top Left - The PUZZLE
These items are in the upper half of the graph, meaning they are good at contributing profit like the STARs but they aren't as popular with your guests. These are menu items you should look at adjusting!
Why make changes to profitable items?
Profitability is great, but items that are infrequently or rarely ordered lead to wasted product, inefficient prepping, and unproductive menu space. Try to figure out why these items aren't more popular.
What kinds of changes can be made to increase popularity?
Forget everything you know about running a restaurant and look at your printed and online menu as someone trying to order dinner. Sometimes it is as simple as these items are on a lost place in the menu - hidden in the middle of a list or at the bottom right, consider moving the item to a more prominent spot, changing the name, or adding a menu call out such as a frame or a box around the item.
Of course, there is also the good old-fashioned sales contest for staff. Ask them about the item and why guests don't order it more often, maybe the portion size is too small or too large for most customers, or servers don't sell it because it comes on the heaviest plate. All of these are real reasons we have seen for items lagging in popularity!
Bottom Left - The DOG
These items are not very popular and don't contribute much to profit. Products in this section are chief contributors to wasted time and product. Ordering supplies for items that aren't ordered, wasted time prepping the mise en place for these dishes, and a busier menu for including them.
Should I just cut all the Dogs from my menu?
Not necessarily, though removing these items is an option. Can they be adjusted to make them more profitable or more popular? Try adjusting portion sizes, switching out the garnish, or adding something your customers love.
Step 4: Apply your changes
This is the exciting part! Once you've analyzed your menu, you'll know which menu items are your Stars, Plowhorses, Puzzles, and Dogs and have identified your plan for changes it is time to apply them. This means:
- Setting a date and time for your menu changes to go into effect
- Updating your menus (don't forget your online and takeout menus too!)
- Training the staff on the changes - make sure the kitchen or bar are prepared with any changed recipes or portion sizes, train your FOH team on what is changing and why and how you want them to update their language with customers
- Consider Running a Contest with your team to push some of the highlights
- Set up your Monitoring Dashboard
Menu Engineering is about using data to ask and answer questions about your business, specifically about your menus. You know your menu and clientele best, so trust that knowledge and experience and use your data to highlight where you can be most effective. Let's discuss some of the common techniques you might employ to affect change.
- Adjust Pricing
- Pricing can be used to manipulate popularity - in most situations lowering a price will increase popularity of an item (if price is a concern or feature for your clientele) and raising a price will decrease popularity.
- Pricing will affect your profitability, so keep that in mind!
- Example 1: If you have a Plowhorse menu item (popular, not very profitable) raising the price a little may not change the popularity significantly, creating a more profitable menu item, this action can turn a Plowhorse into a Star!
- Example 2: A Puzzle is already profitable but is not ordered frequently enough to make a big impact on your menu profitability, and this may lead to wasted product or service inefficiencies. Since it is already profitable, a small decrease in price may help entice more customers to order the item while retaining the existing profitability.
- Adjust Portion Sizes
- A Dog or Plowhorse can be made more profitable by reducing the portion size
- A Puzzle can be made more popular by making the portion sizes more generous
- You can adjust portion sizes across an entire menu, for example you may adjust your Wine by the Glass pours from 6 oz to 5 oz to improve profitability.
- Change Recipes
- Step one - make sure your team is using recipes and following them accurately!
- By changing out ingredients or techniques, you can make a Dog more popular by adding something that draws customers in, like a special garnish or notable ingredient, and profitability can be manipulated by comparing the same ingredient across multiple vendors to get the best price, or switching to a less expensive alternative for a profit killer ingredient.
- Create a Menu Feature
- A box out or placing a menu in a prominent position that guests notice can help a Puzzle gain more traction with your customers
- Hiding a Plowhorse in the middle of a list might drive customers to order some of your more profitable items instead
- Cross-utilize ingredients from some of your Plowhorses or Dogs to increase their profitability
- Add or Eliminate menu items
- This is the most extreme action, but it might be right. If your menu is missing multiple Stars or you have several Dogs, make some changes. Use the data from your other menu items to influence what you choose to add - pick popular ingredients, setups, or styles of dishes.
- Create a Promotion or Contest
- A promotion or contest is a great solution for your Puzzles! These are profitable items but they aren't ordered frequently enough, incentivize the staff with a Contest or consider running an advertisement or promotion to highlight this item!
- A Puzzle is already profitable but is not ordered frequently enough to make a big impact on your menu profitability, and this may lead to wasted product or service inefficiencies. Try highlighting it with your staff! Lead an item training that involves tasting the item, describing the item, and any personal or interesting facts about the item. This can be anything from where the item comes from, historical fun facts, or a cooking technique.
- You can combine techniques as well! A Dog is not profitable or popular - sure you could remove it from your menu, but you could also highlight it in a prominent place on the menu and add a special garnish to entice your guests, while also reducing the portion size and switching out some ingredients to improve its profitability. It is possible to make a Dog a Star!
The Monitoring period
Apply your changes, now watch what happens and share the progress with your team!
You've updated your menu to reflect the changes and trained the staff. You're ready to enter the Monitoring period - during this time you will avoid making any additional changes to your menu so you can measure the impact of the changes you've made.
Think about why you made the changes you did and set some goals now that you'd like to achieve with these changes. Take a look at your progress toward these goals when you review your dashboard.
Goals might be set by item, such as an increase in popularity for a Puzzle that is the focus of your FOH sales contest - set an Item/Cover % Goal for the team to achieve and share the progress as the team applies your changes!
Goals might also be set for the entire menu, such as increasing the profitability of your Wine by the Glass menu from 21% to 25% over the next 5 weeks.
Create a monitoring dashboard
See our complete How-To guide on creating dashboards: Creating & Managing Dashboards
Set your Vertical Axis to Profitability and your Horizontal Axis to Popularity. Items higher up in the graph are generating more profit and items farther to the right on the graph are the more popular items. At the top, you can select between the categories you included in the report.
Then use the speedometer to name the graph and save it to a dashboard. If you already have a menu engineering dashboard set up for this outlet, assign to that or select Create New and name your new dashboard.
The visual allows for at-a-glance monitoring of the progress of the items you are tracking!