Is Your Menu Working For You or Against You?

Menu marketing is an important aspect for the success of any foodservice establishment. Menus are statements of the food and beverage items that are provided by a restaurant based on consumer wants, needs and demands. Menus can be interpreted as a list of products that a restaurant offers, and it can be a piece of literature or display used to communicate the products to the customer. From a marketing view point, menus are more than the conventional function of a communications and selling tool but also a tool that must be formatted to increase restaurant profits."

Tips to a More Profitable Menu
The menu is a significant aspect of the restaurant's marketing strategy. A well-designed and regularly updated menu can lead to a higher PPA.

 Item Placement. People most often buy the first or last menu item in each menu category. Place your menu items with the highest gross profit in these spots on the menu.
 Boxing. Impact 10 to 15 percent of the space on your menu by boxing menu items. As a general rule box one out of every 7 to 10 items. Bold lettering is also a successful type of boxing.
 Page Positioning. On three-panel (page) menus, people most often look at the center panel first, and then move counter clockwise. On two-panel (page) menus people most often look at the top right-hand side first. Consider putting your high profit items such as specials or specialty drinks in these spots.
 Hospitality Symbols and Icons. Stars, hearts, and food symbol icons can make your menu unique and draw attention to menu items that you would prefer to sell. Graphics can set items apart and increase sales on those items as much as 15 percent.
 KISS. Keep food descriptions short and simple because less than one forth of your menu is read. Use wherever possible 'word pictures' rather than lengthy descriptions. And do not fear blank areas - it allows rest for the eyes.
 Showcasing. Highlight types of foods by including menu headings such as "Fresh Salads" or "Our Specialties" rather than using non-descriptive terms such as Salads.
 Menu Inserts. Brand your restaurant by offering a specials menu insert that creates a sense of "You can only get this here". Menu inserts also give your servers something to talk about and keep your menu fresh. Additionally, you can use them to promote high profit specials, food you want to move due to over ordering or new items that could eventually move onto the regular menu.
 Graphics and color usage. Advertise specials through the use of graphics:
--Using photos can sometimes present problems when food is not an exact duplicate of the photo. A well-design graphic avoids this problem.
--Use of graphics can set items apart and increase sales as much as 15%.
Advertise specialty food areas using graphics in your menu system. If the same line is not serving the same items at every meal, use menu systems that incorporate easily changeable graphics to identify the serving line.
Use of colored menu boards and colored menu inserts can attract attention.
 Decrease decision time Show items, price, nutritional information in
easy-to-read formats
Jumbo Meals and Combo Meals can increase profits and reduce decision time.

Nutritional Information. Inform customers of nutritional value of each item using one of the following:
--Heart Healthy Symbol
--Grams of fat identified
--Use a color-coded key to identify nutritional value
--Portion size, calories, fat content, sodium content,
cholesterol content listed

Size and placement of menu boards. Take into account the size of the typeface used on the menu item and the distance the customer is from the menu reading the sign. (I.e. Can the menu be read from 6', 15', 25'?)
--Height of signs should consider the age/size of the audience.
--High traffic areas should use signs that are securely attached to walls, yet easy to change.

USE UNIQUE SIGNS FOR ADVERTISING:
Use free-standing wooden-framed menu boards to advertise restaurant hours, specials of the day, birthdays of customers/employees, happy hour etc.

Use two-sided display boards at entrance/exit to advertise the menu upon entering and exiting your restaurant.

By John Nessel
Restaurant Resource Group

As a restaurant operator you already know the importance of keeping your food costs in line. Pretty obvious stuff huh? That’s because combined with your wages and other payroll expenses, food and beverage costs account for anywhere from 60-70+ percent of your total revenue. Moreover, your food and labor are relatively controllable costs compared to rent, utilities, insurance and most of the remaining expenses that make up your monthly payables list.

Menu Engineering
We’re going to save the labor conversation for another day. Today we’ll take a unique look at controlling your food costs. More specifically I’m going to introduce to you a powerful tool to help you achieve this. This tool, along with techniques for utilizing it, has been called menu engineering. In simpler terms I would describe the process as the methodical selecting, costing, pricing and evaluating of your menu items.

Menu engineering provides the manager with information about a menu item’s profitability, as well as popularity, so that proactive planning, recipe design and customer pricing decisions can be made. Menu engineering is not a substitute for proper purchasing, food rotation, standard recipes or any of the other basic kitchen controls that can negatively impact your costs. Rather it is a method of evaluating every item on your menu relative to its present contribution to bottom line dollars, thereby allowing managers to recognize the items they want to sell!

Contribution Margins
While the concept of food cost percentage (an item’s ingredient cost divided by it’s menu price) is the most commonly used criteria for assessing effective cost controls, the concept of contribution margin (an item’s menu price less it’s food cost) is the basis of menu engineering. A simple question should make the distinction clear. If you could sell one more item before your restaurant closed today, would it be a sirloin steak for $20 that costs you $8 or a plate of pasta primavera for $10 that costs you $2. While the food cost percentage of the pasta is 20% versus 40% for the steak, the steak will contribute $12 to gross revenue as opposed to $8 for the pasta. I’ll take the $12… thank you very much. Contribution margin then is based on the dollars you take to the bank.

Accounting for the Popularity of Menu Items
While a menu item's contribution margin tells us how many dollars each individual sale of the item contributes to the cash register, you need to know how popular the item is to determine the total dollars it contributes to the restaurant’s revenue. A popular item with a high contribution margin is a “star” while an unpopular item with a low contribution margin would fairly be called a “dog”. Menu engineering therefore takes each menu items contribution margin and its popularity into account to determine into which of four categories it falls: star, workhorse, challenge or dog. We’ll get back to these categories shortly.

The Evaluation
I have included a completed Menu Engineering spreadsheet to demonstrate how the process is performed based on the required information listed below (click on the image to enlarge it). This fully automated spreadsheet is available for sale along with other useful restaurant operations spreadsheets at www.rrgconsulting.com/spreadsheets.htm



The information that you need to perform a menu engineering exercise is as follows:

Column A. A list of your competing menu items (a separate evaluation should be performed for each menu category e.g. appetizers, entrees, and desserts)
Column B. A periodic (weekly or monthly) total of the number of each item sold (use your POS report)
Column D. The ingredient cost of each menu item (not just the “center of the plate” cost but the entire cost of the item)
Column E. A list of the menu selling price for each item being evaluated
You can perform the evaluation yourself by manually calculating the numbers in the following: Columns C, F, G, H, L, N, I, J, M, K, O, and Q. (Note that the spreadsheet above automatically calculates these numbers)

The inputs in Columns P, R and S are calculated as follows:

Column P: Profit Category is LOW if the menu item profit is less than the menu’s Average item profit ($4.16 in this example). Conversely, enter HIGH in the cell if the menu items profit is greater than average for the menu.

Column R: Popularity Category is LOW if the menu item's menu-mix percentage (e.g. the total number of the item sold divided by the total number of items) is less than 80% of the average. Conversely this means that we are considering an item to be popular, and placing the word HIGH in the column, if it sells at least 80% of an average item’s popularity. In the example below, the average menu popularity equals 8.3% (100% divided by 12 items = 8.3%). Therefore we consider an item popular (HIGH) if it sells 80% of 8.3% or 6.7%.

Column S: The Menu Item Class is determined by the results of Columns P and R. If an item is both profitable and popular then it’s a STAR. It it’s profitable but relatively unpopular then enter the word CHALLENGE. If the item is relatively unprofitable but popular then enter the word WORKHORSE. Finally, a DOG is an unprofitable and unpopular menu item.

How to Take Action Based on the Results
Let’s start with the obvious. Keep the STARS and dump the DOGS.

Your creativity is now required dealing effectively with your CHALLENGES and WORKHORSES. Lets start with the CHALLENGES. These items are profitable but relatively unpopular. Your “challenge” is to make them more popular. There are many ways to accomplish this including changing the preparation (Veal Marsala may be more popular than Veal Putanesca, but still just as profitable). Re-naming or re-plating the item to make it sound and/or appear more appealing is another alternative. Alternatively you might want to create a whole new menu item using the same “center of the plate” ingredient, but doing it in a way that will be more appealing to your customers.

As for the WORKHORSES, they are popular items with less than ideal profit margins. Here is where your best opportunities lie. Your job is to re-engineer the menu item to reduce its cost while not sacrificing what makes it popular. This can involve substituting a single relatively expensive ingredient for a one that is less costly (e.g Assiago cheese in a Caesar salad for Reggiano Parmesan). It may involve substituting one cut of meat for a less expensive one knowing that the preparation is what makes the item popular. It might be as simple as using a less expensive garnish. How about increasing the items selling price? Your chef’s imagination and talent takes over here. If I knew how to perform this magic I would be wearing an apron and a tocque instead of sitting in this chair banging on my keyboard!

Hopefully it is now easy to see how this information allows you to proactively manage your menu. From collaborations with your chef to tinkering with your prices you can use menu engineering to effectively manage a key aspect of your food costs!

John Nessel is the President of Restaurant Resource Group a Boston based consulting firm that provides simple yet powerful financial tools and support services to restaurant owners and managers. He is also the author of The Restaurant Operators Complete Guide to QuickBooks. John can be contacted at john@rrgconsulting.com