This article was written for QSR by Annabelle Crawford and Jason Hollis of Compeat
The study of menu engineering essentially boils down to two measurements:
- The popularity of the item, relative to other similar items on your menu.
- The extent a menu item is profitable, based on its profit margin.
A dish’s popularity can be determined by its menu mix. The menu mix calculation used in menu engineering indicates whether a menu item is high in popularity or achieves 70% or more of the average number of sales for the items for which it is compared. Low popularity obviously means that a menu item achieves less than that 70% benchmark.
Profitability is determined by an item’s contribution margin, which is simply a menu item’s price minus its food cost. This value helps you measure profit and shows you how your sales affect your net income. This will be the net number of dollars that you take to the bank each time you sell something.
For the purpose of “scoring” menu Items for menu engineering, the contribution margin — high or low — indicates whether the gross profit per sale of the item is above (high) or below (low) the average gross profit for all of your items.
Making menu magic
So, how and why should your brand use all these formulas to determine the most profitable and most popular of your existing dishes. First the “why.”
By understanding which of your dishes are actually working hardest for your bottom line, you’ll know where to put your energy and resources, as well as which items to push and which ones you may need to cut.
Now the “how.” The industry terms below apply to items popularity and profitability. Use these terms to create an actionable plan to turn certain low-performing menu items into high-performance menu stars.
Stars are the most popular and profitable items on your menu. You should make a conscious effort to put them in top visibility areas of the menu. But, they don’t necessarily need to consume that valuable menu real estate in the eye gaze path or “golden triangle” if they’re already doing well in their current placement.
The “golden triangle” refers to the natural path the human eye follows when looking at a menu. Items placed in the top right of each page will be ordered most. Then, within each menu section, the top and bottom items will be ordered more than those in the middle.
If you want to fly a little closer to the sun, you can test these items for price sensitivity. Raise your prices slightly to increase their contribution margin without – it is hoped — sacrificing their popularity. But, be careful not to ruin a good thing. Likewise, take care not to also compromise guests’ level of trust by giving them the sneaking suspicion they might be being gouged.
Workhorse items are those that are typically very popular, but may not be very profitable. Fortunately, You can work to grow the contribution margin of these items without necessarily sacrificing their popularity.
Begin this process by first beginning to increase the price. But, again, be careful not to compromise guests’ trust in your pizza brand. Instead, make small, gradual price increases so you can gauge what customers find acceptable for any given item.
Another option is to conduct “plate audits.”In this practice, direct servers to watch the food that returns to the kitchen when plates are cleared. If, for example, one of the wings in that six-count order is always coming back, it’s probably safe to reduce the size to five wings per order. In doing so, you automatically increase that dish’s contribution margin. But, consider re-plating the dish so that the new setup still looks bountiful with less food.
Finally, don’t be afraid to work with your vendors to get your food cost prices lower. Use the information from your reports to negotiate lower prices for items purchased in large quantities. Lowering food cost prices can instantly bump these already-popular workhorses up to stars.
Puzzles are items that aren’t very popular, but are quite profitable. They are called puzzles because they are some of the most misunderstood items on the menu. Since these items are so profitable, the goal here is to increase their popularity.
One option to do this might be relocate these “puzzles” to higher profile areas of the menu. But take care when you do this not to displace any stars which might actually only have popularity due to their placement, creating yet another “puzzle.”
Another idea is to consider renaming the “puzzle” item. In this approach, work to tap into that your customers’ emotions to draw them into the dish. For example, instead of just offering a “pepperoni” pizza, consider “Uncle Vinny’s pepperoni pie.” By adding that element of nostalgia you could improve sales and, in any case, rebranding the items will not likely do it any harm, given its low order status thus far.
Another idea for puzzles is to include them in an in-house marketing campaign by perhaps staging a contest between servers to sell the most Uncle Vinny’s pepperoni pies, ensuring servers point out the items to guests. Also consider using blackboard specials and table tents to bring focus to the item that may otherwise get overlooked.
Lastly, try decreasing the price a bit. If the item is highly profitable perhaps sacrificing a bit of the margin to increase popularity will actually make you more money in the long run.
Dogs are low-popularity, low-profit menu items. These are the poorest performers on your menu, so our first instinct is to remove them altogether. This is particularly the case if their ingredients are not being cross-utilized.
Every menu has a few dogs, but there are also some items you just can’t eliminate, like the kid’s menu or special dietary items. But, since the profit is low on these items and customers who need them will find them anyway, work to de-emphasize these dishes on your menu or even consider putting them on a standalone menu available upon request.
If you can’t eliminate an item, consider raising its price. If it’s not going to be popular and you can’t take it off of your offerings, you may as well increase the price.
Finally, always take care to train staff around the items they should recommend. This knowledge will help them guide customers to more profitable dishes to improve customer experience while boosting your bottom line.