Menu isn’t just a price list written in black and white. It’s in your hands to design your menu in a way that will encourage your guests to order your most profitable recipes. The process that’s responsible for designing, pricing, and positioning your menu items is called menu engineering.
According to Gofrugal, “Menu engineering is the systematic process of studying restaurant sales and inventory data to understand the popularity and profitability of the items in a restaurant menu over a period. By engineering the menu carefully, restaurants can understand how it performs over time and effect changes so every item stays popular and profitable.”
Image Source: Freepik
Below we will introduce 13 steps on how to develop your menu for maximum profitability and describe the what, why, and how of the process.
1. Calculate the original recipe cost
The food cost and the menu price of the recipe can never be the same. On average, 25-35% of the menu price is the food cost. The profit margins are usually low, especially for full-service restaurants, and the highest profit margin is around 15%. The remaining percent of the menu price is spent on labor, utilities, rent, and other expenses.
So knowing your original recipe cost is the first step towards setting the right prices.And the calculation process is quite simple:
1. List all the ingredients necessary for your recipe,
2. Mention the amount of ingredients used in a given recipe,
3. Understand the cost of each ingredient,
3. Add up the costs of all ingredients.
This formula helps you calculate the ingredient cost, aka original food cost. To understand how to price your menu items, you should add up your profit margin as well and understand what pricing method you go for.
2. Analyze pricing methods and choose the most optimal for you
Source: Freepik
There are five pricing methods widely used when pricing products and services:
1. Competitive pricing
2. Dynamic pricing
3. Cost-plus pricing
4. Penetration pricing
5. Price skimming
Competitive pricing is optimal for restaurants that have hundreds of competitors and are about to enter the market. Tracking your competitors will help you get started with your pricing strategy and test how your audience perceives your brand.
Dynamic pricing is ideal for restaurants and cafes as prices in the food industry are irregular. Besides, holidays, weekends, even certain hours, and certain seasons allow you to price your recipes higher than usual because the demand is increasing.
Cost-plus pricing might seem to be a good option for restaurants as you are in control of your profit margins and revenue in general. But as ingredients costs and even ingredients in a certain recipe aren’t static, relying on this method isn’t viable.
Penetration pricing aims at attracting a large segment of customers through low prices. And after some time, when people try and love the product, businesses increase the prices. You should be ready to sell at loss in the beginning and have a solid strategy to motivate customers to come back.
Price skimming is the opposite of penetration pricing. You set high prices with the intention of attracting affluent buyers. You will be able to make a profit very quickly and in large volumes. However, if your competitors copy your idea (recipe) and set lower prices, you won’t be able to attract price-sensitive customers as well.
3. Have a team member in charge of menu engineering
You might think that your marketing or design teams need to be responsible for a high-converting menu.
While there’s some truth behind this approach, marketing and design teams shouldn’t bear the whole burden. Instead, your restaurant manager or you as a CEO/founder should be actively involved in and responsible for the process. Because menu development isn’t only about designing beautiful illustrations and writing compelling copy. It’s also about having a deep knowledge about food trends, recipe ingredients, original costs, etc.
Restaurants sometimes also hire hospitality consultants or consulting firms who are specialized specifically in menu pricing, design, and development. This service is usually for large restaurants where even a 1% increase in conversion rate can significantly impact the revenue. Small, inexpensive restaurants should try to utilize their existing resources as specialized consulting services might not be something they can afford.
4. Update your menu seasonally or annually
Source: Freepik
If you once designed and printed your restaurant menu, it doesn’t mean that the same piece of paper should serve your need forever. Seasons change, ingredient costs go up and down, holidays come and go… So the question isn’t whether to update your menu or not, the question is – how often to do it.
How often you should review and update your menu mostly depends on what kind of food you offer. If your ingredients are available in all seasons and the prices are more or less stable, you can do menu revisions once a year (that’s the minimum). However, you can offer a special menu on holidays or for large events.
Oppositely, if you include seasonal products in your recipes, then you should update your menu 2-4 times a year.
5. Analyze the profitability of your menu
Not all recipes are created equal. Some of them are popular among your guests but the profit margins are slim. Others aren’t very popular, but that’s where most of your profit comes from.
Menu items are categorized as
1. Starts (popular and profitable),
2. Plow horses (popular, but unprofitable),
3. Puzzle (profitable, but unpopular),
4. Dog (unpopular and unprofitable).
How do you know that this or that recipe is or isn’t popular or profitable? One of the ways is customer reviews. However, to get a full and accurate understanding on what your customers are ordering and which recipes bring you the highest profit, you should simply have a look at your restaurant management system data. You will be able to generate automatic and accurate reports and make sure your restaurant stands on firm ground.
So while updating your menu, you should try to get rid of dogs – recipes that aren’t enjoyable for guests and aren’t profitable for your restaurants. Or you should try to make them more profitable and popular by decreasing prices, changing the ingredients, etc.
6. Draw visitor’s attention to your high-profitability recipes
Find out the most profitable recipes per section (Salads, Main dishes, Drinks, etc) and highlight them.
You can do it by including that recipe in a box, adding an image next to it or writing a unique description.
Don’t highlight multiple items per section as it will decrease the efficiency of your tactic.
7. Add prices next to the recipe, not in a special column
Once you are done listing the recipe ingredients, add the price at the end of the description.
When you have a special column for prices, it draws people’s attention to that column and makes your menu look expensive.
Besides, avoid adding dollar signs next to numbers, simply mention the price.
8. Reflect your brand identity
Image courtesy : Toit
You probably have selected your brand colors carefully as colors play a huge role in food marketing.
Red will make your customers feel more hungry and order more food. Green makes an impression that the food is fresh. Purple is a royal color and can help your restaurant feel luxurious and imaginative.
You shouldn’t use one color in your social media posts and a totally different color on your menu. The same goes for choosing your fonts, tone of voice, etc. Even if you don’t have a brand book for your business (though it would be to the point), create a concise style guide to convey your identity and keep your team on message.
9. Write unique descriptions for your profitable recipes
Image courtesy : The Pizza Bakery
Many restaurants simply list all the ingredients included in the recipe. But that makes the recipes look very trivial. You can increase their value by adding a brand name, geographical location or human touch to the description.
For example, if your recipe includes Szechuan sauce, mention the geographical location – Szechuan – not just the sauce ingredients. Or if the given recipe has been used by the chef’s mother/grandmother, mention it to evoke emotions.
Besides, you can increase the efficiency of your descriptions by using power words that attract people in their food choices – “organic”, “house-made”, “local”, “grass-fed”. People who prefer healthy food will definitely give value to these adjectives. Words like “seasonal”, “juicy”, “zesty” also will help your recipes look more desirable.
10. Limit the use of images
Your menu pages shouldn’t be filled with images and colorful backgrounds. But if you have decided to use images, limite them to 1 per page.
Why?
1. Too many images make your restaurant/cafe look cheap.
2. The white space allows your customers to process the information and think over your offers.
3. Food doesn’t always look the same way on professional photos and in reality. So if your customers see that the food on the menu and the real dish look different, they will probably feel disappointed.
To avoid having a lifeless menu, however, you can use illustrations instead of photos. They are more neutral and won’t overwhelm your visitors.
11. Choose a menu panel according to your recipes
You have 3 options to choose from – one panel menu, two panel menu and multi panel menu. Let’s understand in which cases to use each of them:
One panel menus are great if you have limited recipes. This option helps your customers make a decision quickly but it’s not likely they will order multiple recipes.
Two panel menus are the golden ratio. They offer more recipes, are easy to consume, and customers are likely to order multiple recipes.
Though multiple panel recipes may offer hundreds of recipes, you actually make your visitor’s job harder. When people experience “choice paralysis”, they tend to choose recipes they are familiar with like pizza and burger. But you probably want them to go with more profitable menu items.
12. Think about fonts and readability
Image courtesy : Red Rhino
If you want your menu items to look delicious and unique right from the menu, use interesting fonts instead of something people are used to seeing.
If you offer simple, classic dishes, your fonts may also be classic. For creative restaurants with non-traditional recipes, atypical fonts will be a good option. Here you can find tons of font ideas and download them for free.
To increase readability, avoid all uppercase text, too small text size, and make sure the text is easily readable on the background color. Limit your fonts and letter sizes to 3 – one for the section title, one for listing the recipe name, and another for writing the description/ingredients.
13. Position your preferred recipes according to the primacy/recency effect
Frederick Hansen Lund, a New Zealand psychologist claimed that the information presented in the beginning has the biggest influence on the audience’s decision making process. However, years later another researcher showed that people tend to remember what they were presented with at the end of communication.
Further studies didn’t favor any of these rules and both primacy and relevancy were equally regarded as effective.
So if you have preferred items you want your visitors to order, position them in the beginning or in the end of the menu. People easily forget the information they were presented with in the middle and are likely to order your preferred items that were positioned strategically.
Final thoughts on menu engineering: What’s next?
Your menu design hacks can determine what and how much your customers will order. Don’t disregard the importance of strategic menu development and do at least 1 revision every year. Your manager and a menu consultant can find room for improvements that will drive profitable sales for the rest of the year.
Your restaurant management system will also play a huge role in your menu engineering process. It will analyze customer orders, average order value, understand which recipes are more popular and help you make informed decisions about your menu and potential changes.
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