How to Use a Restaurant Menu Engineering Matrix
Aug 19, 2020 food operations management, data analytics and reporting
As many restaurants begin to bounce back from the COVID-19 pandemic, protecting profit has never been more vital. A Menu Engineering Analysis from your back office system can optimize your menu items and ensure you're only selling the products your guests love and are profitable.
Simply put, menu engineering is the science of designing a menu in a way that maximizes a restaurant's profits. Many restaurants that invest in menu engineering see profits jump by 10-15% or more. But menu engineering is much more than creating a menu that is enticing to the customer's eye. It starts with the specific ingredients that go into making each dish and their food cost percentages.
What Is Menu Costing?
This first step in the menu engineering process is "food costing your menu." Costing a menu determines, right down to the penny, how much it costs to create each dish your restaurant offers, excluding labor costs. This cost is subsequently subtracted from the menu items sales to arrive at the contribution margin or gross profit.
Contribution Margin or Gross Profit
This is how much profit you're making on a single menu item after the cost of ingredients have been subtracted.Contribution Margin = Selling Price – Cost of Ingredients
Once food costs have been determined, the next step is to determine item popularity by gathering a count of each item sold in a given time period. With margin and transaction volume in hand, menu items can then be plotted in a menu engineering matrix, categorizing items into one of four categories:
- STARS: High Profitability, High Popularity
- Your stars are menu items that are the most popular with your guests and the most profitable for you. These super stars are menu items that should be promoted whenever possible.
- PLOW HORSES: Low Profitability, High Popularity
- The solid performing plow horses are products that guests love but have higher food costs. When possible, evaluate plow horse costs, menu price or portion size for these menu items.
- PUZZLES: High Profitability, Low Popularity
- These products would bring you high profitability, if only your customers would order them more often. They're a puzzle to figure out. These dishes challenge you to increase their popularity without increasing the cost to make them.
- DOGS: Low Profitability, Low Popularity
- Dogs are neither profitable or popular. These items should be evaluated to determine if those dogs can be cut from the menu.
How Can Menu Engineering Help Your Restaurant?
As mentioned before, protecting profit has never been more vital during this new "COVID-era" we're all in. A quick Menu Engineering Analysis report from your back office system takes the guesswork out of categorizing menu items and in turn, eliminate the need for many in-house labor hours spent on a manual menu data analysis.
With a quality BOH platform and data warehouse, the process is easy. After selecting location(s) and a time frame, decision makers can easily evaluate how menu items are performing while visualizing and interacting within their data via a few options.
Stars, Plow Horses, Puzzles and Dogs are represented as a heat map to allow users to quickly drill into all items within a classification group:
Alternatively, users can view their menu items plotted in relation to one another with the ability to filter by category (eg: Food Sales) , subcategory (eg: Entree) and microcategory (eg: Dinner) visually or using selectors. In these views, users are able to exclude outliers or drill into a specific cluster of menu items in order to gain a better understanding of their data. Baselines used to categorize menu items are derived from the average gross profit and check quantity for all items selected. These averages dynamically adjust based on selection to provide a clear picture of how the items selected stack up.
Equipped with the data provided in your Menu Engineering Analysis report, operators will be able to identify their highest and lowest performers along with menu items with room for improvement. This will aid in the next steps of selecting the best items and laying out the menu in the optimal way to maximize profit.
So, in this "new normal" time in the restaurant business, get strategic about your menu and keep those profits as high as you can. If you have more questions about menu engineering or food costing and would like to learn about how our customers are optimizing their menus, reach out to us.
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