A Strategy For Menu Engineering

Menu engineering is a make-or-break for most restaurants. Many factors influence your cost of goods. From receiving, to waste, to recipe adherence, to theft. But even controlling all of these isn't going to save your business if your menu isn't engineered properly in the first place.

What food cost should you try to target? 

Many elements play roles in where your targets should lie. Some include the style of service (QSR, Full Service, Fine Dining), cuisine, and location. There are brands that depend on volume to make up for lower margins. Others need to increase prices to counter high rents. Then there are huge companies that have so much buying power that they can sell items at less than you can plate them for. If you're like most operators opening a new location, you did projections based on a product cost that would yield you a certain net profit. You rolled out menus with prices that fit the location then figured you would adjust as you went.

So what do you do if you grossly miscalculated the cost of goods a menu would generate?

Back in the 70s, the Boston Consulting group developed a matrix to help define a company's products. Products were placed in quadrants based on high and low margins and popularity. These quadrants categorized the products to then apply a set of strategies. There have been different names for these categories as the concept has expanded through many industries but the essence is still the same. By creating a spreadsheet that takes into account the P-Mix (number of each of the items sold over a period of time) and the plate cost, you can group all of your menu items into one of these four categories.

Here are the four categories and a basic strategy for each.

Stars. These are high profit and high popularity items. These are the items that need to be what the staff suggests. And they should be placed on the menu using psychological cues to draw the guest's eye to them. Stars are what makes it possible to include some "must haves" on your menu that might not generate margins within your target.

Dogs. Pretty self-explanatory. Low profit and low popularity. It is standard to drop these items. But if they are popular with some of your regulars find a way to hide them on your menu. Or maybe even keep them on your "secret menu".

Work Horses. These are items that are low profit but high popularity. Many times these are the loss leaders that get people in the door. The strategy with this category is to figure out how to make this product at a lower cost through portioning, cheaper product, etc. without destroying the perceived value. But beware, too much cutting will decrease demand turning these items into dogs really quickly. This is also an area where sales strategies of pairing or up-charging with high-profit items is necessary.

Challenges. This is the high profit but low popularity category. The strategy here is to increase popularity through sales technique, specialing, pricing or positioning.

It is as much an art as it is an analysis.

If your business model dictates that you need to run a 30% food cost you can't just take your plate costs divided by your target and that's your menu price. You need to take into account what your competition charges for similar items, items that you'll never get that kind of markup for, and the items that you can get a higher price for to make up for low margin items. Then you have to look at the big picture and look at your menu as a whole. How can you add in sales of high-profit items to make it possible to sell the low-profit items that are getting people in the door? This is where the art of menu engineering comes into play. Through pricing, menu positioning and sales techniques you can manipulate your menu to the target that will keep you in business.