Make Your Restaurant More Profitable: A 5-Step Guide to Menu Engineering

Restaurants invest a lot of time developing menu concepts, sourcing unique ingredients, testing recipes, and creating signature dish presentations. However, despite all these efforts, many still struggle to profit off their business.

You have stable operational costs and are benefiting from a great location. You’re doing well with PR and social media, and getting great customer feedback. So where could the issue lie?

Perhaps it’s with your menu. 

For a restaurant owner, a successful menu is the culmination of their hard work and dedication to their business. It goes beyond a simple list of food items; it is the restaurant’s backbone and gateway to success. 

A good menu is simultaneously informative and enticing. It is also a restaurant’s most powerful marketing tool – and it can make or break sales, depending on how well it is constructed.

If you want to run a successful restaurant, you need a well-optimized menu. To do so, you have to engineer (or re-engineer) your menu to improve your restaurant’s overall performance.

What is Menu Engineering?

Menu engineering is the systematic practice of optimizing your restaurant’s menu based on relevant statistics and customer feedback.

Some say it is both an art and a science. It takes into account design, psychology, and profitability to create the best menu possible.

A properly implemented menu directs your customer’s attention and draws them to your popular items. Optimized menus can increase sales by up to 15% and contribute significantly to your business’s profitability. 

Developing the optimal menu for your restaurant is a process. Menu engineering used to entail a lot of manual number crunching and extensive testing – and even then, reengineering the menu applied a lot of personal intuition. 

Today, there are new tools and sources of data to help restaurateurs engineer their menu. You can use sales data, customer analytics, and food cost appraisals to decide what goes on your menu and what doesn’t.

The Core Steps of Menu Engineering

Let’s look at core processes that make menu engineering work – and how you can apply it directly to your business. 

1. Analyze a Specific Time Period

The first step in the process of menu engineering is to decide which time periods you want to analyze. This step helps give direction to your analysis.

For example, if you want to create a menu for the Christmas season, it would make sense to look at past sales data from November to January. Likewise, sales records of popular menu items during winter can be drastically different from trending menu items during the summer; analyze this period for comparison. 

Decide what questions you want to answer when looking through your data. For instance, should certain menu items be on your menu seasonally or year-round? 

Even if your restaurant doesn’t offer seasonal items, analyzing data from the past can help you keep track of your restaurant’s performance. 

You could look at sales data per day and try to pinpoint order quantity for certain items at certain hours.  

2. Compute (and Re-compute) Your Food Costs

Food costing is one of the most important steps in menu engineering, as it helps you categorize each food item in your menu according to a menu engineering matrix. 

While you can compute food costs manually, you can streamline the process by using your restaurant’s POS. This helps you reduce errors in calculation and keep track of your food costs over time.

Modern restaurant POS systems allow you to define recipes and sub-recipes per menu item and automatically compute its cost per saving. This makes it easier to see how impactful small changes can be on your menu items’ overall profitability.

It’s important to calculate food costs as accurately as possible and avoid rounding out values in computation. This means taking a good, hard look at your ingredients, especially the more expensive ones, and see if you are maximizing them. 

This will lead you to think more critically about your ingredients.

Do certain ingredients appear in only one or a few items? How much effort does it take to source them regularly? 

What does it cost you to store them properly, and how much wastage do you incur due to spoilage?

How much effort does it take for your chef and cooking staff to prepare this item to cook?  

Use these questions, as well as your computations, to help you decide.

3. Categorize Your Menu Items (Popularity vs. Profitability): The Menu Engineering Matrix

Once you’ve calculated your food costs and reviewed the ingredients you use, it’s time to categorize your menu items based on popularity and profitability.

Determine the average revenue contribution of each of your menu items, then evaluate which ones you should keep, and which ones you should consider omitting.

The main focus of menu engineering is to maximize the average contribution of each item in your menu. That way, each item has a place in your menu and can contribute to your overall profit. 

According to this classic Menu Engineering Matrix, menu items can be categorized into four main categories:

a) Plow Horses (high popularity, low profitability)

Plow horses are considered the crowd-pleasers among your menu and are a mainstay of any restaurant. Although they do not have high profit margins, plow horses can contribute to the overall satisfaction of customers and are good items to sell alongside your more profitable ones.

Although plow horses are good at keeping a constant stream of revenue, you want to avoid upselling them on your menu as they can overshadow other more profitable items. 

You can also increase the overall profitability of your plow horses by either lowering your food cost with less expensive ingredients, reducing portion sizes, or simply increasing their price gradually.

b) Stars (high popularity, high profitability)

Stars are commonly ordered items that have high profit margins and should be the bulk of your restaurant’s profits. When it comes to menu changes, you want to keep these items as much as possible without compromising on quality and serving size. 

It’s best to leave these items alone when optimizing your menu. Tweaking anything on these items can affect their popularity or their profitability, so make sure these items stay the way they are.

Any change in its portion size, for example, may reduce its popularity among frequent customers. Any change you do with your stars should be subtle and well-considered, to avoid making customers unhappy.

Stars should be featured prominently on your menu to maximize your revenue. You can highlight these dishes with markers such as “Best Seller” or “Chef’s Choice” to make sure they stand out. Likewise, train your staff to recommend these items to maximize the item’s popularity.

c) Puzzles (low popularity, high profitability)

Puzzles are items that are profitable but not popular with a lot of customers. Although you may want to keep these items for their high profitability, you have to figure out the reason why these items are not ordered as much.

If the food item is too expensive, chances are customers will avoid ordering them. In this case, you can try lowering the price just a bit to make it more appealing, or reducing portion size to make it accessible to more people.

If the food item is exotic or unfamiliar to customers, you can try featuring the item or have staff recommend it. Chances are, customers don’t order your item because they’ve never heard of it before, or are used to ordering their favorites.

Puzzles are meant to be solved, and this one is no exception. Always be on the lookout for ways to make these items more popular. These items just need a little more love to become stars!

d) Dogs (low popularity, low profitability)

Dogs are menu items that are rarely ordered and have low profitability. These menu items are prime candidates for elimination, as they take up valuable menu space that could be used for other more profitable items.

Still, just because they don’t contribute much to your restaurant’s revenue doesn’t mean you have to remove them altogether. Dogs can be items that are made from leftover ingredients to avoid waste or are low-labor items that can be easily made. 

Small profits from these items are still profits. Still, if you find that your menu would simply be better off without the item, don’t be afraid to take these off your menu.

4. Restructure Your Menu 

Now that you have the relevant information regarding your menu items, it’s time to restructure your menu. At this point, aim to fix your menu to include items that can contribute to your revenue, or increase your restaurant’s popularity.

When restructuring your menu, test new menu designs that organize and highlight items you want to upsell, and track any changes you see in ordering patterns. 

Keep in mind the customer’s user experience as they browse through it, whether it’s a printed menu or a digital menu. As much as possible, you want to guide their attention to items in a way that meets your objectives, like picking up a promo, or reading all the way down your menu.

Make sure your menu highlights your high-profit items as much as possible and spread them out in such a way that customers will have to go through multiple menu items before getting to their choice.

While restructuring your menu, try limiting menu choices. If you give too many options to your customer, you’re giving up more control over what they might order. The burden of choice can be overwhelming to some, and can lead them to stick to what’s familiar.

5. Test Your New Menu

Once you’ve finished restructuring your menu, it’s time to test its effectiveness.

Share your new menu with the people closest to you first before releasing it to the public and to have a feel for how your customers may react. Then tap your restaurant’s front of house staff to observe ordering changes from actual customers.  

Always go back and forth between your new menu and your old one. See which changes prove to be effective and which ones need more tuning. 

Once you release your new menu, listen to customer feedback. Keep track of comments in social media posts and always check if your menu items are performing the same or better than in your previous menu. 

Don’t be afraid to revert some changes if needed. Menu engineering is about fine tuning and developing the best menu possible, not recreating it from scratch. 

Improving Your Menu with Design and Presentation

Now that you have decided on what to put on your menu and have a general idea of how your preferred design, apply design and usability principles to guide customers where you want them to go.

Guests will spend a few, critical minutes looking through your menu. In that small window, you should direct them to what you want to sell. Here are things you should consider looking at when finalizing your menu.

1. Choose the Right Colors

People respond to certain colors and color schemes. Colors are powerful tools that can be used to grab your customer’s attention or reinforce your restaurant’s theme.

2. Make Your Menu Legible

Choosing the right font and font size is important to keeping your menu legible and easy to read. Divide your menus into easy-to-scan categories to avoid customer frustration.

3. Limit Choices

Having too many items to choose from can overwhelm your customers. By limiting their choices, you can make it easier for them to order. This also benefits your restaurant, since you lower inventory cost and wastage.

4. Section Your Menu Wisely

If your restaurant has an extensive menu, try opting to create multiple menu sections to help narrow down their choices. (e.g., Breakfast, Sushi, Drinks).

5. Separate the Dessert Menu

The perfect ending to any meal is dessert! You want to separate your dessert menu from your main one, as people usually opt to either get just an appetizer or just a dessert. By separating your dessert menu, customers are more likely to order both.

6. Focus on Item Descriptions

Write good menu descriptions – or get help from a good copywriter who can do it for you. Avoid cheap hyperboles; entice your customers instead with visual, appetizing descriptions.

7. Insert Decoy Items

One way to make a menu item stand out is to surround it with other items that are more costly. That way it would appear more appealing to purchase, and you’re the only one who knows it is actually more profitable than the ones around it.

8. Avoid Highlighting the Price

Customers may tend to look for the cheapest menu item. Depending on your goal, you may aim to put your most expensive item at the top, or mix different items with prices in non-ascending or descending order. That way they focus more on what to order and not on what it costs.

The Power of Menu Engineering

Menu engineering is a tool that can make subtle, powerful changes to your menu’s performance. Using menu engineering not only makes your restaurant more profitable; it creates a more enjoyable ordering experience for your guests.

As your most powerful advertising tool, it’s worth taking the time to reorganize, redesign, or develop a menu that enhances your restaurant’s success.  

If you want the flexibility to tweak your menu as well as other aspects of your restaurant, consider investing in a restaurant management system.