Mastering Menu Profitability: Using Menu Engineering To Increase Revenue
Introduction
Maximizing the profitability of the items on your menu is essential for any successful food and beverage establishment. One underappreciated way to achieve this is through menu engineering. Menu engineering goes beyond just designing a visually appealing menu; it involves understanding the psychology behind how items are presented, priced, and ordered. By grasping the profit margin for each item, you can make informed decisions that boost your revenue.
This guide will help you determine your menu items' costs and profit margins and provide strategies for optimizing your menu layout to highlight your most profitable items. By the end of this article, you'll have actionable tips to enhance your menu's financial performance without compromising guest satisfaction.
Finding the Profit Margin of Your Menu Items
The first step in optimizing your menus for revenue is finding out how much money you make per sale of each menu item. If you know how much each item costs, the formula is relatively simple:
(menu item price) - (menu item cost) = (profit margin)
If you don’t know how much each item costs, check out our articles on How to Cost a Drink and How to Cost Food. Your best option is to use dedicated software like Spec to perform these calculations, as it can automatically adjust to changing ingredient and labor costs. Of course it’s possible to do this manually, but that can be a real headache!
Ordering the Items on Your Menu
Once you have a clear picture of your menu item's costs and profit margins, the next step is organizing these items on your menu to draw guests towards profitable items. The general concept we are trying to execute here is putting more profitable items toward the top of your menu, or at the top of groups within your menu.
Remember that high-profit margin items don’t necessarily mean expensive for the guest. A $10.00 cocktail that costs $1.00 to make has a higher profit margin than a $15.00 cocktail that costs $7.00 to make.
Ultimately, your top priority should be doing this without detracting from your guests’ experience. Placing the most expensive items at the top of your menus is a good way to discourage guests from ordering anything.
Make Your Profitable Menu Items Enticing
It’s one thing to get a guest to see your most profitable menu item first, but another to get them to order it. If an item is too expensive or lacks broad appeal, it will not be ordered.
That’s why it’s essential to funnel sales to high-profit margin items using the following three strategies: eye-catching names, irresistible ingredients, and appropriate pricing.
1) Eye-Catching Names
Drawing attention to a particular drink or dish with a well-thought-out name is a no-brainer. Consider how “Buttery Texas Toast” sounds much more appealing than simply “Texas Toast.” Now let’s think about the inverse. If a name is overly long or embarrassing to say out loud, it may discourage guests from attempting to order it.
2) Irresistible Ingredients
The second way to entice a guest to order a particular item on your menu is by including irresistible ingredients. These cocktails and dishes should be lovingly made with ingredients that have broad appeal. Spirits like vodka and whiskey tend to attract more orders than lesser-known ones like scotch, caçacha, and pisco (though consider that region, cultural trends, and many other factors highly influence this.) That’s not to say you can never work with these products or even increase the demand for them, just ensure you’re still able to keep the lights on in your restaurant if guests don’t order items they deem too unfamiliar.
3) Appropriate Pricing
Finally, it’s a simple fact that guests will tend to order the cheaper items on your menu more often. Sure, upselling your guests on a more expensive item is a viable way to increase your restaurant’s sales, but that doesn’t always work or even feel the most hospitable for your guests.
That’s why you should aim to have a high-profit margin menu item in all pricing tiers within your menu. If your appetizers range in price from $5 to $20, make sure you have a profitable item priced at $5, $10, and $15. Then, funnel sales to these items by placing them above similarly priced options, giving them eye-catching names, and making them with irresistible ingredients.
Conclusion
Effectively managing your menu's profitability involves more than just knowing your costs; it's about strategically presenting and pricing your items to maximize sales and guest appeal. By identifying high-profit items, positioning them strategically on your menu, and making them irresistible through creative names and quality ingredients, you can drive higher revenue and ensure a better experience for your guests. Implement these strategies to positively impact your bottom line while keeping your customers delighted and coming back for more.
The easiest way to understand the cost of your menus and R&D current and future menu items is with Spec.
Spec enables users to dynamically cost out ingredients and labor for kitchen and bar recipes. Discover the bottom line on all your menus by signing up for a free trial of Spec Pro today.
