Menu Analysis: 5 Reasons to Actually Analyze Your Restaurant Menu

By: AJ Beltis

4 Minute Read

Nov 06, 2018

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Analysis of your menu makeup and product mix takes time, requires effort, and can be confusing without the right system.

But it's absolutely necessary for anybody running a restaurant.

Now, in the wake of the release of Toast's Food Cost Calculator, it's a great time to explain what menu analysis is and why it's important.

What is Menu Analysis?

Menu analyzing (or menu analysis) is an extremely broad term, yet its importance cannot be overstated. Menu analyzing encompasses an understanding of the fonts, styles, and copy used on your tangible menus as well as the product mix of food and ingredients you decide to use for recipes in the kitchen.

The definition of restaurant menu analysis is: the steps taken to identify the profitability and popularity of each menu item, and the strategy to ultimately enhance restaurant sales and success.

This process is ongoing and will require an in-depth understanding of your restaurant's brand and image as well as restaurant metrics such as gross profit, cost of goods sold, and sales volume. For that reason, many restaurateurs don't take the time to analyze their menu. But that could be detrimental to your success. Let's go over five reasons why restaurateurs need to actually take some time to analyze their menu.

1) You Can Increase Sales by 27%

Menu engineering is one of the primary responsibilities for restaurateurs.

For those of you less familiar with the term, menu engineering encompasses all duties surrounding the pricing and design of your menu and its offerings. Both a qualitative and a quantitative exercise, menu engineering calls on you to understand your most profitable and popular menu items and strategically place them on your menu with enticing descriptions. A step above analyzing your menu, menu engineering is about taking action to achieve better profit and success.

You might think menu engineering is just a menial task, but when it's done right, it can increase your sales by 27%.

That's a pretty impressive ROI for putting a little extra time into your menu.

2) You'll Know Your Competition Better

Understanding not only your price & markup strategy - but also that of your competitors - will help you set more accurate price points for your food.

For example, let's say after some menu analysis, you discover that you have the most expensive burger in your town. You can make this work to your advantage in a few different ways. First, if you feel your markup is too high, consider bringing prices down a bit to sell more of these burgers.

Second, you could make this work consistently with your brand. If you're a high-end restaurant, or offer more specialty burgers, the higher markup speaks to your offering. In that light, keeping your price the same helps to differentiate your product, so that may be the wiser choice.

3) You'll Understand Your Profitability

Profit keeps your doors open. Without profit, your restaurant is either losing money or you're just breaking even - neither of which sound extremely appealing.

When you analyze your menu, it can help you understand which specific menu items are contributing to your profit.

When you understand the profitability of each item, you can develop better pricing strategies to better engineer your menu.

CTA4) You Can Discover Where You Could Be Earning Even More

It's important to know which items are making you money. With insight from your menu analysis, you can alter your menu and your recipes to items more profitable overall.

For example, one term used in menu engineering is plowhorse. It refers to items that are high in popularity but low in profitability. By identifying which menu items fall into this category, you can price your menu differently, alter the portion size, and/or change the ingredient makeup of these items to increase your profitability.

5) Not to Get Too Technical...But It's Kind of Your Job

At the end of the day, a restaurant is as much a business as a bank, a software provider, a factory, or a construction company.

All  business owners - restaurant owners included - should prioritize the task of understanding their cost of their goods sold. Markups, ingredients, product mix, and portioning should be terms used daily in your role. It's all just part of the job.

How to Analyze Your Restaurant Menu

Great, you're (hopefully) sold on the importance of understanding your menu's metrics. Now comes the next step: learning how to do it!

Read more in this blog post: Menu Engineering Bootcamp: Boost Your Menu Items' Popularity and Profitability.

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