Menu engineering and design are hot topics in the restaurant industry right now. Restaurateurs are becoming increasingly aware of the impact that a strategic and data-driven menu can have on their bottom line. Maybe they're inserting visual cues to draw attention or calculating costs down to the ounce. Either way, it's clear menus are no longer simply a list of dishes.
With this new wave of menu research comes a lot of terms that are becoming more commonplace in the restaurant industry. Here's a brief index of what you'll need to know to re-engineer your menu for maximum profitability.
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15 Restaurant Menu Engineering Terms
The study and optimization of a menu based on the popularity and profitability of menu items. Menu engineering is a data-driven practice restaurant owners use to increase revenue and reduce waste.
A subset of menu engineering focused on the visual science and appeal of a restaurant’s menu. Menu design should reflect a restaurant’s brand and personality while taking into account consumer psychology and visual aesthetics.
The core associations that a consumer has with a business. A restaurant’s “brand” is the first thing that comes to mind when a guest hears the name. It’s often the components that set this business apart from others.
Cost of Goods Sold (COGS)
A mathematical equation to determine the cost required to create each of the food and beverage items on the menu. It is the sum of beginning and purchased inventory subtracted by final inventory. COGS is particularly important for menu engineering because lowering it has a direct correlation to a more profitable restaurant.
Food Cost Percentage
A mathematical equation that calculates the percentage of a menu item cost that the restaurant takes as profit. It’s calculated by dividing the cost to create the menu item by the price of the item. The difference is the percentage that the restaurant makes on each sale of that item.
A mathematical equation that measures a menu item’s profitability over time. By subtracting food costs within a certain time period from menu item sales within that same period, restaurateurs can use this metric to measure how sales affect income and how costs are affected over time.
The quadrant of items in a menu engineering chart that are both highly profitable and highly popular. These are the items that should be consistent on the menu and used in promotions whenever possible.
The quadrant of items in a menu engineering chart that are very popular but not very profitable for the business. These are likely the items that guests expect to see, but may need to have ingredients or portion size modified to improve margin.
The quadrant of items in a menu engineering chart that are highly profitable to the restaurant but aren’t popular with guests. These are potentially hidden gems that need to be reinvented by lowering prices, changing their position on the menu, or packaging them a different way.
The quadrant of items in a menu engineering chart that are neither popular or profitable. Most likely, these items should be removed from your menu and replaced with more profitable dishes.
The application of consumer behavior theories to menu design. Menu item organization, placement, and visual cues can be strategically implemented based on what we know about human psychology.
Paradox of Choice
The theory that more choices can actually lead to increased confusion and poor decisions. In menu engineering, studies have shown that there is a sweet spot between too few and too many choices.
A psychological phenomenon that says people are more likely to change their preference between two options when a third, less appealing option, is introduced to show the “value” of the most expensive option. In menu engineering, this is the science of bundling options to improve their perceived value.
The impact that a symbol has on a particular situation or decision-making process. This is often used to define the impact that a dollar sign on a menu item (or lack thereof) has on the perceived value.
Words and phrases that appeal directly to a person’s sight, smell, hearing, taste, or feeling. These words, like “succulent,” “smooth,” and “aromatic,” are often used in menu item descriptions to draw out a specific reaction from the guest.
What other unusual terms have you come across during your menu analysis? Share your helpful terms in the comments below.
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