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Your restaurant’s menu is much more than a list of food.
It can be a your greatest marketing tool, introducing potential customers to your brand and getting them excited about your unique cuisine.
The average customer spends 109 seconds studying your menu. That’s almost two minutes going over each description and detail, so how can you make that time count?
It can also be the end result of intricate pricing strategy and food cost considerations, ensuring each plate is contributing to your overall profitability targets.
With inflation driving up already high restaurant food costs, profitability has to be a top concern on restaurant menus. How intentional are you being with your menu items and their pricing?
Menu engineering is an effective, scalable process for balancing your menu between popularity and profitability. The goal is to harmonize costing and pricing information with your restaurant vibes and brand.
Keep reading to learn how menu engineering can help you achieve this balance. See how successful menu engineering analysis can establish profit benchmarks while informing your design and layout decisions.
Menu engineering was more important than ever during COVID.
Now it's again more important than ever as inflation roars, supply chains and commodities remain volatile, and sufficient restaurant labor remains ever elusive.
All these challenges have forced many restaurants to scale down their menus to the most popular and profitable products — known as a minimum variable menu, or MVM.
A minimum viable menu is a condensed menu positioned to satisfy and delight customers while protecting profitability and shrinking your kitchen's ingredient inventory. It's a form of restaurant menu engineering that enables operators to provide popular items that drive profits at lower than average customers and revenue.
The reduction in the number of dishes being served helps minimize ordering while also making it easier to take control of costs. And because you’re prioritizing dishes that are lower-cost and higher-margin, your menu is more efficient in generating profits.
The menu engineering analysis involved in building a minimum viable menu can help protect your menu profitability from one crisis to the next and all points in between.
It can be especially helpful as you expand your online ordering menu, accounting for different costs can help identify what the prices should be. Online ordering could come with higher prices: delivery costs and 3rd-party fees can really add up.
Menu engineering can help you figure out what to price menu items, and where these prices should be higher or lower to account for additional takeout and delivery costs.
What is menu engineering?
Menu engineering is a framework to evaluate and optimize your restaurant menu pricing and design to create a more profitable menu and business overall. It involves categorizing all menu items into one of four menu engineering categories, based on the profitability and popularity of each item. Then, you use that restaurant data in conjunction with the principles of menu psychology to revamp your menu design and content decisions.
According to Menu Cover Depot, ongoing menu engineering has the potential to increase restaurant profits by 10-15%.
Menu engineering helps restaurants by:
Eliminating poor-performing items from the menu, helping your food costs
Highlighting your more profitable menu items
Creating a system for regular analysis of your menu, keeping it optimized to help make your restaurant money
Engineering your menu requires knowledge about your customers and an in-depth analysis of your restaurant’s food costs, menu item prices, and contribution margins. With a detailed view of your menu items’ profitability and popularity, you can identify which items contribute to your success and which items are holding your restaurant back.
When deciding who should tackle the task of analyzing and redesigning your restaurant menu, think through who has the most knowledge of your food costs, the performance of menu items, and some background on menu design principles and menu psychology. This may be a group of individuals run by the restaurant manager: the chef, owner, servers, and customers are all important here to provide different perspectives.
Once you’ve categorized your menu items using a menu engineering worksheet you can use this menu engineering data to guide a guest’s decision-making process so they select your most profitable menu items. But first:
The 4 Menu Engineering Categories
Stars: High profitability and high popularity
Your Stars are high profit, high popularity items. They’re cheap to make, and your guests can’t get enough of them. Rather than experiment with these menu items, keep them consistent, and promote them in any way you can. Be sure to make them extremely visible on your menu. If you have a mac and cheese on your menu, we’d bet it’s a Star.
Puzzles: High profitability and low popularity
Puzzles are the items on your menu that are highly profitable, but difficult to sell. Try to find out why they’re not selling — could they be better described or more prominently placed on your menu? Promoted more on social media? Or, it might be that the price tag is a little too high — sometimes, simply lowering prices slightly can increase popularity enough to produce higher overall profits.
Plowhorses: Low profitability and high popularity
Plowhorses are popular menu staples whose ingredients are on the more expensive side. The goal with plowhorses is to make them more profitable. How? You can rework the recipe to create a more profitable version of the same item, or pair the item on your menu with a profit-boosting drink. You can also keep an eye on portion size: Are customers leaving these menu items on their plates? You may want to decrease the portion size slightly while improving the appearance of the dish.
Dogs: Low profitability and low popularity
Dogs are the items on your menu that are costly to make and not much of a hit among your guests. They’re taking up space on your menu for items that could increase your profits. Consider omitting your Dogs, or you can de-emphasize them by hiding them on your menu. You can also try rebranding and re-inventing the item before you remove it altogether.
Learn how to calculate plate costs so you can properly price menu items, manage your COGS, and achieve profitability targets.
Menu design for maximum profitability
Here’s our step-by-step guide to menu engineering and using your findings to create a menu design that works for your restaurant’s brand and balance sheet.
1. Choose a timeframe to analyze your menu
The goal of menu engineering analysis is to redesign your menu and shuffle around different items on the page to help push your most profitable items, so figure out how often you'll realistically be able to do it.
Menu engineering analysis takes some time, but it's a time investment that can really pay off.
If you can do it seasonally (or quarterly), that’s great. But even doing a menu engineering analysis twice a year can help you boost your sales: Some menu engineering analysis is always better than none.
You can also implement the right restaurant technology to keep a quick menu analysis always at your fingertips. For example, reporting and dashboards within xtraCHEF by Toast can provide a real-time barometer of menu health based on the most recent food costs.
2. Measure profitability and popularity
Important metrics for measuring profitability and popularity include the menu item food cost, menu item food cost percentage, contribution margin, and amount sold or frequency of sales.
All of these metrics can be conducted manually by gathering ingredient pricing information from your invoices and converting those prices into the portion costs of each ingredient within a specific dish. It's completely doable with a calculator or spreadsheet, but it is a tedious manual process that's primed for natural human error.
On the other hand, xtraCHEF by Toast can automate not just your food cost calculations but also your invoice processing. In fact, xtraCHEF is built on its ability its ability to digitize critical invoice data — which then funnels into food cost analysis, pricing fluctuation reports, and much much more.
How to calculate menu item food cost
Here's the formula for calculating food costs for a menu item:
Cost of each ingredient + Purchasing costs = Menu item food cost
Calculating food cost for each menu item might not be as fun as writing the menu descriptions. But this is critical analysis that's necessary to determine prices and profits, help reduce food waste, and curtail over-ordering. Food costs are a foundational data point to guide your menu engineering analysis.
Here's a quick rundown on how to manually calculate food costs for a specific dish.
List all ingredients involved in a specific dish. Don’t forget the cooking oil, seasonings, and garnishes.
Based on what you pay for each item, calculate the cost of each ingredient in a dish. If a single onion costs $0.24, and each one yields eight slices, the onion cost for a dish that includes two slices would be $0.06.
Compile delivery fees, interest, return charges, or other expenses related to purchasing foods and inventory. DO NOT include labor costs.
Add the cost of ingredients and the costs of purchasing together. This is the food cost for a specific menu item.
For a deeper dive, take a look at our article How to Calculate Plate Costs Based on Your Restaurant's Recipes
How to calculate menu item food cost percentage
Here's the formula for calculating food costs as a percentage of sales:
Menu item food cost / Menu price = Food cost percentage
Depending on the outcome, you can then determine whether you are pricing your dishes correctly. For example, if you sell a meal for $20 and your food costs for the dish are $8, then your food cost percentage is 40%.
How to calculate contribution margin
Here's the formula for calculating the contribution margin of a menu item:
Menu price — Menu item food cost = Profit
Contribution margin, or individual item profit, is the difference between the selling price and the item cost. We will use this number when we map your menu items in the next step.
How to calculate menu item popularity
Most POS systems already count how many of each item is ordered in a specific time frame, so this data should be really easy to access.
You can also corroborate your findings with anecdotal information from your staff — has one of your dishes been selling like crazy after you promoted it on social media? They'll be the ones to notice these insights.
3. Categorize your menu items
Once you know how much of each item has sold in your specific time frame, and how much profit is driven by each menu item, you can plot popularity and profitability together in a menu engineering matrix.
That's where the Menu Engineering Spreadsheet comes in. It’ll categorize the menu items into one of the four menu engineering categories mentioned above: Stars, Puzzles, Plowhorses, and Dogs.
Then, it’ll show you all your menu items on a scatter plot. Your Y-axis will be the item's popularity (or the number of items sold in the timeframe you chose), and the X-axis will be the item’s profitability (or that item’s contribution margin). It'll look something like this:
You can then draw a trending line through these items to see whether your menu is trending toward Stars, Dogs, Plowhorses, or Puzzles.
4. Design with your menu engineering findings in mind
When redesigning a menu, use the findings from your menu engineering analysis to guide the layout.
It’s also important to talk to your trusted customers about specific menu items and learn from their feedback. What types of customers order which items? Do certain meals drive them to your restaurant, or are they attracted by your atmosphere? Do your regulars even read your menu thoroughly, or do they stick to their usual order? Mention that you're working on a menu redesign, and ask if there are any items they never consider ordering.
With both empirical and anecdotal information about your menu items, you can go ahead and redesign your menu. Use these four menu design conventions to guide your new design.
Highlight your Stars and Puzzles.
Use visual cues to highlight the items you want to sell the most. You could place a box around them, print the item in a different color, underline them, or put a picture near them. You could also label items as “Chef’s Special” or “New” to draw the eye.
The best practice here is to highlight one item per category so you don't end up with so many highlighted items that none of them stand out.
Craft beautiful menu descriptions.
According to research from Cornell University, menu items sell 27% more if they’re given a great menu description. Don’t just list the ingredients; use evocative words that pique the guest’s interest. Keep it brief, and don’t use overly flowery language, but make sure the guests know how much love goes into every plate.
Keep eye movement patterns in mind.
There are several different schools of thought when it comes to eye movement patterns when reading a menu. Some cite "The Golden Triangle," where the eyes move to the middle first before traveling to the top right corner and then, finally, to the top left.
But according to a Korean research study, a third of your diners are more likely to order the first item they see on your menu.
We suggest you cover your bases: place your Stars and your Puzzles — your highest-profit items — at the top-left, top-right, and center of your menu.
Keep your menu short — and try out having separate menus for lunch and dinner services.
According to George A. Miller, a cognitive psychology expert, most guests may only remember seven pieces of information (plus or minus two) at a given time. When looking at a restaurant's menu, guests often have too many choices to process.
If you have two different curated menus for your different meal services, it lessens the burden of choice. If it's lunchtime, guests will only have to pick from your lunchtime items.
It also allows you to play around with pricing and make some Plowhorses (low profit, high popularity) into Stars. For example, if you have a fettuccine alfredo that’s super popular at lunch and dinner, you can charge $13 for a lunch portion, and $16 for a somewhat larger dinner portion that comes with a side of garlic bread. It costs you almost the same to make, and suddenly the item is much more profitable at dinner than it is at lunch.
5. Analyze your new menu's success
A few months after you've done your first menu-engineering-fueled total redesign, go back and check how your sales have been impacted. Then, you can do another round of menu engineering analysis, and make one or two small tweaks depending on how your Stars, Puzzles, Plowhorses, and Dogs are doing.
Then, going forward, continue to only test one or two things at a time, so you can keep track of what works and what doesn't.
6. Involve your staff in the menu engineering process
Finally, don’t forget to train your staff on your new menu design. They’re your best assets because they speak to customers every day. Your front-of-house team probably already knows which menu items are your Stars (high profit, high popularity) — but if you teach them which menu items are Puzzles (high profit, low popularity), they can help you push those items into Star territory.
Menu engineering is an ongoing process that has the potential to boost sales, decrease food waste, and improve the profitability of your restaurant. With a few small updates, you’ll start to see the impact of where items are placed on the menu, how they’re displayed, and the descriptive words you use.
What is menu psychology?
There’s a science to how restaurant menus should be designed, how prices should be displayed, words to use, and more that improves the likelihood diners will choose certain items.
Let’s review the most well-known menu psychology concepts that may affect your menu design.
Currency symbols: Research shows that removing currency signs can help diners think less about pricing and more about the dishes they want. Upscale restaurants often use round numbers instead of ending in .99 or .95, which can seem like the item is less valuable or expensive.
Highlight feature foods: Take extra time to highlight these items in boxes, callouts, or with expanded descriptions.
Menu colors: Color theory can be applied to restaurants and menus to associate the right emotions with your restaurant’s style or mood. For example, red provokes excitement, passion, and energy, and is commonly used by restaurants, while blue is known to be the least appetizing color.
Eye movements: As mentioned above, people tend to look at the middle of a page, next to the top right corner, and then to the top left corner, and is known as the “Golden Triangle”. Place your most profitable items there.
Descriptive language: Rather than using hyperbole and cheesy language, use rich descriptions with enticing language to tell your diners about each menu item.
No matter what kind of restaurant or menu you have, you can engineer your menu for maximum return by completing this six-step process. To learn more about menu engineering and to become a menu engineering pro, start our free, online menu engineering course here. You can work through it at your own pace, or do it along with your team members.
Related restaurant financial resources
Where do you go from here?
It's been an unprecedented few years for what was already an often gruesome industry to work in.
Restaurant operators and their front- and back-of-house deserve some reprieve from it all. You deserve some time back in the day to spend doing what you love, whether that's creating new dishes or drinks, launching a new restaurant marketing campaign, or even simply spending a few extra hours away from it all.
Restaurant management may very likely never be a cakewalk, but the right combination of technology can take the edge off, provide automation that eliminates some human error, and unlock a few hours each week that would otherwise be spend doing tedious data input or analysis.
If now isn't the time to research and implement new or additional technology, when is?