How do you optimize your profit margins with menu engineering?

1 Calculate your food cost percentage

The first step is to calculate your food cost percentage, which is the ratio of the cost of ingredients to the selling price of each menu item. This will help you determine how profitable each item is, and how much room you have to adjust your prices. To calculate your food cost percentage, divide the total cost of ingredients by the total sales revenue for each item, and multiply by 100. For example, if an item costs $2 to make and sells for $10, the food cost percentage is 20%.

2 Categorize your menu items

The next step is to categorize your menu items based on their profitability and popularity. You can use a menu engineering matrix to plot your items on four quadrants: stars, plowhorses, puzzles, and dogs. Stars are high-profit and high-popularity items that you want to promote and highlight on your menu. Plowhorses are low-profit and high-popularity items that you want to optimize by reducing costs or increasing prices. Puzzles are high-profit and low-popularity items that you want to test and improve by changing the name, description, or presentation. Dogs are low-profit and low-popularity items that you want to eliminate or replace with better options.

3 Apply menu psychology principles

The third step is to apply menu psychology principles to influence your customers' decision-making and perception of value. You can use various techniques to make your menu more appealing and persuasive, such as utilizing descriptive language and sensory words to evoke emotions and appetite, avoiding dollar signs and decimals to reduce the pain of paying, creating contrast with color, font, and layout to draw attention to your star items, offering limited-time offers, specials, and bundles to increase urgency and average check size, steering customers towards your desired items with anchoring, decoy, and bracketing effects, and providing recommendations, ratings, and testimonials to build trust and social proof.

4 Monitor and adjust your menu performance

The final step is to monitor and adjust your menu performance based on your sales data, customer feedback, and market trends. You should track and analyze key metrics such as food cost percentage, contribution margin, menu mix, and item popularity. You should also solicit and respond to customer reviews, comments, and suggestions. You should review and update your menu regularly to reflect seasonal changes, customer preferences, and competitive advantages.

By following these steps, you can optimize your profit margins with menu engineering and create a menu that works for your business and your customers.