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Restaurant Menu Engineering is Not Optional

September 10, 2015

By Henry Pertman, Director, Hospitality Consulting at CohnReznick in Baltimore, Md.

For the 30 years I was in the restaurant business, there was no such thing as “menu engineering.” The menu was the menu.

Examining what was selling and what wasn’t was something you did every few years. There was a pretty easy formula for calculating the price of a menu item. Assume a food cost, labor cost, overhead, etc., and if you sold a lot, you made a little money. It was tough and time consuming, but simple.

To say everything has changed is quite the understatement. Ingredient costs keep increasing. More and more, people want to spend less time in their kitchen and more time in a restaurant. The choices of where your customers go to eat have increased, and continue to increase every single day.

So, where do you start to deal with it? “It” in this case, is your menu.

Menu engineering is a reality which needs to be addressed a minimum of twice a year. The reality is that the prices of commodity items, particularly poultry-related ones, are rising while you read this. You can subsidize these increases from your bottom line, also known as your pocket. If it is a temporary increase, that may be prudent.

But cost of goods sold (COGS) is not the only important component to menu engineering. Menu pricing needs to reflect your cost of labor, which is rising from a wage perspective. It would be an expensive mistake to not incorporate additional costs due to increased HR requirements introduced by the Affordable Care Act.

The final consideration is to examine the menu mix and whether it makes sense or not to customers and to your profits. Why did it ever make sense to sell menu items, keep items in inventory (and regularly throw them away) because of that ONE occasional customer who would have cried if their favorite item wasn’t available? No more! Make the greatest number of customers happy, and keep them coming back.

Due to increased competition in the restaurant market, menu engineering is not something that should be done. It is something that must be done!

Utilizing the point of sale, analyzing the data and making changes seasonally or based on costs is essential. Use your technology. Always hold on to the best sellers, making sure they are priced properly. Will selling a Chicken Caesar Salad for $7 or $8 will result in lower sales? Pricing a Chicken Alfredo for $19 instead of $18 might not result in any fewer sales, but it will make a big difference in your bottom line.

Get rid of the dogs that are on your menu and look at the specials that had good margin and sold well throughout the year. Replace the underperforming dishes with those menu items, feature them prominently on the menu and keep the menu fresh, lively, exciting – and profitable.