Uncorkd Digital Beer Menus

How to Bullet Proof Your Menu With Menu Engineering

You want to build a successful menu. But what is a successful menu? In general, it’s a menu that helps you increase sales. But after  you’ve defined what success means for you, how can you measure that success over time and ensure that your menu stays successful. One strategy that has been kicked around for many years, but is now really gaining traction in the restaurant industry is menu engineering. This is a strategy that you need to know about.

What is Menu Engineering?

Menu Engineering is a strategy that guides decision making as you’re building a menu. As with all menu construction, there are three main factors that you must keep at the forefront of your decisions.

Menu Design: The documents aesthetic value and it’s attractiveness to customers

Menu Organization: Where items are located and how a customer navigates or understands the menu.

Pricing: The price of items, and more importantly, the strategy behind how you arrived at a given price and how that price contributes to your overall profit.

These three areas are crucial to creating a menu of any kind. But when it comes to the logic that drives menu engineering, there are unique ideas that come into play. Essentially, menu engineering is the intersection of profitability and popularity. Popularity is a fluid concept. Tastes change, whether that’s because of seasonal preference, shifting consumer trends, or changes in your customers economic situation. But through the lens of menu engineering, your approach to profitability also becomes more fluid. We’ll dive deeper into that in a bit, but first, we need to cover the building blocks of menu engineering.

The Building Blocks of Menu Engineering

Customer Demand: This is the number of customer’s served.

Menu Mix: The spread of customer preference among all of your menu items, ie, how often each item on your menu is ordered.

Contribution Margin: The dollar value each item contributes to your restaurant’s gross profit.

 

Uncorkd Bullet Proof Menu Engineering

Image from http://www.menucoverdepot.com/

Menu Mix is the the number of each items sold on on your menu.

Horse: Popular sellers with low profitability

Dog: Low sellers with low profitability

Puzzle: Low sellers with high profitability

Star: High sellers with high profitability

You want more stars on your menus than dogs. That’s clear. Horses can be staples that your customers love. And puzzle’s might be your prestige or luxury items that you push to diners with large budgets who want a truly unique experience.

Menu Engineering attempts to leverage more dollars out of customers by offering them a better customer experience through higher value items. By only concerning yourself with cost percentages, you might actually be leaving crucial dollars on the table. Or in this case, in your customers’ wallets.

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A Deep Dive on Contribution Margin

Contribution Margin is the truly unique aspect of menu engineering. The importance of contribution margin is what sets it apart from other menu pricing techniques. A common strategy for arriving at pricing is to base your prices off of a percentage of cost. If a restaurant wants to keep their alcohol costs around 20%, then they could price their items in a way that will achieve that goal.

Here is the formula: (Cost of Item) / (Menu Price) = Cost Percentage.

For example, if you were pricing a Cabernet Sauvignon by the glass on your menu, and you want a 20% cost, you’d arrive at your price like this:

Cost of Cabernet Sauvignon Glass Menu Price Percentage of Cost Contribution Margin
$3.2 $16.00 20% $12.8

For many menu items, this might be a fine strategy. But what if your customers aren’t willing to spend $16 on a glass of Cabernet Sauvignon? They might choose to order a lower priced item.

Maybe they would rather order a Merlot that is priced at $10. At 20% cost, that means the contribution margin for your Merlot is $8.00.

Cost of Merlot Glass Menu Price Percentage of Cost Contribution Margin
$2.0 $10.00 20% $8.00

In this scenario, you’ve met your cost percentage, but you’re only generating $8.00 in gross profit per Merlot sold. Now, what if you sold your Cabernet Sauvignon for $14 instead of $16, and you find that your customers were willing to order more Cabs at $14 instead of $16.

Cost of Cabernet Sauvignon Glass Menu Price Percentage of Cost Contribution Margin
$3.2 $14.00 23% $10.80

This is where contribution margin shows its benefits. Yes, your percentage of cost rose by 3%, but a glass of Cabernet Sauvignon is now contributing $10.80 to your gross profit. By making the glass of Cab more appealing to your customers, you’re convincing them to order more Cabs than Merlots, and you’re adding $2.80 more of gross profit to your restaurant than you otherwise would have.

This is the key, contribution margin places importance on dollars over percentage. A successful business generates more dollars, not necessarily better percentages. 

Digital Menus Can Bullet Proof Your Menu Engineering

Wine Analytics and Intelligence

If you follow menu engineering strategies then you have to constantly monitor each items performance in the spectrum of Demand, Menu Mix, and Contribution Margin. This also means you will have to adjust your menu according to your findings. This may mean a menu design, moving item placement, or shifting prices.

Analytics

Tracking menu analytics is extremely important in menu engineering. This is why services like Uncorkd digital menus help make restaurants more profitability with better menu control. With Uncorkd menus, you can track customer demand for items, and learn more about your menu mix, and determine which factors affect customers’ orders. Digital menus track analytics for you, so a the hard work is already done. You’re provided crucial information in an easy-to-understand manner so you can make those decisions with more speed and confidence.

Never Re-print Menus

Digital menus also allow you to make updates to your menu instantly and track the performance of those changes. If you need to reorganize how you list wines, you can do that in seconds and without the need to re-print menus. It’s a great tool to help you build higher performing menus that increase your sales.

More Menu Control

In short, digital menus give you more control over your menus. This is important as you look to bullet proof your menus. This control, and added value for customers, gives you the power to earn more dollars from your customers and in return give them a high value experience.

Kyle Thacker