What if your top-line revenue remainedflat and your bottom-line profit grew by3% to 5%? How do successful independentsand chains grow so rapidly? Theanswer: through menu engineering.
Menu engineering is a sophisticatedstudy that observes how restaurant patronsmake item selections, and thendesigns or engineers the menu to encourageconsumers to select certain itemsover others. Well-engineered menus sellhigher-gross-profit items that satisfy theconsumer and supply incremental gross-profit dollars to the restaurant operator.If you consider your menu nothing morethan a decorative price list, you’re missingopportunities. Your menu is yourmost powerful merchandising tool. Yourmenu reflects what makes your pizzeriaspecial and profitable.
Menus perform three primary functions:First, they position the restaurant.As an example, paper menus in a carryoutpizzeria are appropriate and smart;consumers can take them home for easyreordering. But a paper menu in a whitetableclothpizzeria with an extensive Italianwine list confuses customers. Second,menus merchandise; they offer choices tothe consumer. And, finally, they sell. Thepurpose of menu engineering is to sell theitems you want to sell.
Picture that you’re out to dinner withfamily and friends. The waitstaff visits thetable to ask if you made your choice yet.You and your tablemates have been sippingdrinks and catching up, but the socialpressure to place an order is high, so yougrab the menu, scan the pictures and text,and quickly pick an item. Most people dineout primarily to enjoy their time, so manyitems will satisfy their food desires. Menuengineering encourages consumers to buythe items that your kitchen staff executeswell and that drive additional profit.
Typical Pizza Menu
• Makes price most important element
• Lists lowest to highest price
• Does not make use of most importantplacement areas: first and last
The first step of engineering your menu: Calculate your theoretical food cost. Simplyadd the value of all ingredients in a particular dish and divide by the selling cost(see graphic below). Once you determine your cost for each, you must rank them—not by food cost percentage, but by grossprofit dollar contribution.
Food cost percentage is an interesting management tool, but it doesn’t determineprofitable operations. Ask your accountant or your banker: You take dollars to thebank, not percentages. Excellent menu engineering that satisfies customers’ needsand delivers additional gross profit to you is the key to success.Menu engineering is an established and important study, and many of its teachingsand techniques are used by chain restaurants. They pour tens of thousands of dollarsinto consumer studies, focus groups, eye movement studies, etc., to determine whyconsumers select the items they buy. Below are some simple improvements you canmake to your own menu.
Improved Pizza Menu
Elements of Menu Success
Placement. When consumers chooseitems from a menu they don’t read, theyscan. Statistics show that the most chosenitems are in the first and second, andthe last and next to last, spots on a list.In the above example, selection behaviorpredicts consumers will choose, in order,Greek, Hawaiian, Gourmet and DaWorks. This corresponds exactly to theranking in the food cost analysis.
Vegetarian options are very importanttoday. The Greek Pizza is vegetarian,as is the Vegetarian pizza “buried”in the middle of the menu. Therefore, aconsumer who scans for a vegetarian optionfinds the Greek first and chooses it.This creates a $10.38 gross profit, vs. the$9.12 of the regular Vegetarian. The consumergets what he wants, and you makean additional $1.26. Project the effect onyour bottom line if you made an additional$1 gross profit on every order. This isthe power of menu engineering.
Review your current menu; chancesare, the first item you feature is cheesepizza, as shown in the Typical Pizza Menushown on the previous page. Plain pizzais typically a low-profit item, as it is thecommodity, along with pepperoni pizza,that drives your coupon shoppers. Additionally,children, who do not even readthe menu, usually choose cheese pizza.In featuring the cheese first, you give upyour highest-gross-profit placement fora low-profit item that the key buyer doesnot even notice.
Callouts. This is a simple change youcan make: Notice the red color used tocall out “vegetarian” on the Greek Pizza.Boxes around items also drive eyes tothat item. Feature a “House Special” inbold text and surrounded by a box (seethe example at right). Boxes placed inthe lower left-hand corner draw the eye;this is a hot spot, so use it wisely. Manyrestaurants feature a favorite item in thisspot; it should be a high-gross-profit contributor,not just an item your patronslike. Promotion of a low-gross-profit itemincreases your chance of lowering youroverall margin.
Descriptions. Another technique usedto drive sales: the description. Reread thedescription on the previous page of theGreek and the Vegetarian. Which wouldyou choose? Again, gently encourage thepatron to choose the item that satisfiesboth you and them.
Pictures. Yes, people eat with their eyes.Enticing color pictures of your food, notgeneric pizza shots, sell products. However,menus have limited real estate, so youcannot feature images of all items (exceptonline). Again, choose beautiful picturesof a limited number of high-gross-profititems. Use only color pictures—no black-and-whiteshots. If you print your carryoutmenu in one or two colors, do notshow pictures. Food in one color looksterrible; either use full color or don’t includepictures at all. Likewise, do not usepoor-quality photos. Most people havedigital cameras today, but you shouldn’tuse them. Food photography is an art; ifyou are not prepared to spend the moneyto hire a professional photographer andfood stylist, don’t use pictures. Photosonly work when done correctly; in thiscase, less is more, so if you don’t have topqualityshots, skip it.
Buried prices. Notice where the pricesappear on the Improved Pizza Menu onthe previous page; they are “buried” in thedescription vs. appearing in list form atthe end after a series of dots. In the TypicalPizza Menu, pizza is listed by lowestprice to highest price, so people naturallychoose items priced in the middle. Buryingprices allows people to buy what theywant rather than buy according to price.Especially in groups, people are hesitantto order higher-priced items, as it appearspiggish or greedy. Buried pricesgive customers permission to buy whatthey want.
Reprints. Many pizzerias are reluctantto reprint menus because of cost and/orbecause they’re afraid to change prices.When costs spike, sometimes you mustraise prices. Pizzeria operators frequentlycomplain they cannot raises prices becausethey have printed prices on menusthat customers have at home in theirmenu drawers. The simple solution is toprint menus with expiration dates, justlike coupons. You can always choose tohonor “expired menu prices,” but in acase where you have raised prices, youhave alerted customers that prices aresubject to change. Gas stations neverhesitate to change their prices; if the costof oil rises, they raise the price, frequentlythat day and never with any notice.Consumers know this and accept it. Withdigital printing today, you can economicallychange your menu prices, add newitems or offer specials by printing smallerquantities of menus more frequently.This more flexible approach keeps yourmenu fresh for regular customers.
Menu engineering is a topic that takesyears to research and perfect; there ismuch more complexity than can be discussedin a short magazine article. However,the tips discussed here are simple toexecute and will provide additional profitabilitywith minimal effort. Meanwhile,begin looking at menus more critically—from your competitors and from restaurantsthat you visit; you will begin to seethat some use these techniques and profitfrom their inclusion. Try a few of the ideasand see if they work for you; you havenothing to lose but extra profit.