Make The Most Of Menu Planning

Make The Most Of Menu Planning

If you do not know what each item on your menu costs, you may be leaving 5 percent on the table! Easily 90 percent of all restaurants do not have accurate, up-to-date costs for all the items they sell, let alone know what the individual gross profit contribution (margin) is from each menu item. Without that information, you cannot create a more profitable menu. You need a menu analysis. To perform a menu analysis, you need the following:

  • A computer with some type of menu analysis or spreadsheet software. This can be done manually, but if you can computerize, it makes it easier to stay current as prices change in the future.
  • A copy of your menu
  • A current product mix (or sales abstract reports) for a minimum of 23 periods (months)
  • An accurate recipe and food costing for all menu items

Your first step in menu analysis is to review your written recipes. When was the last time your recipes were costed? Most likely they were done when the last menu was written (which on average is every 68 months). The people usually responsible for recipe costing — the chefs — are typically busy handling day-to-day operations. They often have little time to spend on the little details that will make or break your operation. And the little things will kill you.

Your business is about dimes, nickels and pennies. Ask yourself, what a penny is worth? It is only 1/100 of a dollar, yet in a restaurant with annual sales of $1.5 million, being off by one penny is worth $15,000 . . . that isn’t “chump change!”

The next step is to analyze your menu, asking two critical questions: Does the menu accurately reflect your concept, goals and position in the marketplace? Is your menu providing you with the maximum gross profit contribution?

Then you must examine every item on the menu for popularity and contribution to gross profit. Each item will fall into one of four distinct categories:

  • Menu items that have a high gross profit contribution and high product mix. These items have maximum menu power, and depending upon your menu, these items should command the best real estate on the menu. The more we can influence mix toward these items, the more profitable the operation will be.
  • Menu items that sell well (high in product mix) but have less-than-average gross profit contribution. These items are often loss leaders but you’ve got to have them. Typically, these items are very price sensitive.
  • Menu items that have greater-than-average gross profit, but lower-than-average popularity. Sometimes, these items act as “image makers” and provide a largely psychological benefit to the guest. Typically, these are the more expensive items on the menu. Too many of these items can have a negative effect on the menu and they should be candidates for elimination, repackaging, repricing or replacement.
  • Menu items that have lower-than-average popularity and make a lower-than-average contribution to gross profit. These items are also candidates for elimination, repackaging, repricing or replacing. If you choose to keep an item in this category, you should know the reason. Often, these items are important to a particular market segment (like children’s meals) and should stay on the menu to help you remain competitive.

Only when you have all this information can you accurately determine which items should remain on your menu. Only when you have all this information can you make an informed decision about how and where each item should be placed on the menu to have the maximum impact on your profitability.

Conducting a menu analysis is not an easy task, but it is a necessary one that should be performed monthly. However, all the analysis in the world is of no use unless you act upon the information and apply it to your menu. Every month you fail to react and change your menu will cost thousands of dollars in lost profit!

Banger Smith is a restaurant management veteran. Before opening Menus for Profit, Inc. in 1996, he served as vice president of The Menu Workshop in Seattle.

Menu changes may require a review and pre-approval by the local health jurisdiction.

Rev. 12/13/14


This article is an excerpt from the Handbook for Excellent Restaurant Operations (HERO), published by the Washington Hospitality Association.  Want a hard copy of the whole manual?  It’s one of the many benefits of becoming a member!  Find out more about joining the Washington Hospitality Association here.

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Categories: HERO