The Magic Art of Menu Engineering

For those stalwarts of the hospitality industry we likely remember “Menu Engineering” as something introduced to us while completing our studies, and we seldom ever revisited the topic again. If that’s you, then read on!

if not, read on anyway as you might get a few gems of information that help you in your journey of success

After many years in the business and talking about menu engineering in generic terms a good friend shared an updated menu engineering Excel template with me. In its base form it was probably the best example I had seen for a while which gave us a great starting point to work from. Over the years we had modified it to better capture and present the information we were after from a multi-unit/multi-country perspective.

Remember the Basics

Needless to say, the result of our tweaking was highly beneficial and gave us a tool that allowed us and our unit General Managers a clearer approach to menu planning & pricing. None of this insight could have come, however, without following some basics…..

Market research & comparison with your competitive set
Clear understanding of where your consumer currently sees your product from a market/price perspective
Accurate menu costings

As they say “Junk In Junk Out”. So with these three aspects in place we’re in a good spot to move forward.

Going with the Gut?……Or

Once we had the 3 fundamentals in place, it was insightful to see how well these facts aligned with the beliefs of our GM’s, Head Chefs and Bar Managers (which often was based on gut feel built over years of experience). While some beliefs were well validated, there were substantial “a-ha” moments to be had. In one Indonesian operation, we found that an offering of 5 Non-Alcoholic Cocktails yielded 45% of all cocktail sales. Not surprising, you might say, given that this is the world’s most populous Muslim country. However, the managers were highly surprised by this finding, given that the concept and brand was known as a place for alcoholic drinks.

So with this new found awareness, how did menu engineering help us further in our Non-Alcoholic Cocktail selection? With such high contribution, we asked:

Is the selection sufficient enough? Does the menu change regularly enough to ensure regulars do not get bored with the offering?
With these top sellers, can we squeeze out more profit on each item without blowing the price point related to our markets perception?
Given the low cost of these cocktails and high contribution margin, should we make this section more prominent on the beverage list?
Is there a market segment that we need to more effectively promote to (given that most beverage promotions were related to alcoholic drinks)?

These were just some of the questions that were asked as part of the process of turning information and knowledge into greater business success.

Learnings and Loss Leaders

As we expand our journey into learning and benefitting from a broader Menu Engineering approach some other aspects to consider are:

If an item is a top seller, it should have a higher contribution margin (or at worst equivalent) than other items in that section of the menu
You’ve heard it before “you can’t bank percentages”! Whilst the cost percentage may be higher than typically acceptable, look at the contribution margin. Simplistically, your $50 steak that costs you $20 (a contribution margin of $30 and 40% cost) is making you a lot more than your $30 chicken that costs you $10 (a contribution margin of $20 and 33% cost)
If an item, such as a steak, is perceived as a premium item, can you in fact charge $60 without impacting volume or customer satisfaction

And remember if you feature a “Loss Leader” menu item, and it’s not bringing new customers in the door or increasing frequency or spend of your existing customers, its not a “leader” just a LOOSER!

You may be intrigued that I have used a beverage to discuss Menu Engineering when typically we think Food Menus. Over the years we have found that the tool is as valuable for Food, Wine, Beverages and even in retail.