Let’s start with a simple idea: the amount a menu item SELLS during an average week constitutes its Menu Mix. If you only had four items on a menu, the menu mix might look like this:
| ITEM | NUMBER SOLD | MENU MIX % |
|---|---|---|
| Hamburgers | 60 | 60% |
| French Fries | 30 | 30% |
| Chicken Sandwiches | 5 | 5% |
| Cobb Salad | 15 | 15% |
| 100% |
The menu mix is the combination of great selling dishes and lesser selling items. No menu has ONLY best-sellers. (Just like how everyone can’t come in first place!) The blend of different dishes a restaurant offers is the MENU MIX.
Managers need to monitor the effectiveness of menu items to maximize profits. Right? Common sense. To do that, you apply a method called the sales mix analysis.
A sales mix analysis is a way of thinking about the popularity and profitability of a group of menu items, done at least four times per year. The analysis includes determining which menu items are most popular and which contribute the most money to expenses and profit. The results of this analysis determine whether managers need to make changes in menu pricing, content, or design.
To start a sales mix analysis, determine how much it costs to make items and how much you sell them for, resulting in a chart which looks a little like this:
Why do ALL the menu items? It gives us the bottom line. In this example restaurant, total food cost for the entire menu is at 24% (which is excellent, BTW)
Once you have completed this step, you can systematically look at each individual item and determine which ones are making money and which items are selling poorly. This gives you everything you need to know to determine which menu items to leave alone, which need to have an increase or decrease in price, which to promote, and which to eliminate.
Menu Engineering
Menu engineering is the initial and regular analysis of the restaurant’s menu mix – its combination of different entrees, appetizers, desserts, and side items, how well they sell, and how profitable they are. When a restaurant first opens, then again every 3-6 months, the restaurant should analyze every single item in each of the menu’s sections for popularity and profitability.
Want to stay in business? You have to carefully think through what you are serving and whether it is actually making you money or not.
Skip this step? You’ll be working for someone else in no time and your dream restaurant will be closed and forgotten.
There are four commonly referenced categories of menu items used when we start considering menu mix – stars, plow horses, puzzles,and dogs. Use your sales mix analysis chart to group menu items into one of those four key categories. You can do this by using the graph below and asking just two questions:
How popular is it?
How much do our customers LOVE this item?How profitable is it?
How much money do we make when we SELL this item?
Plot each items popularity and profitability on the chart below, then consider where each falls.
What exactly are these different categories? Glad you asked.
STARS: High profitability, high popularity
These items are both popular and profitable. For the most part, stars should be left alone. Locate them in a highly visible position on the menu. Test them occasionally for price rigidity-that is, are guests willing to pay more for these items and still buy them in significant quantity? If so, these items may be able to carry a larger portion of any increase in cost of food and labor. They are the celebrities of the menu, the highest-priced stars, and they may be less price sensitive than any other items on the menu.
Examples: Mashed potatoes, Soda, Spaghetti, Fried Chicken; dishes that are cheap to make and beloved by MOST people
PUZZLES: High profitability, low popularity
Puzzles: These items are unpopular, but very profitable. As a result, the number of puzzles on a menu should be limited. One of the best solutions to helping out a puzzle is to decrease its price. While this may appear counterproductive to making a profit, consider that the guest may not perceive it as a fair value. If an item is not selling, no profit is being made anyway. Another option is to leave its price alone and reposition it on the menu, perhaps featuring it in a more popular location. Additionally, try to advertise it by using table tents, chalkboards, or suggestive selling. Or, you can rename it. A puzzle’s popularity can be affected by what it is called, especially if it is unfamiliar to guests. Remember that even if a puzzle is not selling well, it can make a lot of money, relatively speaking. If sales can be substantially increased without decreasing the price, the item could easily become a star.
Examples: Very spicy Thai or Indian dishes, dishes that are cheap to make but not beloved by MOST guests
PLOWHORSES: Low profitability, high popularity
These items bring guests into the restaurant but could bring its bottom line down. It might be worth reducing portion size, seeking less expensive ingredients or raising the menu price to increase profitability.
These items are often an important reason for a restaurant’s popularity. Because they are less profitable, one option may be to increase their price. However, this should be done very carefully. If a plow horse is highly price sensitive-that is, if guests see it as a good price-value and that is the reason they come to your restaurant- then try to pass on only the food-cost increases of the item to the menu price. If it is only marginally profitable (close to the dog on the graph), drop it from the menu and make a substitution for it.
When increasing the price, always test for a negative effect on sales. Make any price increase in stages (e.g., from $4.55 to $4.75, then $4.95). If the item is an image maker or signature item, hold its current price as long as possible. On the other hand, if the listing is a non-signature item with a low contribution margin, move the plow horse to a lower-profile position on the menu. Attempt to shift demand to more profitable items through merchandising and menu positioning. Another solution might be to reduce the item’s standard portion without making the difference noticeable. Also, try adding value to the item through menu packaging. In other words, merchandise the plow horse by packaging it with side items to increase its contribution margin.
Examples: Porterhouse steaks, Seabass, Live Shellfish; dishes that are expensive to make and beloved by MOST people
DOGS: Low profitability, low popularity
These items should be removed from the menu to streamline back-of-house operations and make way for possible new dishes.
These items are unpopular and unprofitable. Eliminate all dog items if possible. Replace them with more popular items. Take advantage of hot, trendy, or cutting-edge listings. Restaurant and Foodservice operations are sometimes intimidated by influential guests who want managers to continue carrying a dog item on the menu. The way to solve this problem is to carry the item in inventory (assuming it has a shelf life), but not on the menu. Offer the special guest the opportunity to have the item made to order on request. You can charge extra for this service. This would raise the dog’s price to puzzle status.
Some items in the dog category may have market potential. These tend to be the more popular dogs, and may be converted to puzzles by increasing prices. Another detail to consider is that the menu may have too many items. It is not unusual to discover a number of highly unpopular menu listings that have little, if any, relation to other more popular and profitable items held in inventory. Do not be afraid to eliminate dogs, especially when demand is not satisfactory.
Example: Japanese stir-fried eggplant, crab-stuffed chicken breast; dishes that are expensive to make (and most guests don’t like them very much)
When you are designing a menu for the first time, you will need to VERY CAREFULLY GUESS which items will fall into which category and be able to justify your decision to keep or eliminate options.