As a business owner, profit margins are the best way to measure your success. However, are you getting the best margin possible? When it comes to restaurants, you may be leaving money on the table, and no, we’re not talking about tips.
Today, we want to discuss how you can raise your restaurant profits by about 15 percent. Fortunately, the process is relatively straightforward and doesn’t involve cutting costs or lowering the quality of your food.
Menu Engineering: What It Is and How it Can Help
While there are several tactics you can use to increase your profit margin, one of the most effective is called menu engineering. This process may sound a bit complicated, but once you understand it, you’ll wonder how you managed without it.
Here is the basic outline for menu engineering.
Step One: Determine Your Cost for Each Menu Item
You should have a comprehensive list of food costs already, but in case you don’t, now is the perfect time to do so. Go down the menu and determine both the cost to you and the profit.
When doing this, you want to focus solely on food and packaging costs. While other components like labor and overhead are vital to consider for your business as a whole, they are not part of menu engineering.
Step Two: Categorize Each Menu Item by Popularity and Profit
If you’re a new restaurant, it can be challenging to know which dishes are going to be the most popular, but you should have some data at least to draw from for now. Even if you’ve only been open for a few days, those numbers can give you a baseline.
Realistically, you want to bundle each item into one of four different groups.
- High profitability and low popularity
- High profitability and high popularity
- Low profit and high popularity
- Low profit and low popularity
Step Three: Redesign Your Menu
Ideally, your menu will consist only of items with high popularity and high profitability. However, as we all know, the chances of that happening are relatively slim. While you could trim your menu down to just the star players, you don’t want to alienate your customer base.
Instead, follow these tips for engineering your new menu design.
- Cut Low Performers – anything in the low profit, low popularity section should be removed from the menu first. They aren’t adding to your bottom line, and most likely, no one will miss them.
- Minimize Highlighting – placing high-value dishes in brackets or bold fonts will cause more guests to take notice. However, if everything is highlighted, then nothing is. Use it sparingly.
- Focus on Descriptions, Not Prices – while you want to be upfront about the cost of different items, don’t let it define your menu. Instead, let the food speak for itself, and the customer can decide if it’s worth it. Rich, descriptive text will have more of an impact than a lower dollar value.
- Streamline Your Menu Size – if customers are flipping through pages of dishes, it’s much harder to engineer higher profits. Instead, keep it short (ideally, two or three pages max).
- Place Top Performers First – people tend to read menus from top to bottom, and their interest wanes as they go down the list. Don’t bury your best sellers in the middle.
Step Four: Test and Analyze Your Redesign
While you may think that your new menu will work wonders, the fact is that it may take a few variations to get it right. Once you release the updated version, take note of how it impacts sales. After a month or so, redo steps one and two to determine if a new redesign is necessary.
Over time, you’ll be able to refine your menu until it becomes as profitable as possible. By cutting low performers and focusing the attention on the highest-profit dishes, you can earn more money without cutting quality or service.
How Direct Mail Can Help
For the most part, menu engineering happens inside the restaurant itself. However, if you’re looking for a viable way to market your business to the community, direct mail is one of the best options.
Not only do you get a decent ROI, but direct mail is the perfect medium to test your new menu design. See how well the new layout resonates with direct mail customers and use that in your analysis. Also, if you do delivery or online ordering, these mailers can provide even more data to help improve your profitability.
Contact Always Direct Marketing Today
Designing and implementing a direct mail marketing campaign may seem challenging, but Always Direct Marketing has you covered. We’ll handle every aspect of your marketing, from designing each mailer to helping you find the right customers. Contact us to see how menu engineering and direct mail can help boost your profits today.