STEP 1: ANALYZE YOUR MENU INGREDIENTS
Determining the profitability of your menu requires knowledge of some basic formulas. If you take the time to work through these formulas for every menu item, you will have a total view of your menu’s profitability.
a) Determine the Cost of Ingredients: Calculate the total cost of all the ingredients used to prepare the dish. This includes both the direct ingredients used in the dish itself and any accompanying components or sides. Be sure to include all ingredients, including spices, oils, garnishes, and any condiments.
b) Calculate Portion Cost: Divide the total cost of ingredients by the number of portions the recipe yields. This will give you the cost of ingredients per portion.
c) Factor in Overhead Costs: Consider the overhead costs associated with the dish, such as labor, utilities, rent, and other operating expenses. Estimate and allocate a portion of these costs to the dish based on its contribution to overall sales.
d) Determine Selling Price: Set a selling price for the dish that takes into account the cost of ingredients, overhead costs, desired profit margin, and the market value of the dish. Consider factors such as the target customer, competition, and the perceived value of the dish.
e) Calculate Gross Profit: Subtract the portion cost from the selling price to determine the gross profit per portion. This represents the profit generated from the dish before considering overhead costs.
f) Analyze Profitability: Evaluate the gross profit margin of the dish by comparing it to the total cost of the dish, including overhead costs. A higher gross profit margin indicates better profitability. If the gross profit margin is too low, you may need to adjust the selling price, review ingredient costs, or find ways to streamline operations to improve profitability.
STEP 2: CATEGORIZE MENU ITEMS
Divide them into four categories:
Now that you’ve gone through this profitability calculation, cross-reference how profitable your items and their popularity are (how well they’ve sold in a given time period). In doing so, you will divide your menu into four categories: Separating your menu into these four categories gives you a shorthand for the profitability of your menu. Based on this categorization, you can try to promote, adjust portions, adjust cost, or cull certain dishes to better increase your menu’s overall profitability.
STEP 6: TRAIN YOUR STAFF
Get your staff involved in your menu engineering efforts. Brainstorm ideas. Let them experiment. Show them your research findings. Once the menu is finalized, make sure they’re trained and comfortable, and ready to deliver on your menu concept with quality and consistency.
STEP 7: MONITOR AND TWEAK
In between menu engineering overhauls, you can still make small adjustments along the way. Keep an eye on sales data, industry trends, and customer feedback to keep your menu fresh.
While people get into the restaurant business for a variety of reasons, your restaurant has to be profitable – bottom line. By putting menu engineering formulas, models, and principles into practice, you can make your menu work harder for you.