Menu Engineering Bootcamp: How to Increase Restaurant Sales in 30 Days or Less Introduction You’ve all seen the headlines. The Science of Menu Engineering. The Psychology of Menu Design. How to Make your Menu Work Smart, Not Hard. It’s a fact: Menu engineering is the latest restaurant industry buzzword. Most people know it involves analyzing restaurant sales data. Most people know it has to do with placing menu items where they’ll stand out. However, most people don’t know where to start. Or, more accurately, they don’t make time to start. But every second you don’t look at your menu prices, food costs, and contribution margins, you lose money on your best menu items. The Menu Engineering Bootcamp will give you a regimen to follow as you engineer your menu to increase restaurant sales. From day one, you’ll have actionable lessons, takeaways, and assignments to follow. By the end of the 30-day course, you’ll have an optimized menu, the menu engineering worksheets you need to track your success, and a better idea of menu statistics to follow for years to come. I know you’re eager to get started, but before you do, I recommend printing out this PDF, especially the following page, which has a calendar to follow on your journey. Cross off the days as you go along, and let each lesson and assignment sink in before moving on to the next one. Let’s get started! Table of Contents & Lesson Calendar Record Your Day of Download ___ /___ /_____ Week 1/Lesson 1: Open an Investigation Into Your Menu..........................................................................................................................1 Complete by ___/____/____ (6 days after downloading) Week 2/Lesson 2: Stars, Puzzles, and Dogs, Oh My!.....................................................................................................................................6 Complete by ___/____/____ (11 days after downloading) Week 3/Lesson 3: Put Up Your Feet, Relax, and Learn About Menu Psychology .............................................................................10 Complete by ___/____/____ (16 days after downloading) Week 4/Lesson 4: void These Common Menu Gaffes At All Costs.........................................................................................................15 Complete by ___/____/____ (21 days after downloading) Week 5/Lesson 5: Experiment With Your Menu Like You Would In the Kitchen..............................................................................19 Complete by ___/____/____ (26 days after downloading) Conclusion (congrats you made it!)...............................................................................................................................21 Lesson 1: Open an Investigation Into Your Menu Restaurant data is your friend. Before you start thinking about stars or dogs -- whatever those are -- you need to delve into the nitty-gritty details of your menu with a comprehensive food cost analysis. In this lesson, you’ll learn how to calculate: ● cost of goods sold ● menu item food costs ● food cost percentage ● contribution margin ● menu item popularity You’ll learn how to calculate this in the following section. Gather your information in a spreadsheet so you can access it at all times. 1 Costs of Goods Sold (COGS) Cost of Goods Sold is beginning inventory + purchased inventory final inventory. Cost of Goods Sold refers to the cost required to create each of the food and beverage items on your menu. COGS is really just a representation of your restaurant’s inventory during a specific time period. In order to calculate COGS, you need to record inventory levels at the beginning and end of a given period of time, and any additional inventory purchases. Every dollar shaved off COGS is another dollar added to your restaurant’s gross profit. For example, If you have $5,000 worth of inyou purchase another $2,000Item during Menu Food Costs Individual menu item costs is cost of each ingredient + cost of purchasing. Yes, this is a painstaking exercise when dealing with several ingredients and portioning, but it is the pillar of menu engineering, especially when calculating food cost percentage and contribution margin, arguably two of the most important restaurant metrics… well, ever. “Cost of purchasing” not only includes the price you paid on the item, but any delivery fees, interest, return charges, or other expenses related to purchasing inventory (excluding labor costs). Here’s an example: an onion costs 25 cents + $1 for delivery, so $1.25, and each onion yields eight slices, the onion cost for a dish that includes two slices would be 30 cents. If you’re making tomato soup, your menu item food cost might be one stick of butter ($1) + 2 slices white onion ($0.30) + 3 tomatoes ($2) = $3.30. 2 Costs of Goods Sold (COGS) Food Cost Percentage Food cost percentage is menu item food cost / menu price. Calculating food cost percentage requires you know exactly what you’re paying for when ordering food, which ingredients match with which recipes, and how much each ingredient costs (which you now have after the past section). Food cost percentage can be a benchmark that you track on a weekly, monthly, or quarterly basis. It’s a good way to identify trends in your menu engineering. However, it is not the end-all be-all to restaurant success, and there is no “perfect” food cost percentage number. Contribution Margin Contribution margin is menu item sales - food costs within a certain time period. Contribution margin is an efficient way to measure profit, analyze how sales affect net income, and ultimately explain how different factors of your food business react to changes. It’s basically the net amount of dollars you take to the bank. Bonus Section: Food Cost Percentage vs. Contribution Margin While it’s never constructive to compare your restaurant to someone else’s, it is fair to compare your restaurant against its past success, evaluating your goals based on that historical data. Do you want to save more money or make more money? Depending on your current situation, you may want to look at food cost percentage or contribution margin. 3 For example, say you have two menu items: a sirloin steak for $20 that costs you $10 and a pizza for $10 that costs you $3. The food cost percentage is 50% for the steak and 30% for the pizza. However, the contribution margin for the steak is $10 compared to $7 for the pizza. So it seems like you’re making more money on the steak, although the item could be priced higher to net you even more. Neither metric is solely indicative of restaurant success, but examined together, they can be used to make important business decisions. Menu Item Popularity To calculate menu item popularity, add together the amount of times a menu item was sold. You can also look at menu item popularity percentage with this equation: individual menu items sold / total menu items sold x 100. How many times did someone buy that tomato soup, that pizza, or that sirloin steak in the past quarter? How about compared to last quarter? Menu item popularity is a good indicator of a dish’s “perceived value,” and might be a sign that you’re already marketing this item well on your menu. Menu Item Popularity 4 Assignment TO DO: Use the next few days to dig deep into your restaurant data. Look out for growing trends to get ready for the next lesson. 5 1. What metrics do you need to track in a food cost analysis? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. What’s the difference between food cost percentage and contribution margin? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. Why is it important to look at individual menu item food costs? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. What are some ways to minimize restaurant food costs? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 5. What are growing trends, if any, that you see in the data before you? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ Lesson 2: Stars, Puzzles, and Dogs, Oh My! Popularity You’ve done a food cost analysis. If you’re tired of staring at numbers, don’t worry; now, it’s time to visualize your restaurant sales. Create a scatter plot graph with your menu items’ contribution margin and menu item popularity using data from a certain time period, such as this past quarter. Plowhorses Stars Dogs Puzzles Profitability After creating this graph, with your spreadsheet, you should be able to draw a trend line through these items to determine whether you’re trending towards dogs, puzzles, stars, or plowhorses. Let’s look at each of these menu items individually to learn how to optimize them. 6 STARS: High Profitability and High Popularity Your stars are the upper crust, the cream of the crop, the creme de la creme… They’re superstars! These are your most popular and most profitable dishes. On The Menu: Your menu design should highlight your stars. Rather than change up the ingredients in these items, keep them consistent, and promote them any way you can. PLOWHORSES: Low Profitability and High Popularity Your plowhorses are popular staples at your restaurant… that are actually costing you more money than you’re making. They have low profitability and high popularity. On The Menu: You might try experimenting with less expensive ingredients in this dish to create a more profitable version. If there’s a larger menu item in this category, see if portion size is killing profit; are customers leaving these menu items on their plates? PUZZLES: High Profitability and Low Popularity Your puzzles are your hidden gems. They’re valuable, but they’re also “diamonds in the rough.” Customers don’t see them as viable options. They’re highly profitable, but difficult to sell. On The Menu: Investigate whether customers like the taste of these items. You may need to reinvent these items, but sometimes simply lowering prices will increase popularity enough to produce higher overall profits. You may also want to feature these items on your menu, make them specials, or position them in a different way. 7 DOGS: Low profitability and low popularity Dogs? More like duds. Your dogs are your menu items that just aren’t contributing to profit or profitability. On The Menu: Consider omitting your dogs. However, be careful. You may have a menu item that is a staple among some customers but not others (your kid’s mac and cheese, for instance). Instead of removing these dogs, you can deemphasize them by hiding them on your menu. Different Strategies for Different Menus In addition to this data and analysis, you should also factor in your gut instincts; after all, you know your restaurant best. With this information in mind, you can make great decisions about its future, with numbers to back you up. Once you get the hang of it, you can use menu engineering to optimize other aspects of your foodservice: ● ● ● ● Specific menus (breakfast, lunch, dinner, dessert) Online ordering and delivery items Cocktail and specialty drink menus Weekly specials and happy hour How will you use menu engineering in your restaurant? 8 Assignment TO DO: Make your own scatter plot graph with these tips. What trends do you see? Are you already getting ideas for how to improve your menu? Next week will be a quick lesson in menu psychology, so you can learn some of the best strategies for optimizing your best menu items. 9 1. What are the two axises on the Menu Engineering Graph? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. Which category of menu item is most important? (Opinion.) _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. What do you do with dogs? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. What do you do with stars? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 5. What are some different ways of looking at your restaurant data? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ Lesson 3: Put Up Your Feet, Relax, and Learn About Menu Psychology You thought we were going to start designing next, right? Not so fast. There’s still so much to learn - every day - about menu psychology. This week’s lesson is a primer on the top six psychology principles used in menu design. For more, subscribe to the Toast blog. 1. Paradox of Choice According to George A. Miller, a founder of cognitive psychology, most guests may only remember seven pieces of information (plus or minus two) at a given time. When looking at a restaurant’s menu, guests have loads of choices. The more menu items crowded in there, the more anxiety they feel to choose, and choose right. The cheapest option? The most delectable option? Nah, I’ll just stick with my usual. This is the paradox of choice. We think that with more choices, we’ll be able to make a better decision, but the reality is that we end up getting bogged down. Do This: To combat the paradox of choice, menus typically “cluster” similar pieces of information together: there’s a category for pizzas, a category for appetizers, a category for pastas, and so on. This helps guests remember the highlights of each list. Make it easier for guests to scan your menu by offering up to seven options per food category. You don’t want customers to leave with a bad taste in their mouths — with the anxiety that they could have made a better choice. 10 2. Decoy Effect The decoy effect is a psychological phenomenon that says guests are more likely to change their preference between two options when a third, less appealing option, is introduced to show the “value” of the most expensive option. According to Dan Ariely, the decoy effect really works. He ran a study on 100 MIT students, asking them which newspaper subscription they would buy — the combo deal (digital and print), the more expensive deal (print), or the less expensive deal (digital). When all three options were present, they chose the combo deal. But when he removed the redundant option (the print subscription), they preferred the cheaper choice. The print subscription acted as a decoy, giving guests a frame of reference for just how good the combo deal was, and enticed them to pay more. Do This: If you’re looking to increase sales of a particular menu item, you might want to show its pricing against other items. It could help increase the sales on the item you ultimately want guests to order, especially for those who are price-sensitive. Try bundling items together so guests see obvious results; for example, fries $5, hamburger $10, hamburger and fries $10. 3. Social Proof Social proof is the theory that people will adopt the beliefs or actions of a group of people they like or trust. It’s the “me too” effect. Do This: This is an easy win on your menu. As well as including pictures of your food, why not also include quotes from customers or family members? Show why people love the item. You may also want to encourage customers to write an honest review of your restaurant or a particular menu item on Yelp or Facebook. 11 4. Semantic Salience Semantics refers to the relationship between signs and symbols and their meaning(s). Salience, however, is the relative conspicuousness of something in a given situation. So when we’re talking about semantic salience, we’re referring to how noticeable (and potentially important) a symbol’s meaning is to a specific situation or decision-making process. Do This: In menu design, this can apply specifically to pricing. It’s not about what the menu items actually cost, but rather how they’re presented to the guest. Consider how symbols affect your menu price presentation. Here are a few ways to think about displaying prices: ● ● ● ● ● $14.00 $14 14.00 14 fourteen dollars The dollar sign makes the price more conspicuous, adding salience. While all of these prices are indisputably equal amounts, they differ in saliency. A dollar sign tends to be associated with having to pay, and having to pay tends to be associated with losing money, which is never someone’s first option. 12 5. Eye Movement Patterns Eye movement patterns are a tricky science. Most restaurant experts will say that people’s eyes will immediately flit to the top of the page or the top righthand corner. However, according to a Korean research study, a third of your diners are more likely to order the first item they see on the page. And this San Francisco State study, using scanners and video cameras, revealed that guests read menus like a book. Do This: Most research shows that the top of your menu - whether right or left - is important. Place your stars at the top, your puzzles at the very bottom, and your workhorses, or your most expensive items, in the middle. Emphasize menu items with a box, different font color, or a picture of it, but remember that the more often you implement these tactics, the less impact they will have. If you want to attract the eye to specific menu items, a good practice is to only emphasize one item per category (appetizer, entree, dessert, etc.) 6. Descriptive Language Labels The names and descriptions of the dishes on the menu are what diners tend to base their ordering decisions on, so you better be precise and captivating with your menu descriptions. A field experiment conducted by Dr. Brian Wansink at Cornell University found that descriptive menu labels resulted in customers feeling more satisfied with their meal. This allowed for more favorable comments — assuming that the item lived up to expectations. Comparing dishes labeled with sensory descriptors such as “tender,” “succulent,” and “satin”; cultural or geographic terms like “Cajun” and “Italian”; and nostalgic terms like “homestyle,” “traditional,” and “Grandma’s” versus the same meals without those extra descriptors revealed an important insight: the descriptive labels increased sales by 27%. Do This: Showing the details and craftsmanship of how a dish is prepared will help diners appreciate it more. Work with a copywriter to get guests’ taste buds tingling with phrasing that is mouth-watering, scrumptious, and delectable. 13 Assignment TO DO: Take your current menu, place it next to you, and stare at it. Are your stars and puzzles highlighted? What about your menu prices? How do you scan it; how does your business partner scan it? What ideas do you have for the future design? 14 1. How can you highlight your puzzles to turn them into stars? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. What is the decoy effect, and how can you apply it to your menu items? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. What is an important symbol on your menu? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. What is the “me too” effect and how can you apply it to your menu items? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 5. How many menu items should be in each category to address paradox of choice? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ Lesson 4: Avoid These Common Menu Gaffes At All Costs You’ve learned the do’s of menu engineering; now let’s learn the don’ts. No more best practices; let’s learn some worst practices. Here are 10 menu mistakes you need to avoid at all costs. 1. DON’T Make It Hard to Read This is a case of “over-designing” your menu that needs to be addressed - fast. Any respectable graphic designer will tell you that simplicity is always best. So don’t overcomplicate your font size, paper color, or font style. Don’t make font size too small or too large, and definitely don’t print your menu on light paper with light ink, or dark paper with dark ink. Instead, think about the usability of your menu; will the low light in your restaurant affect its readability? 2. DON’T Use Space Poorly There are two ways to use space poorly: cluttering space with too much, or using so much white space that the customer wonders where the menu actually is. If you need to fill space, use pictures, or boxes, or even include information about your restaurant hours, website, or social links. 15 3. DON’T Forget About Your Branding If a guest took your menu home as a souvenir, would they remember your restaurant? If your menu matches your restaurant branding, then most likely the answer is yes. Guests should be able to visualize your décor, type of food, price range and whether you were casual or upscale dining, all from your menu. If your menu doesn’t match the branding in your restaurant, you’re missing out on an opportunity to make the guest experience that much better. 4. DON’T Make the Menu Itself Too Big The size of the menu needs to take into account the size of the table, the place setting and the table appointments. Oversized menus can be awkward to hold and handle while having a conversation with other guests, and overly cumbersome for waiters to collect. 5. DON’T Overflow It With Too Many Menu Items While you may be tempted to offer your guests the world, it is possible for your menu to be too long. At a certain point, additional menu items stop improving the guest experience and start hurting sales. When it takes longer for guests to place their orders, it slows down the table turn time or the time it takes to get guests through the line. The result is that you end up serving fewer guests during each shift. Keep your menu simple. Remove those dogs. 6. DON’T Oversell Your Menu Items Here’s a common mistake: instead of simply emphasizing what they’re most proud of, some restaurants shout it in their menu. Don’t go overboard; when highlighting certain menu items, it should subtly guide your guests. 16 7. DON’T Be Avant-Garde With Organization It seems obvious, but it’s worth noting: menus should be organized logically. Items should be listed by menu groups. All appetizers should be in one section of the menu, all of the burgers listed together, etc. The desserts should not appear before the appetizers. Menu groups should be listed in order of course. If guests find the main courses first, they may ignore the appetizers section entirely. 8. DON’T Ignore Upsell Opportunities While your servers are likely trained to upsell certain items, the menu can also play a role. All potential modification addons should be listed on the menu. If there is a burger on the menu, note the option for bacon, mushrooms, and other offerings and the additional price associated with each. If it’s right there on the menu, you won’t have to rely solely on the servers or risk missing out on easy upsell opportunities. 9. DON’T Print A Flimsy Menu If you create menus that are overly susceptible to wear and tear (food, grease, water stains), you’ll have to spend that much more money replacing them. Consider laminating your menu, or using thicker paper to print on instead. 10. DON’T Have Your Chef Write Your Menu Descriptions Unless your chef was once a professional copywriter, he or she should not be the only one writing menu descriptions. Instead, let a copywriter or publicist lead the project, with the chef and key wait staff giving their feedback. 17 Assignment TO DO: Keep all of this in mind… and start designing! Or, give this guide to a menu designer you know. Also give them an updated list of prices, your #1 star with directions to emphasize it, and a list of your puzzles with directions to emphasize them. Make sure your menu designer gives you a proof, or mock-up, of the menu design so you can approve it before it goes live. Notice any of the gaffes above? Return the menu for another draft until it’s perfect. 18 1. What is white space? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. What are some ways you can accidentally “over-design” your menu? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. What are some examples of upsell opportunities you can include on your menu? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. What are key ways to design the menu book itself? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 5. What do you think is the worst menu gaffe? (Opinion). _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ Lesson 5: Experiment With Your Menu Like You Would In the Kitchen It’s time to implement everything you’ve learned into a workable menu! You’ve worked with your menu designer, your graphic designer, or your photo editing software until your new menu is perfect. Congratulations! Now, do this at least twice a year. When you change up your menu, change up your menu design, too. Or, if you don’t do a complete menu overhaul, A/B test your menu. A/B testing is marketing jargon for testing one element on the menu to see if it increases sales. Keep copy, font, and design the same, but change up which menu item is highlighted in a box. It might increase purchase rate, a fancy term for the amount of times someone orders, based on your changes. As the data changes, and it will quarter by quarter and year by year, you may find your priorities change as well. Maybe you don’t want to focus on raising sales but instead want to focus on lowering costs. Whatever your “theme” may be, make sure your menu sticks to it. With your menu engineering spreadsheet, you can also compare each time period side-by-side with separate sheets to see where you’re improving and where you’re not. 19 Assignment TO DO: Keep an eye on your restaurant metrics, and bookmark this course for next quarter (or half-year, or year, etc.) Congratulations, you did it! 20 1. What is A/B testing? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. What is purchase rate? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. What metrics should you look at when comparing different time periods? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. How often should you engineer your menu? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 5. How has your menu evolved over the course of this course? _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ Conclusion Toast Restaurant POS has the advanced functionality you need to dig deep into your restaurant metrics, automating sales, labor costs, food costs, and so much more. Get to know your couch better with Toast POS; sign up for a demo today. Whip Your Menu into Shape. Schedule Your Demo Today pos.toasttab.com/demo