menu-engineering-bootcamp-ebook-5

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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
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menu item food costs
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food cost percentage
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contribution margin
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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?
_________________________________________________________________________________________________
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2.
What’s the difference between food cost percentage and contribution margin?
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3.
Why is it important to look at individual menu item food costs?
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4.
What are some ways to minimize restaurant food costs?
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5.
What are growing trends, if any, that you see in the data before you?
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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?
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2.
Which category of menu item is most important? (Opinion.)
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3.
What do you do with dogs?
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4.
What do you do with stars?
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5.
What are some different ways of looking at your restaurant data?
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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.
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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?
_________________________________________________________________________________________________
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2.
What is the decoy effect, and how can you apply it to your menu items?
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3.
What is an important symbol on your menu?
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4.
What is the “me too” effect and how can you apply it to your menu items?
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5.
How many menu items should be in each category to address paradox of choice?
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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?
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2.
What are some ways you can accidentally “over-design” your menu?
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3.
What are some examples of upsell opportunities you can include on your menu?
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4.
What are key ways to design the menu book itself?
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5.
What do you think is the worst menu gaffe? (Opinion).
_________________________________________________________________________________________________
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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.
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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?
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2.
What is purchase rate?
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3.
What metrics should you look at when comparing different time periods?
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4.
How often should you engineer your menu?
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5.
How has your menu evolved over the course of this course?
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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
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