The middle of January should always mean one thing in a restaurant owners mind…
…the development of the next menu which should launch towards the middle of March, latest beginning of April.
Ideally, every restaurant should release two menus a year, one in March / April and a second one in November / December. Why do we work around these periods? Historically these are the two periods that price increases come through from suppliers and secondly, they signify the change of season which means some ingredients become costlier as they may be seasonal i.e. pineapples, citrus fruit and avocado.
As a menu developer, I often get asked, “How do you decide what to remove from your menu and what to keep on your menu?”
When I ask the same question to Restaurant or Food & Beverage Managers, a lot of them will tell me that they simply keep the popular items and remove the slow sellers. Problem with that method is that some of the popular items may not be profitable and some of the slow items much be “grudge” menu items that need to stay, such as vegetarian dishes or children’s meals.
The correct and most effective process, is to break the menu down, using a sales report for the last three months, into the following four categories (and all menu items can fall into one of these categories);
- The menu items that are the top sellers with high profit margins
- The menu items that are top sellers, with low profit margins
- The menu items that are low sellers with high profit margins
- The menu items that are low sellers with low profit margins
We refer to this method as “menu engineering” and the process assists with making the correct business decisions around every item on the menu.
The first category of menu items, are our top sellers and little to no changes should be made to these items, except an unavoidable annual or bi-annual price increase, or they will become poor profit items. The recipes should never be changed, only ever the presentation, if anything.
What these menu items do indicate to us, is what’s popular in your trading environment and shows us the spend per head that we should work with when developing new menu items.
The second category is a little trickier to deal with; the top sellers with low profit margins. There are two reasons the profit can be low on these items. Firstly, they may have a low selling price as they are value items and cannot be costed higher in the market you are trading in, or secondly, they may have expensive ingredients and are already placed at their maximum selling price (compared to your competitors) and cannot be increased or they will drop in sales and the business can be perceived as overpriced. The value items are menu items can be referred to as “loss leaders” and have a role in every menu, if the turnover on these menu items is high enough to justify their place on the menu. A low profit menu item may not be profitable to the business when sold in low volumes, but may be profitable to the business if it is very high in sales or turnover. These “loss leaders” or value menu items, drive feet through the business and those same feet, bring friends that will purchase a high profit menu item.
On saying this, I did mention that this category is tricky, because it can also be the downfall of a business if there are too many of these items on the menu, versus items from the first category, that generate a lot of profit as well as turnover. It is important to have a balanced menu, which appeals to the taste and spending power of a large audience.
The third category of menu items need to either be re-developed to make them more appealing in terms of flavour, presentation, cost or even just the placement or description on the menu can drive their sales up, to turn them into category one menu items. If the items are too expensive, change the recipe slightly to decrease the cost of the ingredients, without compromising the quality and re-position them, without taking sales away from any menu item in the first category, in other words, create a new market and convert customers from ordering category 2 and 4 items, to ordering category 1 and 3 items to make your business more profitable.
Finally, category 4 menu items which are low sellers and poor profit items, need to be looked at and either removed from the menu or accepted as “grudge” menu items, such as vegetarian meals, children’s meals or specialist meals, that will always be in the low sales category, but must be on the menu to have a balanced menu and to ensure that all Customers are catered for.
No stock items used in this category of menu items, should be single use items, i.e. all stock items used to make any of these menu items, must be used in other menu items or you will have stock losses as your stock may spoil as these items are low sellers. To keep stock moving and to avoid spoilage, always ensure an ingredient is used at least three times on the menu.
To follow the menu engineering process, all menu items must be costed accurately, using tested recipes and current stock costs. This is the most important step to the process. It can be a long exercise to cost each menu item or load the recipes onto the back-office system, but once this step has been done, it is a simple process of updating stock costs each time you need to cost a recipe or check the profitability of a menu item.