Optimise your restaurant's profits with menu engineering

As a restaurant owner, you're passionate about providing people with delicious food. But you also want to make a profit. To achieve this, you need to keep an eye on your business's costs and generate enough turnover to cover them. Menu engineering gives you more information about your margin and the popularity of your dishes and forms the basis for optimising your menu. Want to increase the profits of your restaurant? The chefs at La Lorraine Bakery Group are here to help.

Know your cost structure to optimise your profit

Step one to determining your margin is knowing your costs. These are the costs you will incur as a restaurant owner:

Food and drink costs: your most important costs relate to the purchase of food and drink to build your inventory.
Rent or mortgage: the monthly costs of the property in which your restaurant operates.
Staff costs: payment of your staff, including kitchen staff, wait staff, cleaners and management. Take into account your social obligations, insurance cover and any costs of training.
Permits and licences: costs of any permits you need, such as an alcohol licence, health & safety permits and operating permits.
Marketing and advertising: costs of attracting customers to your restaurant.
Furnishings and equipment: this includes furniture and decorations, as well as ovens, fridges, dishwashers and other kitchen appliances.
Operational costs: such as napkins, plates, cutlery but also cleaning agents.
Insurance: fire insurance, liability insurance and theft insurance.
Taxes and levies: taxes you need to pay on your turnover (VAT) and taxes you need to pay on your restaurant’s profits.

Menu engineering: how to optimise your profit

Menu engineering is the best systematic method to analyse and optimise your menu and improve your profitability.

Step 1: Analyse the cost prices and profit margins

Determine the costs of each dish, including ingredients, preparation and any garnishes. Then determine the sales price to calculate the profit of each dish.

Tip: read our article about optimising your food cost percentage to determine your sales price.

Step 2: Take a look at the popularity and sales data of each dish

Collect sales data for each dish to determine how often each dish is ordered. Then you can identify the popular and less popular dishes.

Step 3: Menu engineering matrix

With the information you gathered in step 1 (sales price) and step 2 (popularity), you will now create a menu engineering matrix. This matrix gives you a clear understanding of which dishes are the most profitable for your company.

Many restaurant owners believe that their best-selling dish is their most profitable. However, popularity means nothing if you are losing out because the dish has a low gross profit margin. So before you ask your servers to push this dish to customers, use the menu engineering matrix to find out how it measures up.

Take the information gathered in step 1 and 2 and divide your dishes into four different categories: stars, plow horses, puzzles and dogs.

Stars have a high gross profit margin (and therefore a low food cost percentage) and are very popular. These dishes are incredibly valuable to your restaurant and should never be removed from your menu.
Plow horses are dishes that are popular with customers but have a low gross profit margin. They don't contribute to your profit, only to your popularity. There is an opportunity here if you can lower the cost price of production.
Puzzles are like plow horses in that they have potential. They are not very popular yet but have a high gross profit margin. You need to bring these dishes to the attention of your customers.
Dogs need to be evaluated. They are unpopular and have a low profit margin. These dishes clearly don't resonate with your target group.

Step 4: Using the information you gained from the menu engineering matrix

Now you have this information, you need to do something with it. Your stars are perfect as they are. Don't make any changes to the price or recipe. However, it's good to put these dishes in the spotlight. You could create a chef's menu with three of your “stars” or a list of recommendations, which is a collection of all your “stars”.

Popularity-wise, your plow horses are doing just fine and don't need any help there, but you do need to increase their margins. One way to achieve this would be to change out certain ingredients or side dishes per season. Perhaps asparagus in spring and parsnips in autumn, when they are cheaper. Another option is to increase your sales price or make the portions smaller. If you are increasing the sales price, your customers will want you to justify this price hike. So, add another (low cost) side dish, present it in a more upscale fashion or add extra optional toppings. Give your customers the sense that they are still getting value for money.

Puzzles need to be highlighted due to their high profit margins. Give them a prominent spot on your menu, integrate them into your menu of the day or weekly suggestions, ask your staff to recommend these dishes, share pictures on social media, etc. There are many ways to draw attention to them.

Dogs need to be reassessed. Figure out why they are unpopular and tweak the recipe or presentation to increase the margin and popularity. Don't scrap them just yet, especially if they appeal to a smaller target group like vegans or vegetarians.

Save on costs and increase the margin of your menu

As a restaurant, you generate turnover from the sale of your dishes and drinks. Margins are therefore your priority and make the difference between a business with room for growth and a business struggling to keep its head above water.

Because the purchasing costs of food and drink are usually high, you should aim to get the best savings. Here are some tips from the chefs at La Lorraine Bakery Group:

Buy in bulk: buy products with a longer shelf life or faster turnover time in larger quantities. You will often receive a discount from your supplier.
Quality frozen products: you want to avoid waste at all costs, so it's smart to use quality frozen products. Choose a reliable supplier, such as La Lorraine Bakery Group, for breads, patisserie, viennoiserie, sweet snacks and savoury snacks.
Seasonal products: some products are substantially cheaper and more popular in certain seasons. Add specials to your menu that are guaranteed to become “stars”.
- Spring: lamb, veal, salmon, shrimp, asparagus and other spring vegetables.
- Summer: chicken, pork, tuna, mussels, tomato, melon, etc.
- Autumn: turkey, duck, trout, sea bass, pumpkin, pear, etc.
- Winter: beef, game, haddock, scallops, kale, Belgian endive, etc.