The way that you design and manage your menu can have a big impact on the business’ bottom line. Creating a menu is not just about giving customers want they want but doing it in a way that optimises your offering for supply and profitability. If you want to take a deeper dive into how to manage your menu with this in mind then these tips are a great place to start.
Get to grips with the numbers
The foundation of being able to optimise your menu is to make sure that you’re clear on the figures – there are three key metrics to consider.
- Food cost. The first essential figure to generate is going to be the food cost for every item on the menu. This is going to be the cost of each ingredient added to the cost of purchase (which includes items like cost of delivery, interest etc).
- Food cost percentage. This is a figure that you can track on a weekly, monthly or quarterly basis to get more of an idea of profitability. It is generated by dividing the menu item cost by the menu item price.
- Contribution margin. This metric will show you how much each dish adds to your actual profits. Menu item sales less food costs will give you the contribution margin.
Tracking these metrics for your menu will help to identify how much dishes cost, what percentage of each dish is cost, how much revenue they add, where you’re making the most profit and where there is the potential to increase this by charging more.
Identify which items are the most popular
There are lots of ways that you can do this. You can simply look at those that sell the most or you can drill down into the details of the whys and carry out some customer surveys. It’s also possible to use other metrics to determine menu popularity over time – for example if you take the figure for individual menu items sold, divide this by total menu items sold and multiply by 100 you’ll get a trackable figure that you can use to inform decisions such as what the perceived value of a specific dish is and, as a result, whether you’re marketing that dish well.
Create some averages
When you have averages it’s much easier to understand when you’re pushing above, or dropping below, what you might normally expect from your business and how each dish performs. Average contribution margin, for example, is a great way to see how dishes are doing – dividing the total of all item contribution margins by number of menu items will give you this figure.
Visualise your results
It can be really useful to create visuals so that you can see in practice where changes on your menu could help to improve profitability and supply. A simple graph with an X and Y axis used to separate menu items out into four sections that range from excellent performers to the low visibility dishes can make the data you’ve created much more useful.
Optimising your menu in this way can help to ensure that when your diners choose their food those choices better support profitability and growth for your business.