How is your current menu performing? What’s the most profitable item and what items can be removed? How to twist your menu to have more sales and profit? In this post, we going to help you understand your current menu performance, and also give you a simple tool to boost your profitability.
And let’s begin with understanding your current menu performance, you may wonder, I already know what’s my best selling items, but sometime the best selling item not always the items contributes most of your profit, because they may come with higher cost too. So how to really tells the performance of each individual item? we use two simple factors
- Popularity, or how many Seles a menu item made compare to average
- Profitability, how much profit a menu made in each sale compare to others
Based on these two factors, all of your menu items can be grouped into 4 categories:
- Fist category we called it – Stars,
They are your most popular items, they also have high profitability
- the second one is plow horses
they are popular, but they are not profitable compare to other items
- the third one is puzzles
Not very popular, but each sale gives you a decent profit
- and the Last one is Dogs
there are not popular and not profitable
Right, why we talk about these 4 categories? Because we will treat each category with different strategies.
(Very Popular, High Profit)
- you can just Leave as they are considering they are already performed very well
- slightly increase price, without affect too much on the sale quantity. price is the powerful tool, if we can increase the price by 5% without affecting the popularity, we are getting extra 5% profit without doing any hard works. yes, the key is do it with very small steps, so you have lot more room for adjustments,
For the plow horse (Popular, Low Profit)
- first thing we could try to is Reduce the Food Cost, may be by replacing those expensive ingredients with cheaper alternative without affecting food quality too much?
- or maybe we charge more to cover the cost
- because plow horse are popular, they may sit in a good exposure area of our menu, if they are not making enough profit, maybe it time for them to move or swap with other much profitable item
(are Not Popular but with High Profit)
- they are an ideal candidate to swap with plow horses, so they can sit in a good display area, to gain better exposure
- another thing we can try is to Reduce price if that helps sale
- or maybe just Remove them if they are not something for you regular customers
(are Not popular, and Low Profit)
- you can remove them from the menu
- or Increase their price, so they may become puzzle.
- of course, we can Keep them if they often sold together with other profitable items. Example of these are rice or soft drinks.
Menu Classification Tool
So what is the best way to calculate and put so many of our menu items into these categories? I have a simple excel tool for you. You can find the download link here.
That’s said for I Have restaurant; I want to work out the menu performance for last month.
Once download, I will rename the file with the related month in the name, for example, myrestaurant-Feb2020, and the next month, I will name it march2020, so we can keep a record for each month for tracking purpose. That’s go ahead and open it, there are three sections on my menu, Entree, Main and Dessert, if you have more categories then these, feel free to make more sheet by copy and Pasting.
I will start with entrees.
There is only one editable area on this sheet
I will fill in my sales data from my POS system or record-keeping system, Name of the menu item, number of items sold, price on the menu and the food cost.
I will fill in few more lines, so you can see what’s going on.
|Oyster 4 pk||150||$12.00||$6.00|
|Very Nice Pancake||300||$10.00||$3.00|
As you can see, rest of sheet get calculated for us automatically.
To explain them very quickly,
the top section here is our summary section, it contains sum up and average of our sales. Total number of menu item, totoal items sold, 70% menu mix index, which is a magic figure calculated by (1/total number of menu item) * 70%, it is a standard industry formula for comparing popularity.
Bottom right are item realted result, includes sold item percentage, in this case, we sold 100 garlic bread, which is 15.38% of total item sold.
Profit per item, total revenue, total cost and total profit.
At the end of this table, you will see the popularity and profitability result, they are calculated based on compare each line to overall average. Popularity is comparing sales Qty % to 70% menu mix index we mentioned before, and profitability is profit per item compare to the average.
Then base on the popularity and profitability, we have their categories
Now what should we do?
Apply above strategies accordingly, for this example: I may consider removing garlic bread because it’s not popular and not profitable, reduce oysters from 4 pk to 3 pk, so food cost go down, leave pancake as it’s, as it already doing well, and reduce garden salad price by $1, see that helps the sales, And next month I will run the same calculation again to see if the situation changed. The decision is yours, the best thing for this excel tool is, it gives you lots of indicators, so you can make the right decision.
Menu refining does take time for continuedly adjustments and tracking,
You can do it monthly or quarterly. It’s totally up to you, your menu is like your staff in our restaurant, more often you review it, more deeper understanding you have about its performance.
That make it to the end of this post, let me know in the comment if you think this makes your life easier or harder. And If you want to see more tips and tools to improve restaurant profitability, please check this blog regularly. See you next time.