Optimizing your menu and food cost

Optimizing Menus and food cost:

How do you design a menu that balances your dishes? How can you have an easy "Up-sale" menu for your staff and cost-effective ingredients?

Menu Optimizing is one of the most powerful tools in a restaurant’s arsenal to ensure profitability while maintaining a high quality. A well-designed menu isn’t just a list of dishes; it’s a strategic marketing tool that drives your customer choices, enhances guest satisfaction, and maximize your restaurant’s profit margins.

The goal is to create a menu that balances popular, high-margin items with cost-effective ingredients, making it easy for your staff to recommend a high-priced item with ease.

1. Understanding Optimizing your menu and food cost

Menu optimizing involves analyzing each dish on your menu in terms of its popularity (how often it is ordered) and its profitability (how much profit it generates relative to food costs).

The two key points to focus on are:

Food Cost Percentage: The cost of ingredients relative to the price you charge the customer. Ideally, food cost should be 25-35% of the menu price, of course, this varies from what type of restaurant you are operating. Here in Scandinavia, the typical target is 25-30%.
Popularity: This refers to how often a dish is ordered by customers. High popularity usually means the dish resonates well with the target market, but it doesn’t necessarily translate to high profitability.

By categorizing each menu item into one of four categories —Best-sellers, High-cost low prof, Potentials, and Failures—you can develop a clearer strategy for menu design.

2. The Four categories Optimizing your menu

Best sellers: High popularity and high profitability. These are the items you want to feature prominently on your menu. They appeal to customers and bring in significant profit margins. For ex in Scandinavia, the Caesar salad is one of the best sellers.
HCLP: High popularity but low profitability. These are customer favorites but they have a high food cost relative to their price point. While they sell well, you may need to adjust pricing, portion sizes, or ingredients to improve their profitability.
Potentials: Low popularity but high profitability. These dishes are priced well and offer good margins but don’t sell as often. You might need to market them more aggressively or change the dish to make it more appealing to your target audience.
Failures: Low popularity and low profitability. These dishes aren’t bringing in much revenue or customer interest. They should be reconsidered or removed entirely from the menu.

3. Designing the Menu:

Strategies for Balancing Popularity and Profitability

Once you’ve assessed your dishes using the categories, here are several strategies to optimize your menu:

A. Focus on Best-seller Dishes

Feature them!: Place your best-seller items in the most eye-catching positions on your menu. Use design elements like boxes, color highlights, or bold fonts to draw attention to these dishes.
Keep them fresh: Even your stars can benefit from occasional tweaks to keep them interesting. Introduce seasonal variations, or present them in a new way to prevent them from becoming stale.
Leverage high-margin ingredients: For your stars, consider incorporating ingredients that offer high perceived value (such as premium cheeses, meats, or unique garnishes) but are cost-effective to source.

B. Re-engineer your HCLP

Reduce food cost without sacrificing quality: If a dish is popular but costs too much to prepare, explore ways to cut back on expensive ingredients or use alternative, lower-cost suppliers (not quality). For example, substituting one protein with a less expensive, supplier. It's often that you can make a deal with your supplier if you know you are going to sell more of it in the future or get a bulk-order discount.
Adjusting portion sizes can help lower food costs. Make sure you don't lower it too much, some people might notice it, but if it's a small reduction they won't comment on it. If it's too much you will definitely hear it.
Adjust pricing: If a dish is very popular but its food cost is too high, consider raising the price slightly. Small price adjustments are often less noticeable to customers, especially for high-demand items.
Revise the recipe: If a HCLP is losing profitability because of ingredient waste or inefficiency, try streamlining the recipe. For instance, simplifying cooking methods, combining ingredients, or prepping in bulk can reduce operational costs.

C. Market Potentials More Aggressively

Use menu design to boost visibility: Place high-margin, low-popularity items in strategic locations on the menu. Highlight these dishes as "chef’s specials" "chef recommends" "specials" or use them in your marketing campaigns. For example, create limited-time offers or incorporate them into social media promotions.
Promote as upsells: Encourage servers to recommend these items when taking orders. Offering them as an upscale or premium option alongside more popular items could increase their visibility and sales.
Incorporate seasonal ingredients: If your puzzles are unique but not selling, try introducing them with seasonal ingredients or adapt the dish to fit current trends. Seasonal items often have a lower food cost and a higher perceived value.

D. Remove or Revise Failures

Assess why they aren’t selling: Is the recipe outdated, or is the dish simply not in demand/Season? Review the ingredients, presentation, and overall appeal of these items. If they aren’t aligning with current customer preferences/season/audience, it's time to reconsider.
Consider redesigning or renaming: Sometimes, the issue with low-selling items isn’t the dish itself, but the way it’s presented. Try renaming the dish to make it sound more enticing, or change the preparation method to fit current food trends (e.g., turning a traditional item into a healthier or more visually appealing version).
Remove completely: If a dish is both unpopular and unprofitable, it’s often best to remove it from the menu entirely. This frees up space for more profitable, popular options and reduces unnecessary waste and operational difficulties. Aswell gives your extra space to experiment with a replacement dish.

4. Menu Design and Layout Tips

In addition to menu optimization, the way you design your menu visually can influence customer behavior. Consider the following techniques to maximize sales and profitability:

Price anchoring: Avoid listing prices in a way that directly draws attention to the cost. Instead, group items into price ranges and use words like "premium dish" "popular dish" "healthy option"
Highlight high-margin items: Use symbols (e.g., a star or box) to highlight high-margin items or dishes that you want to sell more of.
Strategic placement: Place profitable items in areas where the customer’s eyes naturally fall, such as the top right or the middle of the menu. Research shows that people tend to focus on these areas first.
Design simplicity: A cluttered menu can overwhelm customers. Keep the design clean and organized to allow for easier navigation, while subtly guiding customers to higher-margin options.
Keep prices consistent: Keep it simple - Always finish your prices with the same number. For example don't use this: 349,- / 350,- / 398,- / 292,- / 234,-
Instead keep it consistent: 340,- / 390,- / 450,- / 545,- / 655,-
Always keep the prices ending with the same digits like a 5 or a 0.
Up-selling: When it comes to wine, and especially on glass. Always have 2 of the same type. 1 "normal" quality and 1 "premium" quality. For example:
- 2023 Riesling Trocken Groebe - 120,- per glass "STANDARD"
- 2023 Riesling Trocken Westhofener 140,- per glass "PREMIUM"
- This allows your staff to easily recommend a better and higher quality wine that increases your revenue, without having the guest react too much on the price difference.
- They key is to find 2 different wines, with 2 different flavor profiles for the same money. Ask your wine supplier for different choices and they will surely come up with some options.

5. Using Data and Analytics

To make proper and informed decisions about your menu design and optimization, it's important to track your sales data. Modern POS systems and restaurant management software can provide you with:

Which dishes are being ordered most frequently.
The profitability of each dish (taking into account that you have your food costs correct. Many POS system offers food cost program integrated with your sales data).
Customer feedback and preferences (e.g., through reviews or surveys).
Seasonal trends and inventory reports.
Gives you accurate selling point time. When is your restaurant more busy? at what hour exactly in the day are you selling most? This gives you the opportunity to have extra staff come in to help with the rush.
It helps you keep control of your accounting, inventory stocks, and even labor costs. Some POS even have time-stamp integrated so your staff can check in/out once they arrive or leave work- which then shows on your reports as labor costs without having to import any data from a separate system.

This data-driven approach will help you make better decisions about which items to highlight, tweak, or remove entirely.

6. Testing and observing

Menu optimization is an ongoing process. Once you’ve implemented changes, don’t be afraid to test new dishes or tweak prices and presentations.

Regularly revisit your menu performance to ensure it’s optimized for maximum profitability. Seasonal promotions, limited-time dishes, or rotating specials can keep your menu fresh while helping you refine your menu offerings based on customer behavior and market trends.