As inflation and global food costs remain high or unsteady, now, more than ever, restaurant owners must be intentional with their menus and profitability to be successful. Some operators are looking into simplifying menus, while others are experimenting with alternative ingredients (e.g., light vs dark meat, vegetarian vs meat, etc.,) to save money. Proper tracking of menu items is critical in today’s market, as it allows restaurants to make better purchasing decisions, analyze trends, track differentiating food prices, and more.

Two strategies that many full-service restaurants have started utilizing to combat rising cost of goods and shrinking margins are menu engineering and theoretical food costing. So, what are menu engineering and theoretical food costing?

Menu Engineering

Menu engineering is a tactic designed to increase the maximum profit per guest by optimizing menus via restaurant datapoints, menu analysis, and strategic design optimization.

Menu engineering allows restaurants to:

• Control costs easier
• Identify higher-profiting menu items
• Eliminate poor performing menu items
• Develop an ongoing menu analysis system to continue analysis and optimizations moving forward
• Highlight and showcase popular and profitable menu items through visual design elements
• & more

Theoretical Food Costing

Theoretical food costing, on the other hand, is what your restaurant’s food costs should be based on costs of ingredients and meals sold—assuming no waste, breakage, or shrinkage. By pivoting from simple basic food cost calculations to more complex reporting, such as actual vs theoretical food costs (AvT), operators can determine what costs should have been vs. what they actually were given a specific time period. This allows restaurants to more efficiently analyze their financial status and have more control over their food costs with more data.

Best practices for theoretical food costing and menu engineering

Analyze Your Popularity vs Profitability Matrix

The first step in menu engineering is to identify your menu items in the popularity vs. profitability matrix. The matrix has four quadrants for categorizing each menu item, which are referred to in the industry as plow horse, star, dog, and puzzle. These quadrants categorize how profitable vs. how popular each individual item on the menu is.

Here’s an example of how a basic menu matrix is structured:

Design Engineering

Once your menu is solidified, another step to engineer your menu is to focus on design cues. Showcase your star items and draw attention to your top menu items. By adding a layer of visual focus to your menus, you can help attract customers to top products that add revenue and increase margins in your restaurants.

Use data and technology for accuracy and transparency

In the past, many restaurants viewed menu engineering and food costing as intuitive or gut instinct type tasks. Others have historically managed their reporting via spreadsheets. These methods, however, are error prone, inaccurate, and can be especially difficult for restaurants with large menus.

Restaurant technology streamlines the menu engineering process to make quick, easy, accurate assessments and refinements of your menu. For example, using a theoretical recipe tool, you can adjust portions or ingredients of an individual menu item to see how that affects your product margins. Simultaneously, by being able to view accurate purchasing, pricing, inventory, and food waste data, you can optimize your menus for your restaurants with the ability to see and consider more precise data.

Determine individual plate costs

Another advantage to using technology is generating final costs of individual recipes. Recipe costing can be difficult to do manually or with spreadsheets as food costs are often in flux and recipes evolve. Tech solutions help operators easily assess, change, and understand individual plates and recipes.

Better data with fluctuating prices

By knowing the real-time data of your best and worst selling items, plate costs, and food costs, you can make more informed decisions on which items to keep, change, or eliminate to reduce costs and boost profits.

Optimize inefficiencies and save

Armed with valuable data, work to identify, and improve inefficiencies. For example, if food spoilage is a problem, look at your inventory management process to evaluate historical sales data to see what you need for a given shift. Or, if over-portioning is an issue, look into a recipe management system to help maintain smaller portions and eliminate waste. This data allows you to identify and optimize inefficiencies easily.

Multiple factors influence your cost of goods and profit margins. By utilizing technology that allows for real-time pricing updates, changes, and fluctuations, you can make sure your restaurant reporting is accurate in real-time and driven by your restaurants’ specific data points across locations or regions. This allows you to change, subtract, or add menu items to increase your profit margins based on the data unique to your restaurants.

Human error and outdated systems make it difficult for restaurants to accurately predict or increase their profit margins. By utilizing a restaurant technology platform, restaurants can quickly and easily see inefficiencies and ways to save. This way, you can spend less time calculating price fluctuations, food costs, and other variables and maximize your profit margins.

Greg Staley is the CEO of SynergySuite, a back-of-house restaurant management platform. Greg focuses on facilitating better visibility and increased profitability for restaurant chains through the use of intelligent, integrated back-of-house technology. For more information or to discuss SynergySuite’s solutions, please contact Greg at greg@synergysuite.com.