Whether it is referred to as menu engineering or menu psychology, developing a successful restaurant menu is key in building a lasting restaurant. The purpose of a menu is to inform customers what is being sold, how much it costs and why they should buy it. When a menu is done right, it has the ability to influence a customer’s decision. A menu has to be more than a list of what food and drinks are offered. Instead, it must be viewed as the most powerful selling tool a restaurant has.
In order for restaurant owners to truly leverage the power of a menu, they must pay attention to three key components.
Calculating menu prices is tricky. If the prices are too low, there is the risk of not making enough money. If prices are too high, customers will likely choose to go elsewhere. The key to pricing is understanding costs, competitors and customers. In order to appropriately price items, restaurants must know what their competitors in the market are charging. This might result in adjusting certain items in order to compete. Supply and demand are also key influences on menu prices. A restaurant offering a unique item for their market might be able to get customers to pay above-market prices for the dish. It is also important to consider the recurring expenses involved with running the business. Operating costs should guide pricing decisions. Example costs include rent, equipment, labor and merchant processor fees.
To set prices, a restaurant needs to know how much they spend to make and serve their food. To determine an accurate food cost, they must account for everything that goes onto the plate such as the meat, seasoning and garnishes.
Here is a simple formula that can be used to calculate the cost-per-serving of a dish: Invoice cost of bulk food / portion-per-serving = cost-per-serving.
Once food cost per dish is calculated, a restaurant can determine a price by dividing the food cost by an ideal food cost percentage.
An average in the range of 30 percent is a good target.
Customers want a restaurant menu to be clear and concise. So the simpler the menu, the better. It is best to start with the size of the menu, as this dictates the way a customer views the menu. Placement of dishes on the page depends on menu size. The most efficient menu size is two-pages. A simplistic single-page menu can encourage snacking, which results in fewer entrees being ordered. A novel length menu has so much activity, that restaurants lose their ability to influence the customer’s decision.
Research has shown that there are certain places on a menu that a customer will look to first and places they will typically view last. The average customer looks at the top of a menu first, the bottom second and the middle last. This means a menu should include high margin items near the top of the page. Tactics like shading, coloring and bolding can be utilized for high-margin items to draw a customer’s gaze and influence their decision. Customers typically avoid ordering the most and least expensive items on a menu. In light of this, a menu should have offsetting dishes next to each other.
A menu needs to be well-categorized in order to guide customers to a decision. Items should be split into broad categories like appetizers and entrees, then split further into detailed sections such as chicken entrees and beef entrees.
It is important that the menu lowers the customer’s pain of payment, namely the prices. A menu should not lead customers to the price with a line or numerical list of items. This calls attention to the prices and can cause customers to select lower priced items. Removing dollar signs from a menu can decrease the association of price with money.
There are four main types of menu descriptions: location, sentimentality, sensory and brand name. A restaurant’s identity determines which description type is used. Location descriptions describe based on the origin of the ingredients (i.e Wisconsin Cheddar Cheese). Sentimentality descriptions leverage names to evoke memories or increase the perceived value (i.e. Grandma’s Meatloaf). Sensory descriptions use adjectives to increase the appeal. Finally, brand name descriptions include a popular product’s brand name to entice customers. More profitable dishes can be emphasized with a great description. Unprofitable items can be left with simpler or even no description at all to divert attention back to the more profitable items.
A good menu describes the restaurant, highlights what they do best and subtly affirms the customer’s decision to dine there. A menu can be a powerful tool for a restaurant. It might be the difference between a lasting restaurant and one that doesn’t make it past the first year. Giving special attention to the pricing, design and descriptions can ensure a restaurant creates a successful menu.
Saleem S. Khatri is the CEO of Lavu, a restaurant management platform including mobile point of sale, payment processing, and back of the house software. Prior to Lavu, Saleem successfully built software and hardware companies at start-ups via Y Combinator and other investment firms. Additionally, Saleem was appointed to manage a $79 billion investment portfolio on behalf of the United States Department of the Treasury. Saleem earned his MBA from the Harvard Business School.
