Insights / Technology / How to Strategically Trim Down Your Restaurant Menu to Increase Profits
How to Strategically Trim Down Your Restaurant Menu to Increase Profits

Bigger isn’t always better – especially when it comes to menus.

Last year, 60% of restaurants shortened their menu size, according to Datassential, a food-industry market-research firm that analyzed over 4,800 menus across the U.S. It’s a trend that’s continued well into 2022, as restaurants look to ways of increasing efficiency in the wake of relentless rising costs.

 “You should be constantly evaluating,” says Sergio Hernandez, director of culinary and business development for recipe software company Meez. “Even before COVID, before today’s supply chain issues, streamlining a menu is something that every restaurant operator should’ve been doing.”

 By nature, a tightened menu can enhance inventory control, lower food waste, and be easier to execute by back of house teams that are now often thinly stretched. It also makes it easier to keep track of pricing and potentially negotiate with suppliers, given the increased quantities of ingredients needed for the dishes that remain.

 So where should you start when looking to make menu trims? We break down how to strategically decide which dishes to ditch and which to keep.

Comparing sales to food costs

While it may sound obvious, your first step is to analyze profitability by comparing sales numbers to respective food costs, and this can’t go underrated.

 “Do the math to see how many units you’re selling each night against the food cost on that dish, and then get an average of a couple of weeks’ worth of data,” says Hernandez. “Then you can decide, is that item making you the revenue that you need based on your total sales?”

 Dishes that are profitable and popular are the ones you want to lean in on, and those that aren’t profitable or popular are the ones you can quickly cut. “But between those windows, there’s a spectrum,” says Bo Davis, co-founder of MarginEdge, a restaurant management software company. 

Deciding on dishes that lay in the middle zone may come down to their ingredients. For example, if you’re sourcing tons of individual ingredients specifically for a dish that’s profitable but not popular, it’s likely reasonable to eliminate it. Meanwhile, if this dish includes many of the same ingredients used in your best-selling, highest profitability dishes, it may make sense to keep it, since risk of food waste is decreased.

Weighing high popularity with low profitability 

Getting rid of low-margin dishes can be challenging when your customers really love them. To make a strategic decision, you’ll want to consider several factors. For one, does this dish play a central role in drawing people to the restaurant?

“Even if the margin is low, if it’s a signature dish, it might be what you call in the industry as a ‘loss leader’ – you're not making a prime margin but the dish received press and people are buzzing about it,” says Hernandez. “That’s important to weigh after analyzing how it's performing financially.”

You can also evaluate how you can adapt the dish so that it’s more profitable. “Slight changes in portion size, price, or recipe might push a very popular dish over the edge to also becoming very profitable,” says Geert Merckaert, communications manager at restaurant management software company Apicbase.

Of course, that’s not easy to do if you’re working with a pricy protein at the center of the plate. In this case, are there other places on your menu where you can make up for the lack of profit? 

“Maybe you add more vegetable dishes that are made with local, seasonal vegetables and are just going to really pop on the plate,” says Hernandez. “With dialed-in techniques that ensure your team nails those dishes every time, you can build a huge following for those items and those items can subsidize that high-ticket item that you just can't bring yourself to take off the menu.”

Cross-utilization of ingredients + seasonality

Identifying where you’re cross-utilizing ingredients can also play an important role in menu strategy. “You want ingredients to be versatile. If you have to keep a stock of fresh goods or spices for just a couple of dishes, you run the risk of spoilage,” says Merckaert.

Minimizing food waste means minimizing the risk of throwing money down the drain. Likewise, it’s a good idea to plan your menu with the season and market in mind. Ask your vendors for market reports, and try to remain flexible with making menu changes accordingly. “Avocados, for example, have seasonality and very strong fluctuations, and so you really need to look at both the seasonality of each item on your menu and also try to understand its variability,” says Davis. 

Increase accuracy with recipe management software

There are a variety of software platforms that help take the guesswork out of menu cuts by pitting real-time food costs against your POS sales data. Monthly subscriptions generally fall between $15 to $100. And given that menu analysis is both complex and time-consuming, it’s often a wise investment.

For one, these platforms make it easy to view the exact profit on each dish, even as food costs fluctuate. But you can also often modify recipes in the platform to see how changes to ingredients and portion size affect projected profit. Profit trends are tracked over time, so that when you do make recipe changes, it’s easier to identify if the change increased profits or possibly had a negative impact on sales. And you can do it all without sifting through stacks of invoices and handwritten calculations and comparisons.

“Prices in products move around too much. It was true even during the most stable economic times and it’s even worse now, so having real-time pricing is critical for making intelligent decisions,” says Davis.

Grace Dickinson is a reporter at Back of House. Send tips or inquiries to grace@backofhouse.io.

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