MODULE 1-THE MENU MENU- Is a list of available foods offered in any food service operation

The Menu The arrangement of food by the organization

• Definition The menu is also called “the driver” of a foodservice operation. This
• Importance descriptive term indicates that every part of a foodservice operation is
• Ways in categorizing the menu affected by the menu and stresses how the menu is a managerial tool for
• Menu pricing styles controlling many aspects of a foodservice operation. As you learn more
• The purpose of menu about menus and menu planning, keep in mind menus from your favorite
• Types of menus restaurants or your recent meals in other types of foodservice operations.
• Types of meals
• Classic menu sequence THE PURPOSE OF MENU
• Modern menu course
• Types of meal course To list items sold in the restaurant
To educate customers
LEARNING OBJECTIVE List of prices
1.1. Understand the concept of menu Menu description
1.2. Describe categories and characteristics of different types of menus Act as a marketing tool
1.3. Recognize the importance and use of menus Major determinant for the budget
Gives customers a sense of who are as an operation
INTRODUCTION Importance of the Menu
Consider that You are a foodservice manager. What is the first thing that
comes to your mind when you hear the following: appetizers, entrees, IMORTANCE OF MENU
desserts, daily specials, ethnic cuisine, fine or casual dining, pricing For guest, it communicates the operations image. It contributes to the overall
psychology, trends, cut food costs, reduce your staff, dietary guidelines, dining experience by helping to set a mood and build interest and excitement
government regulations, sustainability, special diets, food delivery, marketing, For production employees, it dictates what foods must be prepared
equipment, customer demand? For service employees, their task is influenced by what items are offered on
Each of the above words probably brought quite a few different thoughts to the menu
mind. One word, however, affects—and is affected by—every term on the list: For managers, it is the chief-in-house marketing and sales tool. It tells what
THE MENU. food and beverage items must be purchased and what equipment must they
“The menu is the heart of any restaurant: It showcases everything you have to have to have, the number of employees they need to hire and their skill level
offer for food and beverages,” Types and Categories of Menus
The menu is designed carefully what the outlet wants to cater for, keeping in Menus can be categorized in a variety of different ways and there are different
mind the type of customers. types of menus, which are often associated with particular types of
The main advantage of a well-planed menu is that it leads to consumer foodservice operations. A classic way to categorize menus is by how often
satisfaction they repeat.
It also helps to motivate the employees for a responsible and successful WAYS IN CATEGORIZING THE MENU
service. 1. ACCORDING TO MENU SCHEDULES
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(how often they are used)
Static menus / Fixed menus- a single menu used for several months or
longer
are those that basically stay the same every day and are most typically used
in quick service to upscale casual restaurants. These types of menus may be
presented on a menu board or in some type of printed format, sometimes
laminated so it is easily cleaned, that is handed to the customer. Typical
sections of a lunch or dinner static menu include appetizers, salads, entrees
(often further divided), sides, desserts and beverages. Choices may be
limited, as they are in some quick service, such as McDonalds or Five Guys,
and quick casual restaurants, such as Panera and Chipotle, or choices may
be extensive requiring a menu that resembles a small book, such as the
Cheesecake Factory.
Cycle menus /Cycle menus- design to provide variety for guests who eat
frequently or even daily like in schools, hospitals, and offices.
are most often used in non-commercial foodservice operations that serve the
same group of customers every day, such as corporate dining (business and
industry), healthcare, schools, and long-term care or CCRCs. A cycle menu
follows a particular pattern designed to meet the needs of the operations
customers and repeats on a regular basis. The length of the cycle should be
set with the customer in mind.
For instance, a hospital can typically use a shorter cycle menu, perhaps five
to seven days, for patients, since most do not stay in the facility for many
days. However, a foodservice operation in a continuing care retirement
community may need a cycle as long as six weeks since customers may be
eating in the CCRC dining room on a daily basis. Cycle menus are often
planned seasonally so an operation might have a spring, summer, and
fall/winter cycle.
Daily (or single-use) menus
Are menu change on a daily basis or may be planned for a special event with
a one-time use. Daily menus are often used in fine dining or for foodservice
operations that feature locally sourced products, which are available in the
market on a given day. Alice Water’s Chez Panisse restaurant uses a daily
menu to highlight seasonal and locally available foods with a “farm to table”
approach. Single-use menus are planned for catered events like banquets or
parties, and are also used in many operations for “daily specials.”
2. ACCORDING TO MENU TYPES/ Meal/Time Period
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THREE BASIC TYPES OF MENUS is designed around the three
traditional meal periods:
Breakfast- menus are fairly standard, items are simple, fast and inexpensive
Lunch- it usually features menu items that are easy and quick to make;it is
lighter than dinner menu
Dinner- is the main meal for most people, it is heavier in character and more
elaborate than those offered at breakfast or lunch
ACCORDING TO MENU PRICING STYLES- Pricing styles – such as a la
carte (each item is individually priced), table d’hôte (a selection of complete
meals offered at set prices), prix fixe (one price for the entire menu), and most
commonly seen in U.S. restaurants, a combination of pricing styles to best
cater to the target customer of the operation.
STYLES OF MENU IN THE FOOD SERVICE INDUSTRY
A LA CARTE MENU- Menu that is priced separately from appetizers to
desserts
SEMI A LA CARTE MENU- A menu in this category usually prices appetizers,
soups, and desserts separately. The entrée usually will include a salad,
potato, vegetable, and sometimes a beverage.
PRIX FIXE MENU- Menu that offers a complete set of meal at a set price
Other ways to categorize menus
Menus can also be categorized in a variety of other ways including any of the
following:
Function of the menu – such as a tasting menu, catering, hotel room service,
dessert, wine or drinks
Style of service – such as American, French (table side cooking), or Russian
(platter service)
Amount of selection – selective (customer has many choices typical of a
family or casual restaurant), non-selective (no choice as with many tasting
menus, hospital special diet menus, or sit-down banquets), or limited or semi-
selective (typical of small operations, fine dining or themed restaurants)
Advantages and Disadvantages of Various Types of Menus
These different categories overlap among each other and types of Frequently used if restaurant’s concept is built around the menu, including:
foodservice operations, both commercial and non-commercial, and offer both Décor
advantages and disadvantages to management and control. For example, Advertising campaign
static menus would be easiest for forecasting, purchasing and labor Market segment identified as the target audience
scheduling since they are the same every day, but cycle menus have those Ex: mc Donald’s
same advantages over daily menus. However, it can take restaurant chains a
year or more to plan or make a change to a static menu. Daily menus are the Cycle menu
most flexible and can be easily changed to adjust to product or market price Different items each day on a weekly, bi weekly, or some other basis, after
changes. Static, and to an extent cycle menu, offer the customer a which the cycle is repeated.
predictable dining experience, but daily menus offer a new dining adventure Seasonal cycle menus are common
with every visit to the foodservice operation. Of course, foodservice Used in healthcare institutions and schools
operations often combine elements of these different types of menus to gain Offers variety with some degree of control over purchasing, production, and
the advantages offered by each. For example: many restaurants using a cost.
static menu offer daily specials or features, which give some flexibility to offer Single use
menu items that are seasonal, or trendy, or use product that needs to be sold Planned for service on a particular day and not used in the exact form a
and not wasted. second time
MENU OFFERING/ SPECIALTY MENUS: Used in on-site food service in which the customer does not vary much from
Children’s menu day to day.
Senior citizen’s menu Du jour menu- list the items “of the day”. These menus change daily and are
Alcoholic beverage focused on seasonal ingredients, preparing the freshest food possible.
Dessert Tourist menu- used to attract tourists
Room service California menu- guest may vary order any item on the menu at any time of
Take out the day
Country style/California menu
Ethnic TYPES OF MEAL

TYPES OF MENU BREAKFAST- is the first meal taken in the after rising from a night’s sleep,
most often eaten in the early morning before undertaking the day’s work.
Table d’hote Among English speakers, “breakfast” can be used to refer to this meal or to
Food items grouped together and sold for one price refer to a eat composed of traditional breakfast foods (such as eggs, oatmeal
Comprises a complete meal at a predetermined price and sausage) served at early morning.
It usually includes three to five course meal available at a fixed price. BRUNCH- is a combination of breakfast and lunch eaten usually during the
A la carte late morning but it can extend to as late as 3 pm. The word is combination of
Food items priced individually breakfast and lunch. Brunch originated in England in the late 1800s, served in
A multiple-choice menu, with each dish priced separately a buffet style manner, and become popular in the United States in the 1930s
Static Menu
Same menu items are offered every day.
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LUNCH- is a midday meal of varying size depending on the culture. During
the 20th century gradually focused toward a small or mid-sized meal eaten at
midday. Lunch is the second meal of the day after breakfast.
HIGH TEA (also known as meat tea time in Ireland) usually refers to the
evening meal or dinner of the working class, typically eaten between 5 pm
and 7 pm. Consists of a hot dish, followed by cakes and bread, butter and
jam. Occasionally there would be cold cuts of meat, such as ham salad.
ELEVENSES- is a snack that is similar to afternoon tea, but eaten in the
morning. It is generally less savory than brunch, and might consist of some
biscuits with a cup of coffee or tea. The name refers to the time of date that it
is taken: around 11 am.
DINNER_ usually refers to the most significant, and important, meal of the
day, which can be the noon or the evening meal. The average dinner time in
the U>K for those who call their evening meal dinner has been found to be at
7:47 pm
SUPPER- may refer to a late evening snack or else as an informal family
meal ( which would be eaten in the kitchen or hall room) as opposed to dinner
which would be eaten in the dining room. It is common for social interest and
hobby clubs that meet in the evening after normal dinner hours to announce
that “a light suffers” will be served after the main business of the meeting.
Normally taken between 10 pm to 11 pm.
CLASSIC MENU SEQUENCE
Hors-d oeuvre/ Appetizer- are of spicy in nature in order to stimulate the
appetite for the dishes that are to follow in the course. Served from a rotating
trolley or a tray a small amount of each variety being placed on the plate to
make up a portion.
Potage/ Soup- soup also act as an appetizer for the further courses to come.
Soups like clear soup (consommé) and the other a thick soup (crème,
velouté, puree) are served during this course.
Oeuf/ egg- oeufs are the dishes made from egg. There are many styles of
cooking and preparation of eggs such as boiled, poached or scrambled. The
omelets’ is the most popular item.
Farinaceous/farineaux/pasta or rice- this is Italy’s contribution to the
courses of the menu; it includes different kinds of rice and pasta. Pasta dishes
are spaghetti, lasagna and gnocchi.
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Poisson/ fish- poisson are the dishes made from fish. Fish, being soft-fibred,
prepares the palate for the heavier meats that follow.
Entrée/entrée- the first in the meat course entrees are generally small, well
garnished dishes which come from the kitchen ready for service. They are
always accompanied by very rich gravy or sauce. The following items can be
served as entrees: Brains, liver, kidney, oxtail.
Sorbet/sorbet- because of the length of the French classical menu, this
course is considered to be the rest between courses. It is water and crushed
ice slush flavored with fruit juice or champagne and served in a glass
Releve/joints- this is the main meat course on the menu, normally larger that
entrees and take the form of butcher’s joints which have to be carved. These
joints are normally roasted. A sauce or a roast gravy with potatoes and green
vegetables are always served with this course.
Roti/ roast- at this stage the balance of the courses is gradually returning
from heavy to light, roast always contain roast of game or poultry: - chicken,
turkey, duck, pheasant, quail.
Legumes/ vegetables – served only with its accompanying sauce. These are
vegetable dishes that can be served separately as an individual course or
may be included along-with releve or roast courses
Salades/salad- small plates of salad taken after main course, quite often
simply green salad and dressing
Buffet froid/ cold buffet- in this course chilled meat and fish (small) pieces
are served.
Entremets/sweets- entremets on a menu refers to desserts. Thus, could
include hot or cold sweets, gateaux, souffles or ice-cream
Savoureux/savory- a dish of pungent taste, such as anchovies on toast or
pickled fruit.
Fromage/cheese- the range of cheeses and various accompaniments,
including biscuits, breads, celery, grapes or apples
Cut fruits & Nuts- dessert is a course that typically comes at the end of a
meal. All forms of fresh fruits and nuts may be served in this course.
Boissons/beverage- all types of hot or cold beverage
MODERN MENU COURSE
Appetizer- a small portion of a food served at the beginning of a meal to
stimulate the appetite
Soup- soup also act as an appetizer may be thick soup (crème) and clear
soup (consommé).
Salad –small plate of salad, quite often simply green salad and dressing.
Fish- fish is served, usually before the main course. Prepares the plate for the
heavier meats that follow
Main course- the main meat course on the menu, larger other course. A
sauce or a roast gravy with potatoes and green vegetables are always served
with this course
Dessert- the sweet items at the end of a meal
Cheese- the range of cheeses and various accompaniments, including
biscuits, breads, celery, grapes or apples
TYPES OF MEAL COURSE
• Technology in menu planning
Introduction
Menu are easy to read when they are finished, but the process of planning a
menu requires consideration of several factors.
According to recent research, customers spend only one or two minutes
reviewing a restaurant's menu. This provides you with just a small window of
opportunity to capture your customers' attention and help them find just what
they are looking for.
MENU PLANNING
Consists of selecting new menu items for an existing menu

In dining, a course is a specific set of food items that are served together The key factors to consider in menu planning
during a meal, all at the same time. A course may include multiple dishes or Type of menu being planned- cycle or single used
only one, and often includes items with some variety of flavors. An average People being served- cultural or ethnic background, religious dietary
meal consists of one or more meal courses. considerations, ages, and health condition
The most typical meal course are: Resources available-economics, time, energy, equipment
Course meal- main course Nutritive value
Course meal- appetizer & main course, or main course & dessert Food selection-color, aroma, flavor, texture, temperature, size and shape,
Course meal- appetizer, main course & dessert availability, interest (variety and creativity)
Course meal- appetizer/soup, salad, main course & dessert PURPOSE OF MENU PLANNING
Course meal- soup, fish, main course, dessert & cheese, or soup, appetizer,  Work will flow more smoothly
salad, main course & dessert  Guests will be served more effectively
Course meal- appetizer, soup, fish, salad, main course & dessert  Profit will be greater
Menu Planning Principles and Factors to Consider
Module 2- MENU PLANNING Menu planning principles include balance, nutritional quality, aesthetics, and
Menu planning variety, including color, texture, flavors, shapes and sizes of food. The
• Developing menus and cost controls equipment and personnel available to produce and serve the menu are also
• Menu/purchasing relation important considerations in planning the menu. Along with all of these
• Conversion of recipes considerations, the effective foodservice manager also has to consider costs,
• Food preferences production and other management issues.
• Nutrition Factors affecting menu planning can be organized into two main areas:
• Marketing strategies customer satisfaction and management decisions. Both of these areas
• The life cycle of the menu must be considered when menus are planned. Having a menu without
• Cost-controls customers is like having 1000 acres of land for sale—in Antarctica. At the
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same time, a menu with items that cannot be produced at an acceptable cost
will simply put a foodservice operation out of business or drive a
noncommercial operation into the red. Most foodservice directors know that
this could mean the end of their job.
Four factors related to customer satisfaction include :
sociocultural background,
food habits and preferences,
nutritional influence, and
aesthetics.
Customer satisfaction. Knowing your customers (and your potential
customers) is obviously a key to planning and designing menus.
Ex: Think about yourself as the customer. What are some of the reasons you
like or dislike a menu? You probably have certain preferences— certain foods
and combinations of foods—from your experiences growing up. Many of us
only like the way mom makes spaghetti sauce or the way dad grills the
steaks; or we think that grandma’s sugar cookies are definitely the best. We
almost can’t eat tomato soup without grilled cheese sandwiches or meatloaf
without mashed potatoes AND gravy. Collecting some market research on our
customers and studying food and menu trends can help menu planners to
keep the menu fresh and satisfying for our customers. Always keep the
sociocultural background and food habits and preferences of the
customer in mind when planning menus.
The influence of nutrition and government regulations
Increasingly, our knowledge of nutrition is influencing the way we eat. The
U.S. government issues Dietary Guidelines with recommendations about how
people should eat. Many nutrition trends, such as smaller portions, ethnic
foods, and gluten-free diets also affect menu planning, Think about the new
food products that have become available in your grocery store or your local
restaurants in the last year. Many of these new items have some nutritional
claim that has brought them to the store shelf or the plate. Noncommercial
foodservice operations, particularly in schools and in health care settings,
have a nutrition mandate from both the government and the customer. When
it comes to feeding children and the elderly, many other different issues
surface. Some of these issues involve foods and surroundings unfamiliar to
kids, and the ability of older patients to chew and swallow. The list goes on.
Sometimes customers may be misinformed about nutrition; then we have the
bigger job of educating them, as well as trying to feed them a well-balanced,
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healthy diet. In some settings, the menu also serves as a nutrition education
tool.
A few key points to remember for the non-commercial sector:
A “textbook” approach to menu planning is not enough. As a foodservice or
dietetic professional, you have to recognize those unique factors that
significantly affect each individual consumer.
You must design your menus to ensure a balanced, nutritious diet that reflects
more of the recipient’s values than your own. The introduction of unusual or
unfamiliar foods may cause a customer to lose interest in eating altogether.
A noncommercial foodservice menu can be used to help a consumer adjust to
a new, unfamiliar regimen. But this educational function usually requires an
increased menu variety with a greater food production effort and perhaps
higher costs.
Aesthetics
Not to be forgotten is the issue of aesthetics. You’ve heard it many times
before: we do eat with our eyes. How our food is presented, along with
texture, consistency, color, shape, and the preparation method, influences
how we feel and what we think about a menu. It can even influence our
appetite and our interest in eating.
Management Decisions
When the menu is thought of as a management tool, a number of other
factors related to menu planning enter the picture. To plan a good menu you
need to consider the following factors:
food cost and budgetary goals of the foodservice operation
production capability, including available equipment and personnel
type of service and food delivery system
availability of foods
the philosophy of the business and foodservice operation
Each one of us has probably had at least one experience in our lives when
the menu planner failed to consider all of the above factors. One common to
many may be Thanksgiving dinner—either at home or in your foodservice
operation—and production capability. The oven(s) is full of roasting turkey
and perhaps the bread stuffing has been squeezed into the side. Now, what
will we do with the baked sweet potatoes, the baked corn, and the green bean
casserole, plus the pies and rolls that need to be baked? The experienced
and wise menu planner considers production capability and adjusts the menu
accordingly. Perhaps the sweet potatoes, corn, and green beans can all be
steamed instead of baked, and the pies and rolls can be baked ahead of the
turkey.
Another effective menu planning principle to consider is called cross-
utilization. This “best practice” involves using one food product in multiple
ways. Let’s consider a standard chicken breast as an example. A teriyaki-
glazed chicken breast could be a center of the plate item, while a home-style
chicken noodle soup, a Napa almond chicken salad, and buffalo chicken
pizza could also be menu offerings. This allows the operation to purchase just
one product, saving time and reducing costs, while offering a large variety of
different dishes. More expensive and more perishable food items, such as
fresh meats, poultry, fish and produce items, should be cross-utilized as much
as possible when menus are planned to reduce waste and better control
costs.
Be sure to think carefully and keep in mind the capabilities of your operation,
your production capacity, food availability, employee skills and financial goals
when planning menus.
Suggested Steps in Menu Planning
Once it’s time to actually plan the menu, the conventional wisdom is to start
with a menu pattern that fits your operation and then work through breakfast,
then lunch, then dinner. For instance, if you are planning a lunch menu, will
you have soups, salads, sandwiches, pizzas, full platters, sides, desserts, and
beverages? How many selections will you offer in each of your chosen menu
categories? Will you have daily specials? Are there any other special options
you might want to offer your customers?
Once you establish your menu categories, it is recommended to plan the main
entrees (platters) first, then the sides that go with the entrees. Other entrees,
such as sandwiches and entrée salads are planned next, followed by soups,
appetizers, additional sides, and any planned daily specials. Desserts and
beverages finish off the categories. This sequence of working through the
menu categories helps make sure the most expensive dishes are chosen first
so the lower-priced items can better fit in the plan and complement the
choices offered. Typically the more limited the menu choices, the easier it is
to control costs, so it’s not surprising that many successful operations serve
only pizza and a few Italian selections while others specialize in burgers and
fries, or even just ice cream and frozen treats with a few sandwiches. The
menu planner can consider factors such as cross-utilization of products,
balance, variety, customer preferences and trends, as well as all those
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management factors for the entire menu mix. In a later chapter another
management tool, menu engineering, a way to analyze the menu offerings
and their popularity and profitability, will be discussed.
Menu Psychology
Once the menu is planned, it is typically published in one form or another.
This can be anything from a simple menu board or a printed sheet of paper
that is easily changed to a lengthy, multiple page laminated “book” that might
be used for 18-24 months before any changes are made. Menus are often
published on an operation’s website, shared on social media, and reviewed
by customers on user-generated content websites, such as TripAdvisor and
Yelp. When menus are published, operators have the opportunity to use
“menu psychology” in their menu design to try to influence customer choices
and purchases. Increasing sales by raising the average check of a restaurant
or overall participation or promoting healthier choices for an onsite
foodservice operation are typically the overall goals of using menu
psychology.
Menu psychology involves using a variety of techniques typically based on
research about how people read a menu and make choices about spending
money. Some examples of menu psychology in menu design include:
placing menu items where the customer’s eyes tend to go first or last (see the
URL links below), using graphics such as boxes and borders to draw attention
to menu items, displaying prices in a way to encourage customer spending, or
not using dollar signs, leader dots, or column pricing (where all prices are
lined up), which can cause guests to spend less, and using descriptive terms
for menu items to encourage sales.
2 BASIC RULES IN MENU PLANNING
KNOWING YOUR GUESTS
KNOWING YOUR OPERATION
5 COMPONENTS OF OPERATION
1.Theme or cuisine
2.Equipment
3. Personnel
4. Quality standards
5. budget
Truth in Menu Best Practices
Menu writers and foodservice operators often use detailed merchandising
terms to describe menu items in the hopes of increasing sales of those menu
items or commanding higher prices. Using these expressive sales tactics is
fine, as long as the terms and descriptions used are true.
“Truth in Menu” also referred to as “accuracy in menus” is a best practice in
planning and sharing menus. Though there is no federal law regarding
accuracy in menus, in general, there are regulations addressing this issue in
various states around the country. Accuracy in menus addresses any and all
of the following:
quantity
quality
price
brand names
production identification
points of origin
merchandizing terms
food preparation
verbal and visual presentation, and
dietary & nutritional concerns
While operators are certainly allowed to merchandize on their menus to
encourage sales, lying about the food being offered is not acceptable. Of
course, there will always be those operators who stretch the truth with items
like mile high meatloaf, or man-hole size nacho platter, and there are items
such as English muffins and French toast that obviously aren’t sourced from
England or France.
Menu Labeling and Consumer Advisory Regulations
There are some federal rules and regulations that all foodservice operations
must be aware of and follow.
Retail Food Establishment Consumer Advisory Requirements
If meat, fish, poultry, shellfish or eggs are served raw, undercooked, or
cooked to order, a disclosure identifying the foods, plus a reminder in 11 pt
type, must appear on the menu or in a written disclosure declaring that eating
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the specified types of animal products as raw or undercooked “may increase
your risk of food-borne illness”. (1)
Food Labeling Rules
In 2014, the U.S. Food and Drug Administration (FDA) issued food labeling
rules for restaurants and similar retail food establishments. The summary of
the rule states:
“To implement the nutrition labeling provisions of the Patient Protection and
Affordable Care Act of 2010 (Affordable Care Act or ACA), the Food and Drug
Administration (FDA or we) is requiring disclosure of certain nutrition
information for standard menu items in certain restaurants and retail food
establishments. The ACA, in part, amended the Federal Food, Drug, and
Cosmetic Act (the FD&C Act), among other things, to require restaurants and
similar retail food establishments that are part of a chain with 20 or more
locations doing business under the same name and offering for sale
substantially the same menu items to provide calorie and other nutrition
information for standard menu items, including food on display and self-
service food. Under provisions of the ACA, restaurants and similar retail food
establishments not otherwise covered by the law may elect to become subject
to these Federal requirements by registering every other year with FDA.
Providing accurate, clear, and consistent nutrition information, including the
calorie content of foods, in restaurants and similar retail food establishments
will make such nutrition information available to consumers in a direct and
accessible manner to enable consumers to make informed and healthful
dietary choices.” (2)
Conclusion
Menu planning is a learned skill improved through practice. Effective menus
are critical to the financial health of a foodservice operation and serve as a
“driver” of the business. Their importance to a successful foodservice
operation can not be overstated.
MODULE 3- MENU BALANCING
Menu Balancing
• Menu engineering
• Strategies for menu engineering
• Calculating menu items cost
• Food Cost Percentage
• Balancing the menu to achieve targets by the price of the item. The difference is the percentage that the restaurant makes on
• Contribution Margin each sale of that item.
• Restaurant prime cost
Contribution Margin
15 Restaurant Menu Engineering Terms
A mathematical equation that measures a menu item’s profitability over time. By
subtracting food costs within a certain time period from menu item sales within that
Menu Engineering
same period, restaurateurs can use this metric to measure how sales affect income and
how costs are affected over time.
The study and optimization of a menu based on the popularity and profitability of
menu items. Menu engineering is a data-driven practice restaurant owners use to
increase revenue and reduce waste. Stars

The quadrant of items in a menu engineering chart that are both highly profitable and
Menu Design
highly popular. These are the items that should be consistent on the menu and used in
promotions whenever possible.
A subset of menu engineering focused on the visual science and appeal of a
restaurant’s menu. Menu design should reflect a restaurant’s brand and personality
while taking into account consumer psychology and visual aesthetics. Plowhorses

The quadrant of items in a menu engineering chart that are very popular but not very
Brand
profitable for the business. These are likely the items that guests expect to see, but
may need to have ingredients or portion size modified to improve margin.
The core associations that a consumer has with a business. A restaurant’s “brand” is
the first thing that comes to mind when a guest hears the name. It’s often the
components that set this business apart from others. Puzzles

The quadrant of items in a menu engineering chart that are highly profitable to the
Cost of Goods Sold (COGS)
restaurant but aren’t popular with guests. These are potentially hidden gems that need
to be reinvented by lowering prices, changing their position on the menu, or
A mathematical equation to determine the cost required to create each of the food and
packaging them a different way.
beverage items on the menu. It is the sum of beginning and purchased inventory
subtracted by final inventory. COGS is particularly important for menu engineering
because lowering it has a direct correlation to a more profitable restaurant. Dogs

The quadrant of items in a menu engineering chart that are neither popular or
Food Cost Percentage
profitable. Most likely, these items should be removed from your menu and replaced
with more profitable dishes.
A mathematical equation that calculates the percentage of a menu item cost that the
restaurant takes as profit. It’s calculated by dividing the cost to create the menu item
Menu Psychology
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The application of consumer behavior theories to menu design. Menu item
organization, placement, and visual cues can be strategically implemented based on
what we know about human psychology.
Paradox of Choice
The theory that more choices can actually lead to increased confusion and poor
decisions. In menu engineering, studies have shown that there is a sweet spot between
too few and too many choices.
Decoy Effect
A psychological phenomenon that says people are more likely to change their
preference between two options when a third, less appealing option, is introduced to
show the “value” of the most expensive option. In menu engineering, this is the
science of bundling options to improve their perceived value.
Semantic Salience
The impact that a symbol has on a particular situation or decision-making process.
This is often used to define the impact that a dollar sign on a menu item (or lack
thereof) has on the perceived value.
Sensory Descriptors
Words and phrases that appeal directly to a person’s sight, smell, hearing, taste, or
feeling. These words, like “succulent,” “smooth,” and “aromatic,” are often used in
menu item descriptions to draw out a specific reaction from the guest.
Now that you're familiar with the key terms, get started revamping your menu for
maximum profitability. Start the Menu Engineering Course today.
What is menu engineering?
Menu engineering is a way to evaluate a restaurant’s menu pricing by using
sales data and food costs to guide which dishes to feature and their menu
10
price. Equipped with that data, menu engineering involves categorizing menu
items based on their popularity (sales volume) and profitability.
To properly engineer a menu, you need to have a firm grasp of each menu
item’s prices and food costs per serving and contribution margin. With that,
restaurateurs can categorize menu items and see which items contribute
more profit and which aren’t pulling their weight and either need to be
rethought or removed from the menu altogether.
In a nutshell: Menu engineering is a series of exercises that assure each dish
and drink featured on your restaurant’s menu is profitable, popular or both.
What’s the primary goal of menu engineering?
The primary goal of menu engineering is to maximize a restaurant’s
profitability by strategically analyzing and optimizing the menu using specific
tactics. Menu engineering involves identifying high-profit and popular items,
adjusting pricing, and strategically placing dishes to influence customer
choices. By understanding the cost and revenue of each item, and customer
behavior, menu engineering aims to increase overall sales and enhance the
dining experience.
What are the benefits of menu engineering?
Menu engineering offers several significant benefits to restaurants that go
beyond just designing an attractive menu.
Maximize profitability
Menu engineers can help restaurants maximize profitability by identifying
high-margin and popular dishes. By strategically positioning them on the
menu and using eye-catching descriptions and visuals, customers are more
likely to be enticed to order these profitable items, increasing overall sales
and revenue.
Cost management
Menu engineering makes restaurants take a better look at their costs, by
analyzing the cost of ingredients and preparation for each dish. Restaurants
can identify dishes with high food costs and low-profit margins, either adjust
their pricing, rework the recipe to improve profitability or remove altogether.
Improved customer experience
By showcasing popular dishes prominently and ensuring clear and appealing
descriptions, customers can make choices more easily and enjoy their meal
without feeling overwhelmed or confused by the menu options.
Reduction of food waste
With a well-engineered menu, restaurants can plan ingredient quantities more
accurately, leading to fewer unsold perishable items and ultimately minimizing
waste.
Innovation
Menu engineering can also encourage innovation and seasonal menu
updates. Regular analysis of menu performance allows restaurants to
experiment with new dishes and update their offerings to match changing
customer preferences, keeping the menu fresh and exciting.
Drawbacks to menu engineering
While menu engineering is ultimately a positive process for any restaurant, it
can come with drawbacks when it’s not done properly. Focusing solely on
profit might neglect customer satisfaction and menu variety. The complexity of
implementation and inflexibility could hinder creativity and experimentation.
Pushing high-margin items excessively may disappoint customers, affecting
long-term trust. How often you edit your menu is also something you consider.
While changing the menu seasonally could bring excitement and innovation
into the mix, changing the menu weekly could create confusion and could turn
customers away. To succeed, restaurants must strike a balance between
profitability and customer experience, periodically reviewing the menu and
considering customer feedback.
The Principles of Menu Engineering
Although you likely have a target overall food cost in your establishment, not
every menu item will carry exactly the same food cost percentage. Some
items are more costly than others, but most establishments will have a range
of prices that all the menu items fit into. Consequently, it is important to
balance the menu so that the low and high food cost items work
together to help you reach your target food cost. This process is called
menu engineering.
means balancing the high and low food cost items; it also includes
strategically featuring or promoting items to help reach your targets.
Calculating Menu Item Costs
The cost per portion derived from yield tests done on the main ingredient of a
menu item usually represents the greatest part of the cost of preparing the
item (see the section above on yield tests for more information).
However, of equal importance is the portion cost factor. For example, the
portion cost factor can be used to determine the cost of a portion of the main
ingredient regardless of the price of the meat (which is often the main cost
11
factor) charged by the supplier as long as the restaurant’s preparation of the
meat remains unchanged. The cost per portion is determined by multiplying
the portion cost factor by the packing house’s price per kilogram (or pound).
Quite often the cost per portion of the main ingredient is used by itself to
determine the selling price of a menu item. This works well with items on an à
la carte menu as the basic main ingredient (such as a steak) is sold by itself
and traditional add-ons (such as a baked potato and other vegetables) are
sold separately.
As discussed earlier in this book, in many cases, some of the components will
be the same, so a basic plate cost can be used to add to the cost of the main
protein to get a total cost for the dish.
In dishes where the main ingredients are not sold as entities but as part of a
prepared dish, the cost of all the items in the recipe must be determined to
find an accurate portion cost price. In this case, a recipe detail and cost sheet
is used to determine the cost price of menu items. (Refer back to the section
on costing individual menu items for more information.)
Once the potential cost of a menu item is determined, the selling price of the
item can also be calculated by using the food cost percentage.
Food Cost Percentages
As you may recall, food cost percentage is determined by dividing the portion
cost by the selling price:
Example 30: Food cost percentages
food cost percentage = portion cost ÷ selling price
If the portion cost is $4.80 and the selling price is $14.00, the food cost
percentage is:
food cost percentage = portion cost ÷ selling price
= $4.80 ÷ $14.00
= 0.34285
= 34.285%
= 34% (rounded off)
Another way of expressing the food cost is as a cost mark-up.
Example 31: Cost mark-up
The cost mark-up is determined by reversing the food cost percentage
equation:
cost mark-up = selling price ÷ portion cost
The cost mark-up can also be determined by dividing the food cost
percentage into 1. The equation then becomes:
cost mark-up = 1 ÷ food cost percentage
In the example above, where the portion cost is $1.20 and the selling price is
$3.50, the cost mark-up can be solved in the following ways:
cost mark-up = selling price ÷ portion cost
= $14.00 ÷ $4.80
= 2.9166
= 2.92
or cost mark-up = 1 ÷ food cost percentage
= 1 ÷ 34.285%
= 1 ÷ 0.34285
= 2.91674
= 2.92
The cost mark-up can be used to determine a selling price when a portion
cost is known by multiplying the cost mark-up and the portion cost:
Example 32: Determine a selling price
selling price = portion cost × cost mark-up
For example, if the ingredients for a portion of soup costs $1.05 and the
restaurant has a cost mark-up of 3.6, the menu price of the soup is:
selling price = portion cost × cost mark-up
= $1.05 × 3.6
= $3.78
The restaurant would charge at least $3.78 for the menu item if it wants to
keep its mark-up margin at 3.6, which is about a 28% food cost percentage.
This price might be adjusted because of competition selling the same item for
a different price, price rounding policies of the restaurant or the whims of
management. For example, many restaurants have prices that end in 5 or 9
(such as $4.99 or $5.95). Prices on such menus tend to be rounded to the
nearest number ending in 5 or 9. No matter what the final menu price is, at
least a base price has been established.
The problem with the above approach is it doesn’t explain how to select a
food percentage or a selling price from which to derive the percentage. In
many cases, the food percentage is based on past experiences of the
manager, or by a supposed awareness of industry averages. For example,
many people simply set their food percentage at 30% and never work out a
more appropriate figure. Similarly, the selling price of a menu item is often the
product of guessing what the market will bear: $4.50 for a bowl of soup may
seem like a good deal or as much as a reasonable person might pay in that
12
restaurant. Unfortunately, none of these methods takes into account the
unique situations affecting most restaurants.
A more accurate way of computing a target food cost percentage is to
estimate total sales, labour costs, and hoped-for profits. These figures are
used to determine allowed food costs. The total of projected food costs is
divided by the projected sales to produce a food cost percentage. The food
cost percentage can be turned into a mark-up margin by dividing the
percentage into 1, as shown above.
Example 33
For example, to determine the food cost percentage of a restaurant that has
projected sales of $10 000 and labour costs of $6000, overhead of $1000,
and a goal of before-tax profits of $500, the following procedure is used:
food costs = sales − (labour costs + overhead + profit)
= $10 000 − ($6000 + $1000 + $500)
= $10 000 − ($7500)
= $2500
food percentage = food costs ÷ sales
= $2500 ÷ $10 000
= 0.25
= 25%
mark-up margin = 1 ÷ food percentage
= 1 ÷ 25%
= 1 ÷ 0.25
=4
In this example, the menu prices would be determined by multiplying the
portion costs of each item by the mark-up margin of 4. Adjustments would
then be made to better fit the prices to local market conditions.
If the application of the derived mark-up margin produces unreasonable
prices, then one or more of the projected sales, labour costs, overhead, or
profits are probably unreasonable. The advantage of using this system is that
it points out (but does not pinpoint) such problem assumptions early in the
process.
A similar approach uses a worksheet as shown in Figure 21.
 greater for an item that has a food cost percentage of 25% (or 75%
percentage profit) than an item that has a food percentage cost of 45% (or
55% percentage profit). However, in terms of monetary profit, the issue is not
that straightforward. What has to be determined is how much money the
menu item generates. This calculation involves finding the contribution margin
of each item.
Example 34: Contribution margin
Contribution margin is determined by subtracting the cost from the selling
price. An item that costs $2.00 to make and sells for $3.00 has a contribution
margin of:
contribution margin = selling price − cost price
= $3.00 − $2.00
= $1.00
Consider the contribution margin of two menu items that have different food
costs and food cost percentages shown in Figure 22.
Figure 22: Contribution margin
Contribution margin
Contribution
Item Food Cost Selling Price Food Cost %
Margin
Chicken $4.50 $16.50 27% $12.00
Steak $9.00 $24.00 38% $15.00
In terms of percentage profit, the chicken is higher. However, in terms of
Figure 21: Worksheet to calculate menu prices. money in the till, the steak creates more money that can be used to pay bills.
In the middle section of the worksheet in Figure 21, a food cost percentage is The key to a good menu is not necessarily to just keep food cost percentages
determined by subtracting other known cost percentages (i.e., operating low; it is to also to keep contribution margins high.
costs, labour cost, and profit wanted) from 100%. One divided by the food Balancing the Menu to Achieve Targets
cost percentage determines the mark-up margin. Food costs are then Menu Analysis
determined in the bottom half of the sheet and a menu price derived by A basic menu analysis determines how often each item on the menu is sold.
multiplying the total cost by the mark-up margin. This basic statistic can be used with cost percentages, menu prices, and
In this pricing method, a “profit wanted” percentage is added to the cost of sales values to make generalizations about the relative value of each menu
each menu item. This builds some potential profit into the menu prices. If you item. Figure 23 shows a menu analysis worksheet for a lunch menu. Most
were to price everything according to costs only, the restaurant would only POS systems can generate this type of information at the end of a shift, day,
ever be able to break even and never turn a profit. week, or month.
Contribution Margins Figure 23: Menu analysis worksheet
On the surface, it seems that the lower the food cost, the more room there is Menu analysis worksheet
for profit. In one sense this is true, as the percentage profit is obviously A B C D E F G H I J
13
 Foo The contribution margin for each item is found by subtracting the cost of the
Tota Portio Total Total
Menu Portio d Total C.M. item from the selling price. In the example in Figure 23, the contribution
Menu Item l n C.M. Food Food
Price n Cost Cost [1] C.M. % margins are given in Column F.
Sold Sales Cost
% Some decisions can be made comparing items:
$10.9 $131.4 The hamburgers, cheeseburgers, BLTs, and ham sandwiches are below the
Hamburger 12 $2.75 25% $8.20 $33.00 $98.40 24% average contribution margin. The first three items are good sellers and
5 0
Cheeseburg $11.9 account for over half of the sales (30/50 = 60%) and they may be able to pull
8 $4.25 36% $7.70 $95.60 $34.00 $61.60 15% their weight by slightly increasing their prices. By adding $0.50 to the menu
er 5
BLT $11.9 $119.5 price of each of these items, they would each have a contribution margin
10 $3.75 31% $8.20 37.50 $82.00 20% above or close to $8.31.
sandwich 5 0
The ham sandwich is significantly lower than the average margin and is also
Ham $10.9
5 $3.50 32% $7.45 $54.75 17.50 $37.25 9% low in sales. It might be best to drop this item from the menu and replace it
sandwich 5
with something else.
Fried $14.9 The fried chicken has a good contribution margin but its sales are a little on
4 $5.25 35% $9.70 $59.80 $21.00 $38.80 9%
chicken 5 the low side. To increase sales, the chicken might be given more prominence
$12.9 on the menu or might be offered as part of a special with a small salad for a
Clubhouse 6 $4.00 31% $8.95 $77.70 $24.00 $53.70 13%
5 slight increase in price. As long as the additions have a reasonable food cost
Steak $15.9 percentage and are inexpensive compared to the portion cost of the chicken,
5 $7.25 45% $8.70 $79.75 36.25 $43.50 10%
sandwich 5 the increase in sales should have a positive impact on the total contribution
$618.5 $203.2 $415.2 margin (the values in Column I).
Totals 50
0 5 5 The type of menu analysis must be tempered with common sense. Because
averages are used to determine an acceptable margin or level of sales, some
The statistics provided in a menu analysis have several uses. For example, menu items will automatically be under the average just as some will have to
the total sold statistics can be used to predict what future sales numbers will be above the average. If items that are under the average are replaced, the
be. This information is valuable for ordering supplies and organizing the next time a menu analysis is done there will be a new average and other
kitchen and kitchen staff to produce the predicted number of items. items under that average. Taken logically, your menu options will run out
Even more important than popularity is the contribution margin of each item. before you have every item being exactly at the average!
Often an average contribution margin is found and compared with the Given that menu items are usually broken down into categories, this type of
contribution margin of individual items. analysis is most effective when comparing similar items. An analysis of all of
Example 35: Average contribution margin the desserts or starters to compare their margins is much more effective than
The average contribution margin in the example above is found by dividing comparing the margin of a dessert against a lobster dinner, which by the very
the total contribution margin (total of Column I) by the number of sales (total nature of its price and cost will always have a higher contribution margin.
of Column B): Profitability
average margin = total margin ÷ number of sales You want to sell menu items that have a high margin of profitability
= $415.25 ÷ 50 . The relative profitability of an item is calculated by comparing its contribution
= $8.31 margin to the average contribution margin (ACM) of all items. The contribution
margin is the selling price of a menu item minus the standard food cost of the
14
item. This is the amount that the item contributes to the labour cost, other Popularity
costs of doing business, and profit. The ACM equals the total contribution Another factor to consider when reviewing your menus is the popularity of an
margin divided by total numbers of items sold. Profitable items have a item. Popularity is determined by comparing sales of items to expected
contribution margin equal to or higher than the ACM. popularity. The expected popularity is the predicted menu mix (sometimes
Desserts and appetizers may have lower contribution margins than entrées. called the sales mix) if each of the menu items in a category were equally
This is because these items generally have lower prices and cannot popular.
contribute the same dollar value of contribution margin, even though their An example is provided in Figure 24, which lists seven appetizers. The
food cost percentage may be lower than entrée items. Also, the restaurant expected popularity would be 100% divided by 7 (the number of menu items)
may wish to tempt patrons to add these items to their purchase, increasing or 14.3%. Menu analysis assumes that popular items have sales of 70% or
the average cheque size. If you can sell more to an individual guest, you more of the expected popularity. In the example, appetizers would have to
increase the revenues without increasing the labour costs and other costs to exceed 10% (70% of 14.3%) of appetizer sales in order to be considered
the same extent. popular. Which of the items are popular?
For example, if the customer orders and appetizer before the entrée, he or Figure 24: Menu analysis worksheet
she does not take up any more time in the restaurant (that is, the customer Figure 24: Menu analysis worksheet
does not decrease seat turnover) because the appetizer is served and eaten Men
during the normal waiting time for preparing the main dish. As well, the Tota Food Total Total
Menu u Portio Portio Total
additional labour of the server is minimal because even without ordering an l Cost Food Food C.M.%
Item Pric n Cost n C.M. C.M.
appetizer service may still be needed to provide additional bread or refill water Sold % Cost Sales
e
glasses. Thus, the sale of the appetizer will increase the profitability of the Thai $6.7 28.59
restaurant even though the contribution margin is not as high. 31 $1.93 $4.82 $59.83 $209.25 $149.42 4.63%
Wings 5 %
Desserts may also have a low contribution margin. Often desserts are Dry $6.7 25.48 $1,424.2 $1,061.3
purchased ready-made (e.g., cakes and cheesecakes). There may be little 211 $1.72 $5.03 $362.92 31.54%
Ribs 5 % 5 3
labour cost in serving these items so the overall contribution of the dessert
$6.9 22.01
item to profitability is high. Nachos 71 $1.53 $5.43 $108.63 $493.45 $384.82 10.61%
5 %
Items that require little preparation (that is, have a low labour cost) may still
generate a significant contribution to margin even when their food costs are Calamar $7.5 29.73
19 $2.23 $5.27 $42.37 $142.50 $100.13 2.84%
higher. Even if the food cost of the item was very high and the CM low, you i 0 %
would want to keep this item because the combined labour cost and food cost Soup
$5.9 26.05
is low. Thus the amount this item contributes to the fixed cost of the business and 78 $1.55 $4.40 $120.90 $464.10 $343.20 11.66%
5 %
is high. Salad
Potential Profitability of Menu Items Thai $6.4 26.05
129 $1.68 $4.77 $216.72 $832.05 $615.33 19.28%
To determine the potential profit in a menu item, you must have a good idea Salad 5 %
of the potential cost of producing the item. Pre-costing the menu means you Cajun $6.9 25.32
130 $1.76 $5.19 $228.80 $903.50 $674.70 19.43%
determine the cost of producing every item on the menu under ideal Caesar 5 %
conditions. The assumption is that cooks will follow directions, the portions will Total
ACM $1,140.7 $4,469.1 $3,328.9 100.00
be accurately measured, and all the portions will be sold. The results are the Appetiz 669 $4.98
= 0 0 3 %
optimum costs; in reality costs could be higher. er
15

You can see at a glance that Dry Ribs is the most popular appetizer, followed
by Thai Salad and Cajun Caesar. Nachos and Soup & Salad fall just slightly
over the 10% boundary. Thai Wings and Calamari show dismal results in
terms of popularity with only 4.63% and 2.84% of appetizer sales.
Sales of menu items are analyzed to put menu items in four categories:
Popular and profitable
Popular but not profitable
Not popular but profitable
Neither popular nor profitable
Figure 25 displays graphs the popularity of the appetizers from the example
over these four categories. The graph shows popularity on the vertical axis
and contribution margin on the horizontal axis. A line is drawn vertically to
indicate the ACM and horizontally to show 70% of expected popularity. This
allows you to see at a glance which category an item falls into: A) Less
popular and profitable, B) popular and profitable, C) unpopular and
unprofitable, and D) Unpopular and profitable.
Figure 25: Analysis of
popularity and profitability of appetizers.
The graph shows that Thai Wings and Calamari were very unpopular menu
items, but it also provides information on profitability. Thai Wings has a
16
contribution margin that is lower than the ACM for appetizers. Calamari has a
contribution margin that is higher than the ACM.
Computer programs may automatically calculate contribution margins and
popularity. The information may be presented in tables or spreadsheets as
shown above, or in a four-box analysis, with less detail, as shown in Figure
26.
Figure 26: Four-box analysis of appetizer items
Figure 26: Four-box analysis of appetizer items
Unprofitable Profitable
Popular Thai Salad, Soup and Salad Dry Ribs, Cajun Caesar, Nachos
Unpopular Thai Wings Calamari
Menu Revisions
Popular and profitable items are ones you want to maintain on your menu.
Maintain the specifications of the item rigidly. Do not change the quality of the
product served. Feature the item in a prominent location on the menu. You
want to sell this item, so make sure that customers see it. Have servers
suggestively sell the item. For example, when asked for suggestions, they
could say, “You may want to try our Linguine Chicken. It is very popular. It has
a cream sauce with lots of fresh basil.” Test the possibility of increasing prices
by raising the price slightly.
If an item is popular but not profitable, you want to see if you can increase the
contribution margin without reducing its popularity. Increase prices carefully
and gradually. If the item is attractive because of its high value, it may still be
a good value after a price increase. You could also increase the contribution
margin by reducing the cost of the accompaniments. For example, you might
substitute less costly vegetables. You might also try to reduce costs by
decreasing the portion size. If you are unable to improve the item’s popularity,
you may want to relocate it to a lower profile part of menu. If the item has a
very low labour cost, you may be able to justify the lower contribution margin
because less revenue is needed to compensate for the labour cost.
Not popular but profitable items are often a puzzle. You want to sell these
items, but your challenge is to encourage the guests to buy them. Shift
demand to these items by repositioning them on the menu. Encourage
servers to suggestively sell these items. Consider decreasing the price slightly
or adding value by offering a larger portion size, more expensive
accompaniments or garnishes. However, you need to be cautious so that you
do not change the item into a popular but unprofitable item.
Items that are neither popular nor profitable are obvious candidates to remove
from the menu. They are not pulling their weight. The only time such an item
might be left on the menu is if it provides an opportunity to use leftovers and
has low labour costs associated with its preparation.
Using Specials and Feature Items
Another way to balance the menu is by using daily specials and feature items.
For example, assume you have been tracking your food costs using a daily
food cost control sheet (refer back to Figure 20). It is halfway through the
month and you are running a slightly higher than average food cost for the
month so far. Choosing to run specials that have lower food costs or having
the staff feature and promote the better food cost items should help to bring
the targets in line by the end of the month.
Arranging Items on the Menu
Another way of engineering the menu is by strategically arranging the items
on the menu. Some menus use callout or feature boxes to highlight certain
items, others have pictures featuring certain menu items, and others may note
an item as a house specialty. These are all ways to attract the attention of the
customer, and in most cases, you will find that it is these items that sell the
best. If these items also have high contribution margins and/or low food costs,
they will increase profitability. Featuring the items with the lowest margins and
highest food costs will have the opposite effect, and likely mean that you will
not be in business for very long.
There are also some psychological reasons that things will sell on a menu.
Often the most expensive or the least expensive item will not sell as well as
other items on the menu because customers do not wanting to appear either
extravagant or cheap in front of their guests. Using descriptions that entice
the customer (e.g., “award-winning,” “best in the city”) will increase the sale of
a particular item, but make sure you can deliver on the promise!
All in all, balancing the menu is something that takes time and experience to
do well, but is a skill that you will need to run a profitable kitchen.
How to engineer a menu and maximize profits
17
While the time it takes will vary based on the size of your menu offering, menu
engineering can be broken down into five broad steps.
Choose a time period
Cost your menu
Categorize menu items based on profit and popularity
Redesign your menu
Measure your new menu’s impact
1. Choose a time period
First thing’s first, you need to select a time period to analyze. For restaurants
that switch up their menu based on the seasonality of produce, it makes
sense to do this at the same time as they craft new seasonal menu items. For
restaurants that rarely make adjustments to their menu, they can revisit their
menu less frequently.
Don’t make the mistake of never revisiting your menu pricing, though. Food
costs fluctuate and your menu prices need to reflect that. If your food costs
grow while your menu price stays the same, your gross profit margin shrinks
and you make less money on the sale.
2. Cost your menu
The three important metrics that you need to measure menu item profitability
are food cost percentage and contribution margin.
That information should be readily available in your restaurant POS system,
but if it isn’t, you can calculate them manually using these formulas:
How to calculate food cost per serving
To find your food cost per serving, you need to list the ingredients used to
make a dish, how much of the ingredient you use and how much that costs.
Include everything down to the seasonings and garnishes.
Here’s a look at calculating food cost per serving in action.
Let’s say you sell hamburgers and pay $19 for five pounds of ground beef. It
takes you 8 ounces of beef to make a single burger, which brings the cost of
ground beef per serving to $1.90.
Perform that same exercise for each ingredient and you get something like
this:
8 ounces of ground beef = $1.90
1 sesame seed bun = $0.25 You don’t need to be a designer (or hire one) to create a beautiful menu.
1 tbsp. of sauce = $0.10 Download your free, easily-customizable menu templates today.
2 slices of cheeses = $0.90 Download your menu templates
2 slices of tomatoes = $0.50 3. Categorize menu items based on profit and popularity
Add the values for each ingredient used to make one burger and you get a Once you know how much of each menu item you sold over a certain period
food cost per serving of $3.65. of time and its contribution margin, you can categorize them based on
How to calculate contribution margin popularity and profitability in a menu matrix.
Your contribution margin (or the profit from that individual menu item) is the Menu items will fall into one of four menu engineering categories: Cash cows,
difference between an item’s selling price and its cost. stars, duds or puzzles. Once completed, a menu matrix gives you a clear
understanding of which menu items are responsible for your profits, which
aren’t and which need to be reworked or removed from your menu
altogether.

Let’s say your hamburger’s menu cost is $14.40 and your food cost per
serving is $3.65.
Contribution margin = $14.40 – $3.65
Subtract the $3.65 food cost per serving from the $14.40 menu cost and you
get a contribution margin of $10.75.
Using analytics to determine menu item popularity
Understanding your menu’s performance using data fed by your point of sale
will give you an edge when the time comes to update your menu. Most POS
systems have reports that show how much you sold of a menu item over a
period of time. Getting tangible insights that you can take action on is key
when redesigning your menu and understanding what works and what
doesn’t. With Lightspeed’s Advanced Insights (available in North America)
you can take a deeper look at customer behavior with unique guest profiles Plowhorses: Low profitability, high popularity
and order tracking. This gives you access to how much specific customers Plowhorses are popular menu items whose food costs are more expensive.
spend and which items they order most. You also get access to a detailed The objective with menu items that fall into this category is to make them
breakdown of your menu performance, with insights on best and worst more profitable either by raising its menu price, lowering food costs, reworking
performers. the recipe with different ingredients or pairing it with high-profit sides and
Along with concrete data, sit down with your servers and bartenders and hear cocktails.
from them. Are there certain dishes that they sell often? They’re on the front Also, pay attention to the portion size of your plowhorses. If you’re noticing
line talking with customers every shift and can give valuable insight. With that customers rarely finish their plate, it may be wise to serve slightly smaller
clear data to back up your decisions, share insights with your employees and portions, reducing food waste and food cost per serving in the process.
to come up with a plan on how to move forward. Stars: High profitability, high popularity
Create your menu in minutes Stars are your menu’s most popular, profitable items. They’re inexpensive to
make and your guests order them often. Rather than rework these menu
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items, it’s best to leave them as they are and promote them in any way you
can.
Make sure your menu design draws special attention to them, increasing the
likelihood that you sell more of your Stars and maximize profits per service.
Puzzles: High profitability, low popularity
Puzzles are menu items that are profitable, but not a popular choice. Try to
pinpoint why they aren’t selling. Are they noticeable on your menu? Could
they benefit from a more compelling description? Should you promote the
dish on Instagram? Is the menu price too high?
Any of these can have an effect on a menu item’s popularity. Try
experimenting with them and measuring the results of the changes you make
on their sales.
Duds: Low profitability, low popularity
Duds are the menu items that are expensive to make and aren’t popular.
They take up valuable space on your restaurant menu, distract your guests
from your stars and puzzles.
You have several options for what to do with duds. You can remove them
from your menu entirely, de-emphasizing them on your menu or reworking the
price or ingredients based on customer feedback. If you choose to rework a
dud and both its sales and contribution margin remain low, consider removing
it from the menu altogether.
4. Redesign your menu
Now, it’s time to use your menu matrix to rethink which dishes to include in
your new menu design and layout.
Along with the quantitative data, it’s also important to gather qualitative data
and feedback from your servers and customers.
Ask your servers which dishes they typically sell the most, which ones they
have a hard time selling and which dishes get negative feedback from guests.
Consider sending a Typeform survey to your customers or members of your
loyalty program. What do they love about your restaurant? What would they
like to see improve? Which dishes are their favorite and least favorite? Do
they think there are enough options?
The only way to know is to ask. Use both the quantitative data from your
menu matrix and the anecdotal information from your surveys and
conversations with staff to further inform which menu items make the final cut
for your re-engineered menu.
What is menu psychology?
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Menu psychology focuses on how patrons interact with menus and how
menus can be designed to motivate customers to take a specific action (like
ordering more and spending more). Everything from the number of items in
the menu, the categories, how the dish price is displayed, to the colors and
placement is analyzed in menu psychology.
Why should restaurants leverage menu psychology?
Restaurants should leverage menu psychology because it can be a tool to
enhance the overall dining experience and boost profitability. By
understanding the psychological factors that drive decision-making, such as
color, layout, pricing, and item placement, restaurants can optimize their
menus to encourage higher spending, increase customer satisfaction and
drive repeat business. Descriptive language and tantalizing imagery can
make dishes more appealing while grouping high-profit items strategically can
increase their chances of being ordered. Highlighting popular or signature
dishes can also create a sense of social proof and encourage customers to
try those items.
Choose the ideal menu configuration
Not all menu configurations are created equal. According to Gregg Rapp’s
menu engineering methodology, the effectiveness of your menu engineering
efforts is dependent on how many panels your menu has.
One-panel menus: Although customers make decisions faster with one-panel
menus, they don’t order as much, which results in lower profits per customer.
Two-panel menus: This is the best menu configuration according to Rapp. It
evokes the feeling of a full dining experience while being easy for customers
to read.
Three-panel menus: If you have a lot of menu items and need the space, a
three-panel menu is a valid option, however, two-panel menus are easier for
guests to read.
Many-panel menus: The more panels your menu has, the less control and
influence you have over the decisions customers make.
Write awesome menu descriptions
A study published by The Association for Consumer Research found that
menu items sell up to 27% better when accompanied by a well-written menu
description.
Rather than simply listing ingredients, a great menu description uses
descriptive adjectives without being too long-winded. Mentioning an
ingredient’s origins, freshness, texture or how it’s prepared are all great ways
to write evocative descriptions—just remember to keep it short.
Emphasize your stars and puzzles
Place eye magnets (graphic elements like an outline, icon, photo or splash of
color) next to the menu items you want to sell the most. That graphic element
will draw customers’ eyes and have them focus their attention on the menu
items you want them to try.
Just don’t overdo it with the graphics. If you use too many, each of the
highlighted items won’t stand out. Rather, they’ll get lost in a sea of graphics,
which defeats the purpose. Rapp says that featuring just one graphic element
per page can increase sales of that menu item by as much as 30%, but the
more visual cues you add, the lower the impact.
When using eye magnets to draw attention to your stars and puzzles,
remember that less is more.
Consider eye movement patterns
People’s eyes tend to focus on certain areas of a menu depending on
whether it’s a one-panel, two-panel, three-panel or many-panel menu. Rapp
suggests placing the dishes you want to draw attention to in the areas where
people’s eyes tend to focus on.
Beware of the burden of choice
When confronted with too many options to choose from, customers have a
harder time deciding what they want and are more likely to be unsatisfied with
the choice they end up making. But good news, preventing customers from
feeling FOMO (the fear of missing out) is possible.
If you have an extensive menu that includes your breakfast/brunch and dinner
options, it may be wise to split that into several different menus, swapping
them in and out as one service begins and the other ends.
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If the issue is that you have a large selection, consider refining your menu.
Cost each menu item and see if there are any duds that you can remove from
your offering altogether.
Train your staff
When we think of menu engineering, we often think about the behind-the-
scenes strategy that goes into crafting a restaurant menu, but a restaurant’s
staff also has the power to influence what guests buy.
They’re the ones interacting with guests each day. Teach them which menu
items to push and they can help guide customers towards choosing those
profitable dishes.
5. Measure your new menu’s impact
Once you’ve finished your menu redesign and it’s been live for a month or so,
look at your sales data to see if the tweaks you made have had a financial
impact. Did you sell more of your puzzles and stars? Did you net more profits
that month than in previous months? Were your food costs lower?
Depending on what you find, you could continue tweaking old and testing new
dishes and rethinking your layout. The funny thing about restaurant menus is
that there’s always room for improvement.
As you test, track your results so you know what worked and what didn’t.
With Lightspeed Advanced Insights you could look even deeper into menu
performance. With its comprehensive data analytics tools, you can easily
track and analyze key performance indicators related to the menu, such as
sales trends, item popularity, and profitability.
By understanding which dishes drive the most revenue and garner the
highest customer interest, restaurant owners and managers can make data-
driven decisions to optimize the menu for greater profitability and customer
satisfaction. This data-driven approach empowers restaurants to identify
strengths, weaknesses, and opportunities within their menu offerings,
ultimately leading to a more successful and engaging dining experience for
customers.
With Lightspeed Restaurant, Grant Macdonald, the Chief Concept Officer for
Kotsu Ramen & Gyoza, can see how much they’ve sold of a particular item
and which ones are driving repeat business. “You can look at the item and
say, ‘I love this item. It sells really well. But you know what? People come
here and they try it and then they don’t come back. Or this item I didn’t think
was a big deal. But the customers that come for this, they love it. They come
back over and over again’. That kind of data drives really good decisions
about what needs to be on our menu, what belongs there, and what makes
sense,” adds Macdonald.
The science behind a profitable menu
Menu engineering can feel like a daunting task, but it doesn’t have to be done
overnight. Select a timeframe, cost your menu, categorize each dish based on
its popularity and profitability, redesign your layout (either by hiring a designer
or using our handy menu templates) and measure the impact of the changes
you make.
By following these steps and building a menu the right way, you’re setting
each sit-down, takeout or delivery order to be a profitable one.
Looking for data and insights to back up your menu revamp? Talk to one of
our experts to find out how Lightspeed can help.
Objectives of the Study
1. To identify the packaging impact on the consumers buying decision.
2. To find out the impact of the packaging elements on consumers purchasing
behavior.
3. To measure the role of each packaging element on the consumer.
4. To identify the elements of packaging, which should be highlighted to
attract consumers?
Elements in menu engeenering
It’s the process of strategically designing a menu to maximize profitability by
analyzing the popularity and profitability of each item on the menu. The
following are the key elements of this engineering:
Menu Item Categories: The first step in menu engineering is categorizing
menu items based on their popularity and profitability. For example, popular
and profitable items can be placed in the “star” category, while less popular
but profitable items can be placed in the “cash cow” category.
Menu Item Analysis: Once the items are categorized, they can be analyzed
using a matrix that considers the popularity and profitability of each item. This
analysis helps to identify which items are worth promoting, which items need
improvement, and which items should be removed from the menu.
Menu Design: The design of the menu can influence customer behavior and
affect profitability. This considers the visual layout, typography, and
placement of menu items to create an appealing and easy-to-read menu that
guides customers towards profitable items.
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Menu Pricing: It also involves pricing strategies such as bundling, tiered
pricing, and anchoring, which can influence the customer’s decision-making
process and increase profitability.
Menu Item Promotion: Finally, it includes strategies for promoting high-profit
items such as highlighting them with special menu design elements, using
enticing language to describe them, and placing them in prominent locations
on the menu.
Restaurant Prime Cost: What It Is & How to Calculate
Running a restaurant successfully is about great food, customer service, and
managing your finances smartly.
The concept of restaurant prime cost is a critical factor that directly impacts
your restaurant’s bottom line. It’s like a secret recipe for making your
restaurant profitable.
In this article, we’ll explain the restaurant’s prime cost, its components, and
how to calculate it.
What are prime costs?
A restaurant’s prime cost consists of its two essential costs:
the cost of goods sold (COGS), which includes expenses related to food and
beverages,
the labor costs (wages and benefits) for the food preparation and service
staff.
Prime costs, often called direct costs, encompass expenses directly tied to
producing or providing goods and services.
Calculating the prime cost helps restaurant owners and managers track the
fundamental expenses directly impacting their profitability and operational
efficiency.
How to calculate your prime costs
Calculating prime cost requires tracking two essential costs:
the cost of goods sold (COGS)
the labor costs (wages and benefits)
The prime cost formula
To calculate the restaurant’s prime cost, use the following prime cost formula
Total Cost of Goods Sold + Total Labor Cost = Prime Cost
Let’s look at the example of calculating the restaurant prime cost. Firstly, we
need to determine the values of the COGS and the labor costs, which are the
prime cost components.
Step 1. Calculating the cost of goods sold
The Cost of Goods Sold (COGS) represents the direct costs incurred by a
business in producing or purchasing the goods or services it sells during a
specific period. This number signifies the precise quantity of food and
beverages consumed in the production of your food and beverage sales.
In the case of restaurants, the examples of the cost of goods sold include:
Food costs: Purchasing ingredients such as vegetables, meats, seafood,
grains, and spices used in menu items.
Beverages: The cost of purchasing alcoholic and non-alcoholic beverages
served in the restaurant.
Packaging materials: Costs associated with packaging items for takeout or
delivery orders, such as containers, bags, and utensils.
Condiments and sauces: The cost of condiments, sauces, and garnishes
used to enhance the flavor of dishes.
Cleaning supplies: Expenses for cleaning supplies used in the kitchen and
dining areas, such as cleaning agents and paper towels.
Disposable tableware: Costs for disposable plates, cups, napkins, and
utensils used for customer service.
Food packaging labels: Expenses for labeling and packaging materials used
to brand and present food items.
Expendable kitchen supplies: Cost for aluminum foil, parchment paper, and
kitchen towels.
The formula to calculate the Cost of Goods Sold (COGS) is as follows:
The Cost of Goods Sold (COGS) = Beginning Inventory Value +
Purchases During the Period – Ending Inventory Value
Suppose you run a small restaurant and want to calculate the COGS for the
month of July. You know the following values:
Beginning inventory value (July 1st): $5,000
Purchases during July (food and beverages): $10,000
Ending inventory value (July 31st): $4,000
Now, you can use the COGS formula:
COGS = Opening Inventory Value + Purchases During the Period –
Closing Inventory Value
COGS = $5,000 + $10,000 – $4,000
COGS = $11,000
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In this example, your COGS for the month of July is $11,000. This means that
in July, you spent $11,000 on the food and beverages used to produce the
meals and drinks sold in your restaurant.
Step 2. Calculating labor costs
Labor costs in a restaurant refer to the expenses associated with employing
and compensating the staff involved in various aspects of food preparation,
service, and restaurant operations.
In the case of restaurants, restaurant labor costs include, among others:
Employee wages and salaries: This includes the base pay that restaurant
employees receive for their work. It covers both front-of-house and back-of-
house staff.
Overtime pay.
Benefits: Costs associated with providing employee benefits, which, for
example, may include:
health insurance,
retirement plans,
paid time off (vacation, sick leave)
Payroll taxes and payroll costs
Training and development: Expenses related to training new and existing
employees.
Uniforms and work attire costs
Staff meals: The cost of providing meals to employees during their shifts.
Bonuses and incentives: Additional payments or rewards given to
employees for their achievements.
Employee turnover costs: Costs associated with recruiting, hiring, and
training new employees to replace those who leave the restaurant.
The formula for calculating a restaurant labor cost is as follows:
The Total Labor Costs = Total Employee Wages + Employee Benefits +
Payroll Taxes + Training Costs + Other Labor – Related Expenses
Suppose you run a small restaurant and want to calculate the total labor costs
for the month of July. You know the following values:
Total Employee Wages (salaries and hourly wages): $15,000
Employee Benefits (health insurance and retirement contributions): $2,000
Payroll Taxes (Social Security, Medicare, and unemployment taxes): $1,500
Training Costs (employee training programs and materials): $500
Other Labor-Related Expenses (staff uniforms and bonuses): $800
To calculate the labor cost for July, add up all these components:
Labor Cost = Total Employee Wages + Employee Benefits + Payroll
Taxes + Training Costs + Other Labor-Related Expenses
Labor Cost = $15,000 + $2,000 + $1,500 + $500 + $800
Labor Cost = $19,800
In this example, the total labor cost for your restaurant in July is $19,800.
For more information on labor costs, check our article with tips on how to
control & reduce labor costs.
Step 3. Calculating the prime costs
Having calculated both the COGS and labor costs for your restaurant, you
can calculate restaurant prime cost.
In our example, the calculations would be as follows:
Prime Cost = Total COGS + Total Labor Cost
Prime Cost = $11,000 + $19,800
Prime Cost = $30,800
To interpret this number, we need to calculate the prime cost percentage.
The Prime Cost Percentage is a financial metric that shows how much of a
restaurant’s total sales revenue is used to cover its prime costs, including the
COGS and labor costs.
The formula to calculate the restaurant prime cost ratio is Prime Cost
Percentage = (Prime Costs / Total Sales Revenue) x 100
We know that in the case of our example restaurant, a restaurant’s prime
costs are $30,800. Suppose the total sales revenue for the same period is
$60,000.
Using the prime cost equation, let’s calculate the restaurant’s prime cost
percentage.
Prime Cost Percentage = (Prime Costs / Total Sales Revenue) x 100
Prime Cost Percentage = ($30,800 / $60,000) x 100
Prime Cost Percentage ≈ (0.5133) x 100
Prime Cost Percentage ≈ 51.33%
In our example, the prime cost percentage for the restaurant is approximately
51.33%. This means about 51.33% of the total sales revenue covers the
prime costs.
Skilled restaurant owners can look closely at how much it costs to make each
menu item, dish, or group of menu items. This helps them quickly figure out if
some items are making enough money or if they should consider raising
menu prices or removing them from the menu.
Why does prime cost matter?
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While analyzing the restaurant’s profitability and thinking of improving its
financial condition, restaurant owners have two basic ways to improve its
profits. They can:
Increase restaurant sales
Reduce the prime costs
Many restaurant owners concentrate on improving sales to increase their
restaurant’s profit. For that purpose, they implement a food ordering system
for restaurants, introduce a loyalty program, and use different marketing tools
(for example, restaurant email marketing and/or restaurant SMS marketing).
These are undeniably good methods for increasing restaurant sales,
contributing to increased generated profits. However, we cannot forget about
restaurant prime costs.
Is it good to increase restaurant sales if you don’t look at your costs? It’s not.
Why? You may, for example, waste food daily (say $2-3 a day) that, in the
long run, will cost you almost $100 monthly, which you could completely
avoid.
You may have a surplus of staff when there are no guests in your restaurant
or only one table is occupied. This is also worth looking into to reduce your
prime costs.
The cost of ingredients you use for preparing your most popular dishes
increased? Look for other food and beverage vendors. You can find a supplier
who offers better pricing, and you will maintain the same food quality in your
restaurant at lower costs.
Calculating and analyzing your restaurant’s prime costs will help you
understand your restaurant profit margin. When you regularly check your
prime costs, you’re ensuring you’re not losing money when making and
serving food.
How frequently should you calculate your prime cost?
As we already know, tracking prime cost is very important to ensure your
restaurant’s profitability.
The frequency of calculating your prime cost can vary depending on the size
and complexity of your restaurant and your specific business needs.
However, it’s generally recommended to calculate your prime cost regularly.
We recommend calculating prime costs weekly to watch the prime cost
performance, as regular monitoring and adjustment of prime costs are
essential for effective cost control and financing a restaurant. Thanks to that,
you can maintain a healthy prime cost in your restaurant.
What is the average restaurant’s prime cost?
The average restaurant prime cost can vary widely depending on various
factors, including the type of restaurant, location, size, menu, pricing strategy,
and overall management. There is no fixed average prime cost that applies to
all restaurants.
Quick service restaurants generally maintain lower percentages for both food
and labor costs compared to full-service restaurants. On the other hand, fine
dining establishments typically experience higher labor cost percentages on a
day-to-day basis.
According to RestaurantOwner, in table service restaurants, it’s commonly
recommended that the prime cost should not exceed 65 percent of total sales.
Some well-established casual dining chains keep their prime cost even lower,
at 60 percent or less.
However, for most independently owned table service restaurants, achieving
a prime cost within 60 to 65 percent of sales can still lead to a healthy net
income.
What is the ideal prime cost?
Aiming for a prime cost of 60% or less (ideally 55%) is a good goal in the
restaurant business. Half of this cost should come from ingredients, and the
other half should come from employee wages and related labor expenses.
The ideal prime cost for a specific dining establishment depends on its unique
circumstances, restaurant goals, and market conditions.
Restaurant owners and managers should regularly analyze their financial
data and adjust their prime cost management strategies to maintain
profitability and prime cost targets.
How to lower your restaurant’s prime costs?
Use the strategies we described below to lower your restaurant’s prime
costs.
1. Conduct periodic cost analyses for your restaurant
Continuously analyze your prime costs and compare them to industry
benchmarks. Identify areas where costs are higher than desired and take
corrective action. Invest in restaurant analytics software to manage your
restaurant’s finances.
2. Negotiate pricing with your vendors
When buying in bulk, ask your suppliers for better prices, discounts, or deals.
Check and compare supplier prices to ensure you get the most value for your
purchased ingredients.
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3. Design a functional menu
Use menu engineering to analyze and adjust your menu to maximize your
restaurant’s profitability. Consider reassessing and changing the sizes of
dishes, recipes, and ingredients to lower your food costs while maintaining
quality.
4. Manage your restaurant’s inventory
Implement strict inventory control practices to minimize food wastage and
prevent over-purchasing. Use restaurant inventory management software to
track and monitor inventory levels effectively.
5. Optimize your labor
Schedule labor based on how many customers you actually have to avoid
having too many employees during quiet times. For that purpose, you can use
restaurant scheduling software.
Moreover, you can also teach your employees to do different jobs so that you
don’t need to hire extra staff unnecessarily.
6. Train your staff
Teach your kitchen and serving staff to reduce food waste, manage portion
sizes, and use ingredients wisely. Foster a culture where your team is mindful
of costs and resourceful.
7. Concentrate on employee retention
High employee turnover can lead to more spending on training and
decreased efficiency. Concentrate on retaining employees by implementing
strategies that help to reduce labor costs and turnover in a restaurant.
8. Run promotions
Plan promotions and specials based on ingredients nearing their expiry date
to avoid food waste and lower prime cost percentage.
9. Listen to your customers
Pay attention to what customers say and make changes to your menu and
service based on their feedback. Happy customers are more likely to come
back, helping boost revenue.
10. Invest in portioning utensils and containers
Investing in portioning utensils and containers is a cost-effective way for
restaurants to control ingredient measurements, reduce food wastage, and
maintain consistent portion sizes, ultimately contributing to lower prime costs.
Key Takeaways
Prime cost is a fundamental financial metric for restaurants, representing the
combined costs of goods sold (COGS) and labor expenses. It directly impacts
profitability and requires careful management.
Prime cost includes purchasing ingredients and beverages (COGS) and labor
costs for food preparation and service. These elements make up the bulk of a
restaurant’s expenses.
Regularly calculating prime cost helps restaurant owners assess their
financial performance, control expenses, set menu prices effectively, and
maximize profitability.
Restaurants’ average prime cost percentages are 60-65% of total sales.
By managing COGS and labor costs efficiently, restaurants can enhance their
financial health and remain competitive in the restaurant industry.
Frequently Asked Questions (FAQ)
What is the prime cost of a restaurant?
The prime cost of a restaurant is the total of two main expenses: the cost of
ingredients used in preparing dishes and beverages (COGS) and the labor
costs of employees involved in food preparation and service.
Here are some strategies to implement changes in the menu based on the
analysis:
Promote high-profit items: Highlight star items using visual design elements
or attractive language to attract customers’ attention. Consider placing them
in prominent locations on the menu, such as the top or bottom of the menu or
in boxes.
Improve low-profit items: Consider changing the menu item’s recipe,
presentation, or pricing to increase its profitability or popularity. For example,
consider using lower-cost ingredients or reducing portion sizes to improve the
contribution margin.
Remove low-profit items: Remove menu items with low profitability and low
popularity to simplify the menu and reduce costs.
MODULE 4 MENU DESIGN
Menu Design
• The Psychology of Menu Design
• Tips on restaurant menu design
• Menu design and style
• Steps in menu design
• Common Menu Mistakes
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Menu psychology is the study of how menus are designed and how they can
influence customers’ choices when ordering food or drinks. It is a strategy
used by restaurants, cafes, and other food service establishments to present
their menu in a way that is visually appealing and effective in guiding
customers to order items that are profitable for the business.
Psychology concepts with influence on menu design:
Currency symbols – remove currency symbols or use round numbers instead
of .99
Avoid using price columns to show your prices
Use descriptive language for each dish, but remember not to make
descriptions too long
Keep your menu short – limit customer choices
Use attractive photos to make a mouth-watering impression
The Psychology of Menu Design
Next time you pick up the menu at your favorite restaurant, instead of making
your decision right away, consider the psychology of menu design and what
items you think the menu is trying to make you select. Look at the way the
menu is laid out, the colors that are used and the descriptions of each dish.
This is all part of the menu design psychology.
Every menu is a carefully constructed to persuade you into making certain
decisions, predominantly ones that will ultimately make you spend more
money. The psychology behind menu engineering is backed by science and
countless hours of research, and covers aspects such as positioning, color
theory, use of buzz words, controlled costing and more.
We’ve explored the main techniques menu engineers implement in the
psychology of menu design to subtly influence the decisions you make,
making for an eye opening read and changing the way you choose your
dishes. Even though it seems tactical in nature, the restaurant CEO should
care about the menu, as every effort to grow sales has the menu as the
protagonist.
 COLOR CONFUSION
The colors on a menu can affect what we order. Green implies the food is
fresh, and orange stimulates the appetite. Yellow is a happy hue and is used
to catch the diner’s attention. Red encourages action and is used to persuade
us to buy the meals with the highest profit margins.
The Menu Strategy Must Be Holistic
When done correctly, a holistic improvement is possible that also delivers
benefits in terms of operational efficiency, brand and competitive
differentiation, media interest that garners positive publicity, guest appeal that
stimulates new trial and frequency, sustainable lifts to sales and profitability,
and even reinvigorate morale and employee engagement at the unit level.
Put Our Experience to Work for You
THE GOLDEN TRIANGLE
When we look at a menu, our eyes typically move to the middle first before
traveling to the top right corner and then, finally, to the top left. This has been
dubbed the ‘Golden Triangle’ by menu engineers, and these three areas are
where you’ll find the dishes with the highest profit margins.
FEEDING THE IMAGINATION
Restaurants pay close attention to how each meal description is written.
Superlative claims – descriptions like “the world’s best burger” – can’t possibly
be true, and diners will simply ignore them. However, enticing adjectives, like
“line-caught” or “sun-dried,” will feed the imagination and get our taste buds
tingling.
SUBCONSCIOUS SCHEMING
We subconsciously order the top two items in each menu section more often,
so restaurant owners tend to list their highest-margin dishes first. However,
some people tend to pick the bottom option, so the last item in each section is
usually a restaurant’s third most cost-effective dish.
COVERT CURRENCY
Paying for a meal is the biggest pain point when dining out. Crafty
restaurateurs remove currency signs from the menu to take the emphasis
away from the cost of the items you’re ordering. Beware of prices written out
in letters – this tactic can encourage us to spend up to 30 percent more.
CONTROLLED COSTING
No matter how tempting each dish sounds, diners still take the price into
account. Restaurateurs use this to their advantage – for example, a meal
priced at $10.95 makes us feel like we’re getting a good deal. Exclusive
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establishments tend to use round numbers, adding an air of chic
sophistication.
LIMITED CHOICES
A huge menu might seem like a good idea, but being forced to choose
between hundreds of options can make us feel stressed. Savvy restaurant
owners list just seven dishes in each section – enough to make us feel like we
have plenty of options without overwhelming us.
A BLAST FROM THE PAST
Nostalgia is a powerful force. A carefully worded description can load almost
any dish with an emotional resonance that is hard to resist. Diners beware –
that tempting slice of ‘Grandma’s Apple Pie’ you’re about to order has
probably been languishing in an industrial freezer for months.
DECOY DISHES
Some restaurants try to deceive their diners by placing a slightly more
expensive item at the top of the menu. This makes all the other dishes appear
to offer more bang for your buck. It also gives us the impression we’re getting
a bargain, encouraging us to spend more.
STORYTELLING
Most items on a menu will have descriptions of a similar length to fit in with
the general layout of the page. Something that doesn’t fit the pattern will stick
out like a sore thumb and catch our attention. Knowing this, restaurant owners
tend to write longer descriptions for the dishes they want to sell more of –
items with the highest profit margins.
EMPOWERING THE CUSTOMER
Restaurant wine lists can rival the average novel in length, especially in high-
end establishments. This is a deliberate marketing tactic designed to
empower guests to make a decision. The more information listed about each
vintage, the more likely we are to choose the wine.
What steps should I take before I design a menu?
As with most creative endeavors, proper results can’t be achieved without
sufficient research. In the case of designing the right menu, that means
collecting data from various sources. Examine your own numbers first, such
as your restaurant’s prospective financial and marketing numbers and its
sales mix. Then look at your competitors: examine their Web sites, menus
and marketing efforts and try to see where they went right and how you could
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NEGATIVE SPACE
If a menu is crammed with text, the eye will naturally be drawn to any open
spaces. Menu designers use this to their advantage – items with the largest
profit margins are often set in their own space, away from the hustle and
bustle of the rest of the descriptions.
MATERIAL WORLD
The material of the menu is used to communicate the brand image. High-end
restaurants use leather and thick paper to suggest their food is of a similar
quality (and, therefore, worth ordering), while a cheaper restaurant might use
vinyl to communicate a menu that represents good value for the money.
GLOSSARIES
Look out for a glossary section on the menu. You’re more likely to order the
pricy steak tartare if you know exactly how it’s prepared (and produced). This
is also why restaurants sometimes list their fancy-sounding wines by the
number, so patrons don’t feel intimidated by the unfamiliar names.
Menu Design: Why It’s Important and How to Do It Right
A good restaurant menu design is key to any restaurant’s marketing plan.
When you design a menu it should express your eatery’s personality, focuses
your overall operations, promotes profitability, establishes your budget, and
keeps your brand fresh in your customer’s mind.
What should my goals be when I design a menu?
Your menu is your primary means of representation: It says exactly who you
are and what you hope to convey personality-wise. It also should create
enough of an impression so that it stays with your client long after the waiter
or waitress walks off with it. In addition, it must convey your restaurant’s brand
in a manner that makes diners excited to be there, want to come back and to
recommend it to family and friends.
compete successfully with those traits. Also, look at vendors and see how
they handle similar challenges, and read industry sources (trade publications,
published research) to evaluate trends and successes.
After that, consider your location and how it relates to the immediate
neighborhood around you. Eighty percent of a typical restaurant’s business
usually comes from the residents living within a 10-minute drive of that
location. Knowing this, ask yourself the following:
What can my restaurant menu offer that others in the area do not?
What menu items do we have in common?
How does our pricing match up?
Does my menu offer more variety than theirs?
Determining these factors will help guide you when you design a menu for
your restaurant.
How should I design a menu?
There are no rights or wrongs in when you design a menu. What works with
some establishments fails at others. However, as mentioned before, your
menu should be an expression of your restaurant’s personality. In designing
it, think about how it will best represent your image and objectives. Are you
classy and sophisticated? Fun-loving and wild? A small, plain text menu can
be used to enhance a restaurant’s impression of elegance or simplicity. A
thick, flashy, image-intensive menu can emphasize a location’s festive side.
Once you determine your restaurant’s personality, you can easily begin
crafting the look of your menu to match that.
How should I arrange items on the menu? Should I use merchandizing
techniques to help?
When you design a menu it should mimic the dining experience. Arrange
items sequentially, with appetizers, salads and soups first, then entrees, then
desserts. Place star items on pages that contain more visual flair than others,
and set markers or photographs around featured items to further draw
attention.
Merchandizing techniques will further help this agenda when you design
a menu by allowing you to easily spotlight specialty and signature items,
introduce newer selections and invoke an appropriate sense of personality. In
turn, the techniques also make these items easier for your clients to find and
recognize.
We Help with Turnarounds and Transformations
Nearly every successful restaurant turnaround had a new menu strategy as a
cornerstone of its brand renaissance.
Put Our Experience to Work for You
What are some tips I can use for my restaurant menu design?
Place your best selling items, or those you want to have the biggest draw, on
the Prime Sweet Spots of the menu. These areas refer to the spots where the
average client brings his or her eyes to first — and thus receive one’s first
attention. Also, arrange your items in columns when you design a menu,
depending on your restaurant’s image: One column inflects a sense of
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sophistication and elegance; two columns bring forth a sense of playfulness,
etc.
Highlight spotlight or signature items in a way that draws attention to them:
boxing selections off within your menu works well at this, as does adding
colors, photographs, labels and logos.
Naming items specifically or creatively (ex. Rojo Chicken Salad) and using
active descriptions of the ingredients in the dishes, makes the food sound
more enticing and exotic for the client — and may induce future visits.
What are some common mistakes in restaurant menu design?
If your menu creates problems for your clients, they will become apprehensive
and less likely to return. Common mistakes include when you design a menu
are: Menu print that is too small to read easily; menus that are too big to
handle easily; menus that lack English translations for non-English words or
phrases; menus that look antiquated in presentation; menus without daily or
weekly special insets; entrees that don’t look like their photos; generic clip art;
and misalignment of brand and menu.
How should I price my menu?
Diners are savvy, and often they’ll know how your items match up value-wise
against your competition. In light of this, keep your more everyday items
(dishes you can find anywhere, really) approximately $1 more or less than
your competition. Many customers do not perceive such increments to be
significant, especially with dishes above $5, so there is some leeway there.
Likewise, remember when you design a menu that items unique to your
restaurant can be a little higher but also should not exceed the other items
excessively. Doing so will make the latter more enticing to diners, especially
those who visit your establishment regularly.
Also, to get a better feel for the sense of value you are promoting when you
design a menu, take a picture of each item on the menu in a way that mimics
the actual presentation on the table. After doing so, ask yourself: Do the items
look like they are worth the price you are charging? Could a change in
presentation justify an increase in price? Is there consistency with the overall
look or does there seem to be a wide range or inconsistency in the price
versus its presentation? You’ll be amazed at what you discover when you
look at the entire menu collectively through the customer’s eyes.
Menu Strategy Must Be Holistic
One of the surest and quickest means to improving performance for a
restaurant chain is through effective menu engineering strategies. It’s about
more than tactical design, merchandising techniques, promotional tactics, and
pricing strategies though.
Get in Touch
How about menu profitability?
To keep your menu fresh, relevant and profitable, you need to know how
each item is performing and how it stacks up against your
competition. Conduct an analysis of your menu every six to twelve months.
During this evaluation, look at profitability analysis and competitive menu
analysis and determine what works best and what isn’t working at all. Then
make the proper adjustments so that your changes reflect your research.
Comparing your menu with that of your competitors also helps. It not only
opens more doors towards pricing your menu, it offers you a solid foundation
on how to measure your profits. Performing a cross analysis helps uncover
strengths and weaknesses in your pricing plan, specifically in terms of the
way your items are priced and presented. By doing this, you determine which
items are most popular, which are most profitable, which need extra
emphasis, and which need to removed or replaced.
About Aaron Allen & Associates
Aaron Allen & Associates works alongside senior executives of the world’s
leading foodservice and hospitality companies to help them solve their most
complex challenges and achieve their most ambitious aims. We have helped
evaluate and engineer menus for some of the world’s largest restaurant
brands, as well as helped restaurant companies around the world drive
revenues, increase profits, and enhance the guest experience through
improved marketing, messaging, and menu engineering.
Our clients span six continents and 100+ countries, collectively posting more
than $300b in revenue. Across 2,000+ engagements, we’ve worked in nearly
every geography, category, cuisine, segment, operating model, ownership
type, and phase of the business life cycle.
Menu Marketing Essentials
Design & Printing
Menus
A menu is more than a simple list of food items; it is a marketing piece with
powerful potential to boost profits. Expert menu marketing strategy is integral
to restaurant success and should be practiced with precision planning and
research. The following menu marketing essentials will help you plan the
perfect menu:
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Tell customers what to buy
Your customers trust you to prepare excellent meals, so shouldn't they also
trust you to recommend the best dishes? Highlight what you want to sell —
your most profitable items — and assign them names such as "House
Specialty" and "Critics' Choice." While all of your dishes should come across
as tantalizing, your big-ticket items should be portrayed as the best of the
best.
Write creative copy
Use creative copy in your section names and item descriptions. Instead of
"seafood," try "Fresh Catch," or instead of "desserts", how about "Elegant
treats"? You want to convey a sense of personality and quality — what makes
your restaurant different from the rest? Also, if your menu includes dishes with
foreign names, translate for your customers.
Encourage your customers to ask their servers
Do your customers need help deciding, or do they want a recommendation?
Your menu should encourage customers to ask their friendly servers for
suggestions, and your servers should be trained in affable service that helps
sell more without being pushy.
Market to specific segments
Your menu copy and design should stick to a common theme, but you can still
highlight special-interest foods to specific segments. Identify sub-niches within
your target audience to define what these sections might be: perhaps a steak
lover's section, a low-calorie section or a kosher food section can boost
business by making it easy for customers to find what they love.
Include coupons

This is especially true for take-out and delivery food
establishments. If you include money-saving coupons on your take-home
menus, your sales will increase. Other restaurants might include a special
double-reservation offer — refer a friend and save 50 percent off. You're
essentially giving one meal away free, but you'll make more in the long run
through repeat business. Your menus should be different from the
competitions — in theme, design and content. You want your menu to work
as a sales piece, motivating customers to choose you instead the competition.
Once you've achieved this, make sure you saturate the market with your
menus: leave one with every customer, send them in your direct-mail
campaigns, leave them in hotel rooms and more. A great menu is an
investment with a high expectation for return on investment. With the proper
menu marketing strategy, you can boost sales tremendously.
The Role Of Menu Design In Restaurant Marketing
marketing. Elements such as font size, choice of typeface, and the use of
white space can have a significant impact on how customers perceive the
restaurant and its offerings.
Research suggests that selecting large fonts with bold lettering is effective in
capturing attention from diners browsing menus; however, it is equally
important to consider how this decision impacts readability. If the text appears
cluttered or difficult to read due to overly ornate script choices or small font
sizes, potential patrons may be less likely to purchase items from the menu.
A strong understanding of current trends in typography also helps restaurants
remain competitive within their industry. While classic fonts are often chosen
for their timeless look and feel, new designs offer unique elements that can
help build customer loyalty and attract new clientele.
Restaurants must also balance between using too much variety — which
might appear overwhelming — and creating continuity across all their printed
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materials by picking one or two signature fonts that become associated with
their brand identity.
Regardless of the specific style used, making sure legibility remains high is
key when designing menus since poor readability could lead to confusion
over prices or ingredients included in each dish. As such, designers should
focus on crafting a visually appealing layout while keeping these practical
considerations front-of-mind throughout the process.
With careful thought into both aesthetics and functionality during creation, a
well designed menu will be able to maximize sales opportunities while
reinforcing any branding efforts already employed by the restaurant.
Graphics And Images | BeeSavvy
Graphics And Images
The use of fonts and typography in menu design has a major impact on
customer perception. Similarly, graphics and images can be used to enhance
the overall look and feel of a restaurant’s menu. By incorporating visuals into
menus, restaurants have an opportunity to emphasize their brand identity
while also making the items they offer more attractive.
Visual elements such as colors, shapes, symbols, or photographs are all
important components in conveying a message through menu design. For
example, using vibrant colors can help draw attention to particular menu items
that may otherwise go unnoticed.
Additionally, by utilizing photos of food items it is possible for customers to get
a better understanding of what will be served before actually ordering. This
helps create excitement which encourages customers to try new dishes or
return again soon in search of familiar favorites.
Graphics and images play an essential role when designing effective menus
that make a lasting impression on guests. Thus, it is important for restaurants
to consider how visual elements like these can best convey their desired
message so customers are left with an enjoyable experience that keeps them
coming back time after time.
Colors And Contrast
The use of colors and contrast in menu design has become a popular
marketing tool for restaurants.
Colors can be used to draw attention to certain elements of the menu, and
contrast can be used to emphasize the importance of certain items.
Color psychology can also be taken into account when designing menus, as
certain colors are associated with different emotions and reactions.
For example, the use of warm colors can draw attention and create a feeling
of warmth, while cool colors can create a calming feeling.
Contrasting elements, such as font size and type, can also be used to create
emphasis and to draw the eye to certain items or sections of the menu.
Overall, the use of colors and contrast in menu design is an effective way to
market restaurants and influence customer choices.
Colors In Menu Design | BeeSavvy
Colors In Menu Design
The psychology of color and its cultural implications often play a key role in
menu design. Colors have the ability to evoke certain emotions within
customers, prompting them to make decisions about what food items they
might order.
Careful consideration must be taken when selecting colors for menus; too
much or too little contrast can lead to confusion or disinterest from diners. A
successful restaurant marketing strategy should use colors that are seen as
comforting yet exciting, creating an emotional connection with customers
without becoming overwhelming or off-putting.
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Studies show that warmer shades such as yellow, orange, and red tend to
stimulate hunger while cooler hues like blue and green can create a more
relaxed atmosphere. By understanding how colors affect customers’
perceptions, restaurants can create unique designs that will draw their
attention and entice them into trying new dishes.
Ultimately, by carefully crafting a menu design incorporating the right colors
and contrasts, restaurateurs can successfully communicate their message
and encourage patrons to engage with the brand on multiple levels.
Contrasting Elements
In addition to color choice, contrasting elements can be used in menu design
to draw the eye of customers.
Contrasting elements such as font size and typeface can create a hierarchy
that draws attention to certain items or specific customization options like
menu pricing.
By using contrast in menus, restaurants are able to highlight their most
popular dishes and give diners clear directions for ordering without
overwhelming them with too much text or imagery.
When designing menus, restaurateurs should strive to create visual balance
by including an appropriate amount of white space between different sections
or items.
This will help keep the menu clean and organized while ensuring that all
information is easily readable.
Additionally, this helps prevent cluttered designs which could lead to
confusion among diners.
Overall, carefully crafted combinations of colors and contrasting elements can
have a positive effect on marketing strategies; well-designed menus can
contribute greatly toward creating brand loyalty amongst customers by
providing an aesthetically pleasing experience before they even sample the
food itself.

Color Psychology | BeeSavvy
Color Psychology
Color psychology is an important factor to consider in menu design. The
colors used can subconsciously influence customers to order certain items
without them necessarily being aware of the effect.
Additionally, food associations and symbolism can be evoked by using
specific hues such as red for hot dishes or blue for cold ones. Moreover,
restaurants can use menu color choices to create a sense of safety and
familiarity; warm tones often invoke feelings of comfort while cooler shades
tend to suggest freshness and vibrancy.
Consequently, restaurateurs should take care when selecting which colors
they choose to represent their brand as it could have a direct impact on
customer experience and perception. As such, menus should employ
intentional color combinations that best reflect the restaurant’s identity while
also appealing to diners’ senses.
Layout And Structure
Menu design plays an integral role in restaurant marketing. A well-designed
menu can help to create a successful dining experience, while a poorly
designed one could lead to customer dissatisfaction and lost revenue.
To ensure that the layout and structure of menus are effective for their
intended purpose, localization and pricing models should be taken into
account. Localization is key when it comes to designing a menu that appeals
to customers. For example, if a restaurant specializes in regional cuisine, then
its menu should reflect this with appropriate language as well as dishes
specific to the region or locality. In addition, prices must also be localized
according to market conditions — what might work in one area may not
necessarily work elsewhere.
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The choice of pricing model is another important factor when creating an
effective menu design. Restaurants often opt for either fixed price menus or à
la carte options depending on their goals. Fixed price menus give customers
all-inclusive meals at pre-determined prices whereas à la carte allows them to
pick individual items from the menu based on their own preferences. Both
have advantages and disadvantages which must be considered before
making a decision — so understanding how each type of pricing works can
help restaurateurs make informed decisions regarding their offerings.
Knowing how best to use both localization and pricing models will ensure that
any given menu is attractive and accurately reflects the style of food being
served by the establishment. With careful consideration during the design
process, restaurants can maximize their potential for attracting new
customers as well as keeping existing ones satisfied with memorable
experiences involving delicious food and great service.
Promotional Strategies
Menu design is a powerful tool for restaurant marketing, as it can influence
customers’ ordering decisions and shape the overall customer experience.
Restaurants leverage menu design to promote their brands, highlight special
offers and differentiate themselves from competitors.
For example, restaurants may use creative visuals or add descriptions of
delicious dishes to emphasize their offerings. Pricing models are also an
important element of menu design since they have a great impact on how
customers perceive value. Adding discounts and promotional offers to certain
items can create attractive pricing propositions that entice people to choose
those options over regular priced items.
Additionally, strategic placement of these discounted items within the menu
helps draw attention to them while increasing sales. Given the importance of
menu design in restaurant marketing strategies, restaurateurs must ensure
that their menus reflect their branding objectives and pricing goals.
It is essential for menus to be well-designed with clear and concise
information about each item for maximum effectiveness. By staying up-to-date
with trends related to menu design and taking advantage of available tools
such as digital menus, restaurants can take full advantage of this powerful
marketing strategy.
Frequently Asked Questions
How Can Menu Design Help To Attract New Customers To A Restaurant?
Menu design can be a powerful tool in attracting new customers to a
restaurant.
By creating an attractive menu layout, restaurants can showcase their
offerings and establish pricing strategies that appeal to potential patrons.
Furthermore, the use of color and font size can help draw attention to certain
dishes or specials, highlighting them as exciting options for customers.
Ultimately, effective menu design has the power to make guests feel
comfortable with their choices while also providing an incentive for trying
something new.
How Often Should Menus Be Updated To Remain Effective?
The frequency of menu updates is an important factor to consider when
creating a successful restaurant marketing strategy.
The visual appeal and pricing of the items listed on the menu should be
updated regularly in order to remain effective, as customers will respond
favorably to new offerings.
Moreover, regular changes can help keep customer interest alive and create
more opportunities for promotional activities such as special discounts or
limited-time offers.
By introducing new dishes and keeping prices competitive, restaurants can
make sure that their menus are attractive enough to draw customers back
again and again.
How Can Menu Design Be Used To Differentiate A Restaurant From Its
Competitors?
Menu design is a key factor in restaurant marketing, as it can be used to
differentiate one eatery from its competitors.
Creative layouts and visual cues may draw diners’ attention to different items
on the menu or pique their interest with unique design elements.
Furthermore, effective use of menu design can create an atmosphere that
reflects the brand’s identity and encourages customers to return again and
again.
How Can Menu Design Enhance The Customer Experience?
Menu design can be used to enhance the customer experience by leveraging
both menu psychology and portion control.
By creating an aesthetically pleasing, easy-to-navigate layout that is tailored
to customers’ preferences, restaurants are able to create a better overall
dining experience.
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Additionally, understanding proper portion sizes and incorporating them into
their menus allows for greater satisfaction with each dish served.
Furthermore, utilizing colors, fonts, images and other elements of graphic
design can help craft an inviting atmosphere that encourages diners to want
to return again in the future.
How Can Menu Design Be Used To Increase Profitability For A
Restaurant?
Menu design can be leveraged to increase profitability for a restaurant.
By optimizing the menu with various price points, businesses are able to
maximize profits by offering options that appeal to different customer
segments and their respective willingness-to-pay.
Additionally, strategically positioning items on the menu allows restaurants to
influence customers’ decisions and encourage them towards higher margin
dishes or combos.
Ultimately, creating an optimal menu is key to driving up sales while also
increasing gross margins.
Conclusion
Menu design is an important tool in restaurant marketing that should not be
overlooked.
An effective menu can attract new customers, set a restaurant apart from its
competitors, enhance the customer experience, and increase profitability for
the business.
It is important to regularly update menus to ensure they remain fresh and
relevant while also keeping up with changing tastes and trends.
By taking into account these factors, restaurants can develop powerful menu
designs that will drive success on all fronts.
Ultimately, investing in quality menu design ensures that businesses have the
best chance of achieving their goals.
Module 5
Menu Development
• Menu Management
• Menu Function
• Step in determining or identifying an operation’s goals and function in
the marketplace
• Organizing a menu
• The structure of standard recipe method
• Function of standard recipe Q factor
MENU MANAGEMENT INTRODUCTION
Study Questions THERE IS NO STRONGER MULTIPURPOSE TOOL FOR A RESTAURANT
1 What function does a menu serve? THAN ITS MENU. A MENU CAN HELP COMMUNICATE THE GOALS OF AN
2 What are the different types of menus? OPERATION TO ITS TARGET MARKET. A MENU CAN BE A SALES TOOL.
3 What factors must be considered when creating a menu? A MENU CAN HELP MANAGERS ASSESS THE OPERATION’S
4 What are the various methods used to price a menu? STRENGTHS AND WEAKNESSES. AND, A MENU SHOWCASES THE
5 How can menu sales be analyzed? FOOD THAT THE KITCHEN STAFF HAS PREPARED TO OFFER.
Key Terms MENU OVERVIEW
À la carte menu One of the most important interactions people have with a given operation is
California menu through the menu, as illustrated in Figure 2.1. It is where sales are initially
Cyclical menu won or lost. If, for example, guests like what is on the menu, and the prices
Du jour menu seem fair, then they are likely to place an order. If, on the other hand, they do
Fixed menu not like what they see, then the operation may lose business. Of course,
Limited menu preparing and delivering what is on the menu matters greatly, but if a person
Limited time offer is not interested enough to order something from the menu in the first place,
(LTO) menu then the product itself does not matter.
Prix fixe menu The menu functions in two ways—for planning purposes and communication
Table d’hôte menu purposes. For the planning function, the menu provides an end goal to which
Profit all the employees work. The chefs gear each stage of food production toward
Margin putting out the best product at the best price. The menu also helps the staff to
Target margin organize themselves by asking certain important questions:
Menu boards • What is the target market? What segments are we aiming to serve?
Spoken menu • What types of food and service do these segments of the market expect?
Sales mix analysis • Are the ingredients for the menu items readily available and cost-effective?
Menu engineering • Can the menu items be prepared in the most appealing way possible?
Sales volume • Is the menu best serving the needs of our target market?
Sales volume • Is the menu best serving the goals of the operation?
percentage So, using the menu as a planning tool actually helps employees stay focused
Stars on all the behind-the-scenes work and how to best accomplish the goals of
Plow horses the operation.
Puzzles As a marketing and communication tool, the menu functions in three
Dogs ways:
Food cost percentage • Informing guests about what the operation offers
method • Selling products
Contribution margin • Creating identity
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Informing Guests There are many types of menus. An understanding of these broad categories
The most basic function of the menu is to tell guests what the operation has to of menus is a good first step in determining or identifying an operation’s goals
offer. But the menu also presents an opportunity to distinguish these items and function in the marketplace. The different menu types are listed in Table
from those of the competition. Many places serve a burger of some sort, but a 2.1.
chef can use the menu to describe exactly how a burger is prepared and why
it is better than any of the competitors’ burgers. Do the chefs use a particular
kind of meat or spice? Do they cook it in a different way? Do they offer
different condiments for the dish? Chefs can describe all of this detail on the
menu.
Check out the two descriptions of burgers in Figure 2.2. Which is more
appealing to you?
In addition, the menu informs guests about potential health concerns, such
as the risks of eating undercooked food, ingredients that may cause allergic
reactions (for example, tree nuts), or particularities of specific dishes (for
example, degrees of spiciness).
Selling Products
The menu may be an operation’s best sales tool. It can greatly influence what
guests decide to order. How? By appealing to the guests’ appetites through
well-written descriptions of menu items. Guests are also influenced by the
placement of items on the menu. For instance, marketers and chefs may
choose to highlight the items they most want to sell by placing those items at
the top of the menu, putting them in a bolder or bigger font, or even by boxing
off the items altogether in a separate category. The more visual attention
certain items attract, the more likely guests are to consider and order them. A
“Daily Specials” page is one way to use the menu to sell product.
Creating Identity
The menu also helps create the image or identity of an operation. The items
listed on a menu say a lot about an operation, but so does the design of the
menu itself. The font, color scheme, and material or paper stock the menu is
printed on all help communicate the identity of an operation. For example, a
menu using a heavy paper stock, bound in a leather cover, and listing menu
items in a script font may give the impression of a high-end, formal operation.
On the other hand, a menu presented on one sheet of regular paper stock
with menu items printed in a large, colored font may create the impression of
an informal, casual operation
MENU TYPES

35
 only the guests who want that food—for instance, an operation might have a
menu based solely on fried chicken and sides that might go with fried chicken.
In a full-service operation, chefs or managers can divide entrées by
categories, such as beef, pork, chicken, lamb, veal, ham, shellfish, fish, pasta,
egg, cheese, and vegetarian dishes. They maintain balance through the
choice of vegetables, sauces, and potatoes used to complement entrées. For
example, if a menu contains ham and chicken, offering sweet potatoes or
yellow winter squash is a good balance. Four to six vegetables, including
potatoes, should meet most menu needs. Salads and salad dressings can
also reflect balance and variety.
The number of desserts on the menu depends on guests’ tastes and past
sales. Some operations may need to serve only ice cream or sherbet to
satisfy their guests. Others may need to combine these with a limited number
of pies or cakes. And it is fairly easy to add puddings and fruit to extend
dessert selections.
ORGANIZING A MENU
Most menus organize food items according to the order in which they are
usually eaten, as illustrated in Figure 2.3, and listed below:
1 Appetizers
2 Soups
3 Salads
4 Sandwiches (sandwiches can be offered before or after salads)
5 Entrées
6 Vegetables
7 Desserts
8 Beverages
Variations in these categories depend on what an operation offers and the
image that management wants to promote. For example, a restaurant that
offers small plates for sharing might break the menu up by types of small
plates (often cold or hot, or by type of meat or vegetable in order to
encourage choosing from multiple parts of the menu.
In larger operations, chefs prepare food using a variety of cooking methods,
such as poaching, roasting, grilling, frying, and baking. This results in a menu
with food items that vary in taste, texture, and seasoning for the right amount
of contrast to meet the tastes of a variety of guests. However, you can also
find operations that focus their menus around one type of food, and therefore KNOWLEDGE CHECK
1 What are the primary functions of
36
the menu?
2 List the different types of menus. 3 How are most menus organized?
CREATING A MENU
A menu also needs to reflect a realistic understanding of what chefs are
capable of producing in a cost-effective way. There are two separate steps in
menu creation—planning and design.
Planning
In the planning phase, managers and chefs must think about the following:
• Physical layout of the facility
• Skill of personnel
• Availability of ingredients
• Wants and needs of the target market
• Expectations of the target market
• Profit margin
Physical Layout of the Facility
Planners must take the physical layout, or space, of the actual operation
into account when they design a menu. For example, planners must take
into consideration the size of storage facilities, preparation and cooking
areas, and the service and dining areas. An operation’s physical layout often
determines the kind of menu that chefs will be most capable of producing;
an operation might not succeed if planners put out a menu that the chefs
cannot produce efficiently.
Skill of Personnel
Planners must also consider the staff of an operation. If management wants
to offer a menu of food items that require highly skilled, delicate preparation,
then they need to have cooks on staff that can fulfill those needs. On the
other hand, if managers want a menu with ingredients that are easy to work
with and inexpensive to produce, it would be a mistake to employ a kitchen
staff that is highly trained and experienced (and, therefore, more costly). In
short, the operation’s personnel must fit the menu that planners create.
Availability of Ingredients
Menu planners must be aware of the price and availability of ingredients
when planning menus. Today, fresh, seasonal ingredients are very popular
with guests. But, a menu that consists of many high-priced ingredients might
end up losing money for the operation because food costs will make the items
unprofitable. Planners need to consider not only what their operation can
produce well, but also how cost-efficient the items are to produce.
37
Wants and Needs of the Target Market
Sometimes, the personal desires of an operation’s owners or managers
overtake the wants and needs of the market they intend to serve. This is a
mistake. The focus should always be on the desires of the guests. An
example of this might be an owner who loves an expensive and hard-to-
obtain type of coffee that, once put on the menu, does not sell any better than
a less-expensive, more readily available coffee.
Expectations of the Target Market
Expectations are closely related to the market’s wants and needs. But the
expectations of the market are more important after an operation has become
established rather than before. Not meeting expectations becomes more
dangerous the longer an operation exists, because management can become
complacent over time. If the operation does not stay true to the needs of its
guests, they might choose to spend their money elsewhere. Consistency is
one of the cornerstones of success in the restaurant and foodservice industry.
Profit Margin
No business can survive if it is not producing at profitable levels. Planners
must create the menu with profitability in mind throughout the entire process.
Profit is defined as the amount of money remaining for an operation after
expenses, or costs, are paid. So, for restaurant and foodservice operations,
this is the amount of money left over from the sale of food and beverages
after the cost of preparing them and paying for other overhead expenses, like
rent and heat. This difference is also called the margin; most restaurant and
foodservice operations set a target margin—the margin they aim to meet—for
their operation.
Designing
Once chefs and managers have decided on the items that will be included on
a menu, the design phase can begin. Well-designed menus are pleasing to
read, easy to understand, and clearly express the identity and character of the
operation as a whole. But how do designers actually accomplish this?
Designers must consider the following elements when laying out a menu:
• Medium (materials and method)
• Layout (how it is arranged)
• Color
• Font
• Art
Medium
An operation’s menu can be presented in a number of ways. Most operations
use some sort of paper with the menu items printed on it. The paper stock
that designers use can help to express the identity of the operation. Thicker
paper stock is more expensive and durable, whereas thinner stock is less
durable and more casual. Additionally, many menus are laminated. This is
done to save the menu, ensure its durability, and make it easier to keep clean.
Sometimes, an operation may opt to put its menu on a different medium
altogether. For example, a menu can be written with chalk on a blackboard
(see Figure 2.4)
that is visible to all the patrons in a dining room, or even on a wall in thedining
room. These types of menus are called menu boards. Finally, at some
operations, the servers memorize the menu and relay it verbally to the guests.
This is called a spoken menu, and it can help personalize the menu and
create a more intimate feel for the operation as a whole.
Layout
How the menu is categorized and sequenced adds to the identity of an
operation. Is everything on one page, or are items spaced out over multiple
pages? Are items crammed together in a busy, hectic way, or are they spaced
wide apart in a calmer, more subdued manner? All of this can say a lot about
an operation’s personality. In addition, the layout can help emphasize items
on
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the menu that management wants guests to order most frequently.
Color
Color is obviously very important to any visual presentation. The colors
chosen by an operation could be the difference between being considered
romantic or rowdy, sophisticated or casual, expensive or inexpensive.
Sometimes the color can even signal to patrons what type of food will be
served.
For example, various blue tones could signal seafood, while a blend of
orange and red may signal a spicier cuisine, such as Cajun food. When
planning the colors of a menu, designers should think about the feeling they
want guests to get when considering the operation. Figure 2.5 shows one
menu’s color schemes.
Font
Like many elements of design, fonts can work in different ways. A font can, of
course, highlight certain elements on the menu. Italic or bold fonts will stand
out on the page and draw guests’ attention. A large, dark font might be helpful
for an operation catering to segments of the market who might appreciate
easy-to-read print, and sometimes using italics helps provide contrast
between the name of the menu item and its description. Fonts can also signal
the personality of an operation. For example, flowing, bubbly fonts might be
appropriate for a kids’ menu (see Figure 2.6). Scripted fonts create a classical
feel, while clean, rigid lines speak to a more modern approach. Menu
designers must be careful when choosing a font for all of these reasons.
Art
Finally, the art on a menu can say a lot about an operation. Illustrations say
“kid-friendly” to many people, while no art at all might say the opposite. A
picture of an old 1950s car will say “diner” to some guests, while a chili
pepper will say “spicy cuisine” to others. The borders that divide various
segments of the menu also fall under the category of art. What kinds of lines
are incorporated in the menu? Straight lines with lots of angles give off a
different vibe than borders with more arcs and curves.
ESSENTIAL SKILLS PLANNING A MENU
Planning a menu is not as easy as simply listing all your favorite dishes or all
the dishes that you find easy to cook. It takes thought and planning to ensure
that you are presenting the right mix of food to the desired guests. Here is a
process that can help you develop a successful menu:
1 List all the menu items that you think might be successful. Take into account
guest preferences, goods available from your suppliers and their prices, the
time of year, and any other factors that you think could be important. See
Figure 2.7a.
2 Eliminate items from the list that might not work on the finished menu. For
instance, look for garnishes that take too long to prepare or multiple dishes
featuring the same main item. Unless your operation is a steak house, how
many steaks do you really need on the menu?
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3 Fine-tune the remaining items to fit your restaurant. Figure 2.7b shows a
menu in the fine-tuning phase.
For example, if your operation has an Italian theme, then your award-winning
chili really does not belong on the menu.
4 Make sure that all the items can be successfully prepared within your
existing structure at an appropriate cost.
No matter how elegant and delicious your potato tuiles may be, if it takes one
chef two hours each day to make them and you only have two other chefs,
the tuiles might be too expensive for your menu. Save special
presentations like this for major events, such as wine dinners or private
parties.
5 Identify the winning selections and create your menu. If these items are new
to your restaurant, or you have hired new staff who have not prepared or seen
any of these dishes, make sure to build some training time into your schedule.
Plan both to teach the cooks how to make the items and to teach the service
staff how to describe them properly.
6 Save the documents you have created when coming up with the final menu.
It may be that a dish that would be unsuccessful now will be a hit in a year or
two. Do not waste all your work.
7 Once you have fully planned out the content of your menu, it is time to
design it!
MENU SALES MIX ANALYSIS
Managers need to monitor the effectiveness of menu items to maximize
profits. A method called the sales mix analysis helps do that. A sales mix
analysis is an analysis of the popularity and profitability of a group of menu
items. To effectively do this, the analysis should be done at least four times
per year. The analysis includes determining which menu items are most
popular and which contribute the most money to expenses and profit.
Basically, you compare menu items in terms of sales and profitability. The
results of this analysis determine whether managers need to make changes in
menu pricing, content, or design.
While there are several methods available to do menu analysis, one of the
most popular is menu engineering. It systematically breaks down a menu’s
components to analyze which items are making money and which items are
selling. Then, managers know which menu items to leave alone, which need
to have an increase or decrease in price, which to promote, and which
to eliminate.
Managers can determine the sales performance of each menu item after the
restaurant has been open for some time and they have enough sales data to
analyze. Gathering information for three months or longer provides more
useful results than data from a shorter time period
You start to gauge performance by looking at sales volume. The sales volume
of a menu item is the number of times the item is sold in a time period.
Generally, managers sort the sales of items by category (appetizers, entrées,
etc.). The quantity of each item sold can be recorded by hand or by a point-of-
sale (POS) system. Managers can also use sales volume information to
compare the number of each menu item sold to the total number of items sold
on the entire menu in the same time period. So, each menu item’s sales can
be expressed as a percentage of total sales. This is called the sales volume
percentage.
PRICING THE MENU
Pricing the menu is a critical process for any operation. Price serves two main
purposes—it provides information to guests, and it determines profitability.
The price of items on a menu indicates the market category in which the
restaurant falls. This, in turn, sets guests’ expectations as to the quality of the
food, level of service, atmosphere to expect, etc. Guests, for example, will
expect more by way of service, quality, and atmosphere for a $50 steak
than for a $10 steak. With increased guest expectations comes the need to
execute all levels of food preparation and service on a higher level as well.
Management needs to make sure that pricing aligns with the goals of the
operation and the skill level of the staff.
Price also determines profitability by ensuring that an operation is bringing
in more money than it spends for the product or service. The price of a
menu item must account for all of the costs involved in producing that item
for the guest. This includes food costs, labor costs, and overhead costs.
Then, management must add in the amount of money it wants, and can
reasonably get, in profit. An item that is overpriced in a particular market will
likely not sell enough to be profitable. In contrast, an item that is underpriced
may sell well, but it will lose money because it costs the operation more than
it is bringing in. Striking the right balance requires careful planning and
consideration.
Classifying Menu Items
There are four key categories of menu classification—stars, plow horses,
puzzles,
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and dogs. After grouping all the menu items into one of those four key
categories,
it is time to make decisions. When making decisions, refer to how close on
the graph an item is to the next category (see Figure 2.8). For example, an
item that falls into the puzzle category but has a popularity number very close
to the star category should be handled differently than one that has a
popularity number far below the star category. The following explains the four
categories:
Stars: These items are both popular and profitable. For the most part,
stars should be left alone. Locate them in a highly visible position on
the menu. Test them occasionally for price rigidity—that is, are guests
willing to pay more for these items and still buy them in significant
quantity? If so, these items may be able to carry a larger portion of any
increase in cost of food and labor. They are the celebrities of the menu,
the highest-priced stars, and they may be less price sensitive than any
other items on the menu.
• Plow horses: These items are popular, but less profitable. These items are
often an important reason for a restaurant’s popularity. Because they are
less profitable, one option may be to increase their price. However, this
should be done very carefully. If a plow horse is highly price sensitive—that
is, if guests see it as a good price-value and that is the reason they come
to your restaurant—then try to pass on only the food-cost increases of the
item to the menu price. If it is only marginally profitable (close to the dog
on the graph), drop it from the menu and make a substitution for it.
When increasing the price, always test for a negative effect on sales. Make
any price increase in stages (e.g., from $4.55 to $4.75, then $4.95). If the
item is an image maker or signature item, hold its current price as long
as possible. On the other hand, if the listing is a non-signature item with a
low contribution margin, move the plow horse to a lower-profile position
on the menu. Attempt to shift demand to more profitable items through
merchandising and menu positioning. Another solution might be to reduce
the item’s standard portion without making the difference noticeable. Also,
try adding value to the item through menu packaging. In other words,
merchandise the plow horse by packaging it with side items to increase its
contribution margin.
• Puzzles: These items are unpopular, but very profitable. As a result, the
number of puzzles on a menu should be limited. One of the best solutions
to helping out a puzzle is to decrease its price. While this may appear
counterproductive to making a profit, consider that the guest may not
perceive it as a fair value. If an item is not selling, no profit is being made
anyway. Another option is to leave its price alone and reposition it on the
menu, perhaps featuring it in a more popular location. Additionally, try to
advertise it by using table tents, chalkboards, or suggestive selling. Or, you
can rename it. A puzzle’s popularity can be affected by what it is called,
especially if it is unfamiliar to guests. Remember that even if a puzzle is not
selling well, it can make a lot of money, relatively speaking. If sales can be
substantially increased without decreasing the price, the item could easily
become a star.
Classifying Menu Items
For a video on classifying menu items, please go to:
Textbooks.Restaurant.org/Videos.
VIDEO
Dogs: These items are unpopular and unprofitable. Eliminate all dog items
if possible. Replace them with more popular items. Take advantage of hot,
trendy, or cutting-edge listings. Restaurant and foodservice operations are Pricing Menu Items
sometimes intimidated by influential guests who want managers to continue There are many methods of pricing menu items. Here, two main methods are
carrying a dog item on the menu. The way to solve this problem is to carry compared: the food cost percentage method and the contribution margin
the item in inventory (assuming it has a shelf life), but not on the menu. method:
Offer the special guest the opportunity to have the item made to order on • Food cost percentage method: Set the percentage of the menu price that
request. You can charge extra for this service. This would raise the dog’s the food cost must be, and then calculate the price that will provide this
price to puzzle status. percentage using the following formula:
Some items in the dog category may have market potential. These tend Item food cost ÷ Food cost percentage = Menu price
to be the more popular dogs, and may be converted to puzzles by Because food cost percentage is dependent on the costs of the food and
increasing prices. Another detail to consider is that the menu may have its preparation within the restaurant or foodservice operation, an accurate
too many items. It is not unusual to discover a number of highly unpopular food cost percentage will be different for each menu category: appetizers,
menu listings that have little, if any, relation to other more popular and salads, entrées, signature dishes, specials, desserts, beverages, etc.
profitable items held in inventory. Do not be afraid to eliminate dogs, • Contribution margin method: This is a pricing method that works for à la
especially when demand is not satisfactory. carte menu items as well as menu items that comprise a meal (soup, salad,
entrée, etc.). This method uses operation-wide data to determine a dollar
amount that must be added to each major menu item’s food cost. The
managers of a restaurant or foodservice operation can use the same
contribution margin for all menu items, or they can calculate separate
contribution margins for different menu categories. There are two steps to
the formula:
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(Total nonfood cost + Target profit) ÷ Number of guests = Contribution
Margin
Contribution margin + Food cost = Menu price
In addition to these methods, there are two other methods that an operation
can use, but only for major menu items. These methods are the set dollar
amount markup and the set percentage increase method:
• Set dollar amount markup: This method simply adds a fixed dollar
amount to the food cost of an item. In order to utilize this method, you must
know the food cost and the dollar amount of the markup. The equation
works as follows:
Food cost + Markup = Menu price
The markup is calculated based on the following:
Profit per + Labor cost per + Operating cost = Markup menu item menu item
per menu item
• Set percentage increase method: This method builds on the set dollar
amount markup method and takes it a step further. Basically, managers
calculate the markup as described for the set dollar amount markup for
one or several menu items. Then they determine what the percentage
markup is in comparison to the items’ food costs.
Food cost × Percentage = Markup
Markup ÷ Food cost = Percentage
Using the markup and food costs from the set dollar amount markup method
allows managers to calculate a percentage markup for all menu items.
ESSENTIAL SKILLS PRICING THE EXTRAS
To determine accurate pricing and food costs, restaurant and foodservice
operations must take into account not just the food the guests order, but the
food that the guests do not order but receive anyway: the salt and pepper on
the table, the bread and butter or olive oil provided, the amuse-bouche or pre-
dessert, the ketchup, the jelly packets—the list is long. And all of those little
things can add up quickly. The total cost of these items is often called the Q
factor and is usually factored into the cost of each entrée on the menu. Here
is how to calculate the Q factor:
1 List all the possible food that you may provide guests for “free.” In addition
to the items already mentioned, include half-and-half, sugar cubes, sliced
lemon, and so on.
2 Determine how much of each item would be used by a typical consumer (for
instance, 1 ounce of butter or 1⁄ 8 teaspoon of salt). An easy way to do this is
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to keep track of how much of each item is served over a period of time, and
then divide by the number of entrées sold during this period. For instance, if
you serve 800 entrées in a two-week period and you use 100 lemons during
this time, placing a half-slice of lemon in each glass of water served, you
would divide 100 lemons by 800 entrées to obtain 0.125 (or 1 ⁄ 8 ) lemons
served per entrée.
3 Calculate the cost of each item based on the average portion used. If each
lemon costs $0.10, then the cost of each serving of lemon is $0.0125.
4 Once you determine the cost of each serving of each item, add them all
together. This total is your Q factor.
5 When costing your entrées, add the Q factor as an ingredient in each.
Using the Q factor is the most efficient and accurate way to determine your
costs and prices. Otherwise, you will be basing your prices on incorrect costs
and are likely to lose profits.
KNOWLEDGE CHECK
1 When creating a menu, what elements of planning and design
should be considered?
2 What is menu engineering?
3 What are the four menu item categories derived from menu engineering?
SUMMARY
In this chapter, you learned the following:
• The menu serves two purposes: planning and communication. For the
planning function, the menu gives an operation an end goal to work toward.
Using the menu as a planning tool helps a manager stay focused on all the
behind-the-scenes work and how to best accomplish an operation’s goals.
• As a marketing tool, the menu informs the market about what the operation
offers, sells products, and creates identity.
• There are many types of menu, including á la carte, du jour, cyclical, limited,
limited time offer (LTO), fixed, California, prix fixe, and table d’hôte.
• Most menus organize food items according to the order in which they are
eaten: appetizers, soups, salads, sandwiches, entrées, vegetables, desserts,
and beverages.
• The two steps in menu creation are planning and design. Planning includes
consideration of the physical layout of the facility, skill of personnel, availability
of ingredients, target market’s wants and needs, target market’s expectations,
and profit margin. When designing a menu, consider the layout, color, font,
and art.
• It is critical to the success of an operation that management have the 4 The menu price minus the food cost equals the
knowledge and means to analyze how well items on its menu are performing. A menu mix.
Menu engineering is the most popular method, as it systematically breaks B standard food cost.
down a menu’s components to analyze which items are making money and C food cost percentage.
which items are not. D contribution margin.
• Pricing on the menu provides information to guests and determines Language Arts: Lots of Menus
profitability. Imagine that you could open any type of restaurant in the world. Identify three
• The classifications that come from menu engineering are star, plow horse, different types of menus you would use at your restaurant. Write a one-page
puzzle, and dog. typed paper describing the three types of menus you would select, and
• The food cost percentage method, contribution margin method, straight identify how you would use them in your operation. Be prepared to share your
markup method, average check method, set dollar amount method, and set paper with the class.
percentage increase method are all ways to price menu items. Science: Making Money
CASE STUDY FOLLOW-UP There are many types of commercial cooking equipment available. If you
Refer back to the unit-opening case study, and answer these questions. could plan the kitchen layout of your dream restaurant, what type of
Question 1: In their new restaurant, Carl and Leo want to start with a limited equipment would you include? Would you include a convection oven or
menu but want to be profitable. How can menu analysis help maximize their conventional oven? Would you use gas-powered burners, or electric induction
chances for a profitable limited menu? cooktops? Write a one-page paper answering the previous questions. Explain
Question 2: How can Carl and Leo’s menu serve as a marketing tool? Give how your decision will impact menu planning and profitability in the restaurant.
examples. Math: Can You Make a Profit?
EXAM PREP QUESTIONS Create a 10-item menu of your own. Research food costs for your ingredients
1. A menu that prices all items separately is called at your local grocer or online. Using the food cost percentage method, figure
A limited. out your menu item prices. Be prepared to present to the class and show your
B prix fixe. estimated food cost research and the math you did to come up with your
C á la carte. menu prices.
D California. Food cost percentage method:
2 Which menu item classification has a low menu mix percentage Item food cost ÷ Food cost percentage = Menu price
and a low contribution margin? Collaboration: Targeting Teens
A Dog Working with two or three other students and using poster board, create and
B Star design a menu that appeals to the teenage target market. Make sure to
C Puzzle include at least eight menu items.
D Plow horse Career Readiness: How Do You Do It All?
3 What type of menu lists the menu items that are available Phone the manager of your favorite white-tablecloth restaurant and ask if you
on a particular day? could schedule some time to interview him/her over the phone. Tell the person
A Fixed you are a student who would like to ask some questions about menu planning
B Du jour and food costing. What type of menu is used? Are seasonal ingredients
C Limited offered? What methods are used to price menu items? How are nonalcoholic
D Prix fixe beverages marked up? Who is the target market? Develop a list of 10
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questions relating to how the management plans menus. Organize your
thoughts and answers into a one- or two-page typed paper that you can share
with the class.
Critical Thinking: Making a Case
Bobo’s Bistro recently changed its menu and pricing. Sales seem to be
decreasing rather quickly. Along with this, a lot of food is being thrown out
because it is going bad before it is used. Guests are not ordering the favorites
as much as they used to. As the manager, what do you need to do? What do
you need to look at? Do you consider one factor or multiple factors? How
should this be solved? Write out a proposal explaining what needs to be done
and what you plan to do to fix it.
Module 6
Menu Format
• Menu Writing
• Menu description
• Importance of menu description
• Steps in menu description
• Menu cover
• Menu layout
• Menu copy
Menu Descriptions: How To Write a Menu (With Examples)
Creating menu descriptions is a crucial component in the success of any
restaurant business. Thoughtfully written restaurant menu descriptions have
the potential to not only attract customers but also effectively convey the taste
and appearance of a dish, ultimately leading to increased sales.
In this article, we will show you how to write a menu, and we will provide you
with examples. So let’s dive into it!
What is menu writing?
According to the National Restaurant Association, menu writing is a process
of writing menu descriptions of food items that are appetizing, informative,
and accurate. Menu writing directly influences restaurant sales and is part of a
restaurant marketing plan.
However, not all restaurant owners go in depth when it comes to carefully
designing their menu descriptions, which can negatively impact profits and the
overall growth of the business.
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What is the importance of menu descriptions?
In today’s competitive restaurant industry, businesses must create
informative, engaging, and descriptive menu descriptions in order to stand out
from their competitors. Additionally, keeping menu descriptions short has a
great influence on customers’ buying decisions as well. The National
Restaurant Association conducted a survey which showed that 87% of diners
say that menu descriptions are a crucial factor in deciding what to order.
Here are the following factors that influence customer buying decisions:
A dish is made with organic ingredients to show you care about health and
the environment.
Ingredients are from local farms to show you support local farmers.
The use of proper names and authentic ingredients of the geographic origin
of dishes to give customers a more authentic experience.
Add menu items that show your culture to make customers feel like they
are in a unique place.
Tell stories about your dishes, the cooking method, or the geographical
origin of your cuisine to make each dish unique.
Use descriptive and exciting words to make the food sound appetizing and
to make your customers crave it.
How to write a powerful menu description?
Below is a list of 13 menu writing tips that will help you to create amazing
descriptions to match the visual design of your menu. If you need help
designing your menu, check out our guide on how to make a restaurant
menu.
1. Highlight the origin of your ingredients
When you begin to write menu descriptions, include information about
the origin of each meal or the location of the ingredients to suggest
quality and freshness. Thanks to this simple technique, you appeal to
customers who value locally sourced and sustainable products. In addition,
you can consult your suppliers for detailed information about the
ingredients you buy from them.
Are customers willing to pay more for a dish prepared from local ingredients?
Yes, most customers will pay more for a dish if it is prepared from local
ingredients or produced sustainably, which is a great way to increase profits.
Here are some of the numbers you can expect to see:
According to a survey by Nielsen, 46% of consumers are willing to pay more
for products and services that are locally sourced.
A survey by the National Restaurant Association found that 60% of
consumers are willing to pay more for food produced sustainably or
organically, which often includes local sourcing.
According to Riviera Produce, customers are more likely to return to your
restaurant when your menu is in tune with nature, shifting just the way
seasons do.
On the other hand, be careful when using unfamiliar ingredients in your menu,
as it may scare your customers. If you need to use untypical ingredients,
provide a brief description to avoid frightening customers who may not be
familiar with the ingredient.
2. Label your menu items
You can increase sales if you meet certain needs and beliefs. That’s why it is
a good idea to include information about dietary restrictions, customs, and
religious practices. The growing number of customers is interested, for
example, in vegetarian and vegan diets. It is also a good idea to include at
least one dish in your menu, e.g., for customers who must avoid certain
products for health reasons and need to be on a gluten-free or lactose-free
diet. You can also consider adding dishes to your restaurant’s menu that are
religious-specific. Remember to research first and assess the potential
number of interested customers before implementing such a change. To
highlight the dishes, they need to be clearly labeled. In UpMenu, you can use
ready-made labels for your entire menu. You can also create your own labels
and use them on your menu template.
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3. Stimulate the senses with rich menu descriptions
It is essential to give each menu item an appealing name, provide a list of
ingredients, and add persuasive food descriptions to entice customers to
order them. Let your customers imagine each dish’s flavors, textures, and
aromas. Naming each dish is important, as it helps sell it.
However, don’t forget about your loyal customers. If they have visited your
restaurant before, they probably know what they are looking for, so it is
important to name a product clearly, meaning that a customer shouldn’t need
to read the whole description to understand a dish.
Fast facts about menu descriptions
A study by Dr. Wansink of Cornell University found that descriptive menu
labels increased sales by as much as 27 percent.
According to a study presented by Posist, appetizing food descriptions can
provoke 45% of people to buy specific food items.
McDonald Paper shared that sales increased by 25% when the owner
learned how to write to describe food. If you neglect to focus on your menu,
you’re cutting down your potential sales and revenue.
While creating your menu descriptions, try to find the right balance.
Remember that you don’t have to use adjectives for all ingredients. Instead,
concentrate on the ones that distinguish your dish.
Recommendation
If you don’t know which adjectives to use while menu writing, you can:
Check a list of popular adjectives like a list of Food Adjectives
Use a tools to generate a list of adjectives like
Adjective Finder
1000+ Words to Describe
In our example, we checked the adjectives for meat, but you can search
adjectives for any other dish by simply putting the word you search adjectives
for in a tool to generate adjectives.
Incorporating words that evoke the senses can excite diners and create their
expectation of what they will get. Follow these three steps while menu writing.
Start with describing textures and flavor, for example,
Crispy
Velvety
Juicy
Succulent
Zesty
Savory
Spicy
Flaky
Buttery
Silky
Melt-in-your-mouth
Use additional words that could describe the cooking process of the
dish, for example, 4. Infuse a sense of nostalgia and storytelling into your menu items
Slow-cooked By creating backstories that evoke emotions and memories and by tying them
Char-grilled to the history or culture of your restaurant, you can create a sense of
Wood-fired nostalgia.
Roasted Discuss with your chef which dishes you offer have an interesting history of
Braised creation and which recipe has a captivating story. You can use this story to
Smoked create menu descriptions. If you don’t have such a story, use your imagination

and make it up 🙂
Flash-fried
Sous-vide
Griddled Keep the number of dishes on your menu, the description of which will be
Baked based on history. Create a maximum of three such menu descriptions.
Use adjectives describing how a customer will feel after eating your
dish, for example:
Satisfied
Nourished
Fulfilled
Content
Gratified
Energized
Refreshed
Relaxed
Satiated
5. Ensure your menu descriptions are short and descriptive
Rejuvenated
Don’t create too long menu descriptions. As we already mentioned, menu
Comforted
descriptions that use descriptive adjectives can increase sales by up to 27%,
but if they are too long, there is a risk that your customers won’t read them.
Again, the key is to keep balance.

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 communication. Depending on your communication style, decide if it is a good
option for your restaurant to have funny menu descriptions or not. Always
remember about your brand consistency.

6. Use high-quality, appetizing photos to attract customers

Regarding the paper menu, restaurants usually don’t put photos of the dishes.
There are several reasons for that:
Including photos in a paper menu can make the menu too large
Photos may lead to customer dissatisfaction if the dish served in a restaurant
is not the same as in the photo
Too many photos distract customers’ attention from menu descriptions
However, we strongly recommend adding menu item photos to your online
restaurant menu.
In UpMenu, you can choose one of the available templates for menus, add
photos of the dishes, and menu descriptions. In addition, we prepared a
helpful guide about food photography tips to help you take appetizing photos
of your dishes.

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8. Never forget about your target audience
Another aspect is to tailor your menu to suit the preferences and tastes of
7. Consider creating funny menu descriptions
your target audience. Depending on who your target customers are, your
To add a sense of humor and personality while creating a menu for a
restaurant website, the menu items your offer, and their menu writing should
restaurant, consider adding witty and creative descriptions that add a
be different. It would help if you used other words to describe your dishes for,
lighthearted and fun tone to your offerings.
for example, students and others for families with children.
Funny menu writing may result in attracting many customers. However, it
9. Keep your menu descriptions fresh and up-to-date
doesn’t necessarily suit each restaurant’s overall brand and tone of

47
Remember to review your menu descriptions regularly. Check your sales
reports and pay attention to any tendency that you notice. For example, some
dishes become your best sellers because of their photos and menu
descriptions.
If you implement any ingredient changes or introduce a seasonal offer,
update your menu. Unfortunately, each change would require you to print
your menu again for a paper menu. That’s why we recommend creating an
online ordering menu for your restaurant, which you can update quickly via an
online ordering platform.
Try to balance keeping the menu fresh and exciting while ensuring
consistency and stability for customers.
10. Make sure your multi-language menu is easy to understand.
If your customers speak different languages, you can make it easier for them
to order by creating separate menus in each language or using graphics to
help them find the right section. One way to do this is by using different font
colors or italicizing the text to distinguish between the languages. This can
save customers time and make their dining experience more enjoyable.
If you offer a multi-language paper menu, don’t forget to create a restaurant
website. Thanks to that, you will increase the number of potential customers.
11. Create your own menu descriptions
It may sound ridiculous but believe us, it’s an important thing. Prepare your
own menu descriptions. Don’t copy them. It’s not fair, and If this gets out,
customers will lose trust in you.
Fast facts about the connection between menu descriptions and food waste
reduction
There appeared some studies and reports that suggest that menu
descriptions can have an impact on food waste reduction:
A study by the Cornell University School of Hotel Administration found that
customers were more likely to order dishes with descriptive and enticing
menu descriptions, resulting in fewer unfinished meals and less food waste.
According to a report by the World Resources Institute, using menu
descriptions that accurately reflect the portion size and presentation of a dish
can help reduce food waste by encouraging customers to order only what
they can eat.
A study by the UK’s Waste and Resources Action Programme (WRAP) found
that restaurants that made simple changes to their menu descriptions, such
48
as using the word “smaller” instead of “side,” were able to reduce food waste
by up to 13%.
12. Don’t make menu writing mistakes
Another critical aspect is not making menu writing mistakes. We recommend
avoiding the following most common menu descriptions mistakes:
Misspellings, typos, and errors
Don’t use too many adjectives – menu descriptions need to be easy to read
Avoid using words that may have negative connotations such as ”burnt” or
“greasy”, and instead use “charred” or “velvety smooth”.
Keep your menu concise and short
Remove currency signs from your menu if possible. Use the information about
the quantity instead.
Place prices near the name or description of the dish to prevent price
shopping, especially if the items have significant price differences.
Avoid mixing different amounts, such as $3.55 and $9.49. Instead, try to make
all prices whole dollar amounts or end them in .99 or .50.
Use a smaller font size for the price to avoid making it a focal point of the
menu.
If you want to know more about increasing profits with a well-developed
menu, check our article on menu engineering.
13. Create a QR menu, mobile menu, and website menu
1. Start with your website menu
While menu writing, don’t forget about your restaurant’s online presence.
Adding menu item descriptions to your online restaurant menu is essential. All
tips we described above are also related to your online restaurant menu.
Helpful resources to create your online menu
Free restaurant menu templates
Free QR Code menu builder
Restaurant menu management software
In UpMenu, when you create a website menu, it is already mobile-optimized.
Thanks to this, your customers can browse your restaurant website on any
device.

2. Don’t forget about your QR code menu

If you want to speed up the ordering process in your restaurant, consider
implementing tableside ordering.
Online Ordering System
Use a QR code menu builder to create a digital menu in just a few minutes.
Start selling food online
Key Takeaways
Set up commission-free ordering for your restaurant's website in minutes.
Menu writing helps to increase your restaurant’s sales and influences your
Boost revenue while saving on third-party fees
customers’ behavior.
Learn more
Always highlight the origin or location of your ingredients to show quality and
Frequently Asked Questions (FAQ)
freshness.
How do you write a description of a menu?
Don’t forget about the information on dietary restrictions.
To write a good description of a menu, you should follow these steps:
Use descriptive and sensory words for your menu writing.
Start with a delicious introduction: Begin by describing the type of cuisine
Consider using storytelling to target your customers’ five senses when
or theme of the menu. This could include the cultural background, special
describing your menu items.
ingredients or flavors, or unique cooking techniques. This will give the reader
Always tailor your menu to suit the preferences and tastes of your target
a general idea of what to expect from the menu.
customers.
List the dishes: List the dishes in the menu, starting with appetizers, then
Add original pictures of your dishes to your online menu.
entrees, and then desserts. You can group similar dishes, such as vegetarian
Try to avoid making menu writing mistakes.
or seafood.
Create QR menu, mobile menu, and website menu for better promotion and
Use descriptive language: Use descriptive language: Use adjectives to
accessibility.
describe the dishes, highlighting their key ingredients, textures, and flavors.
Be creative with your language and try to make the dishes sound as delicious
and tempting as possible. For example, instead of saying “chicken sandwich,”
you could say “succulent grilled chicken breast served on a freshly-baked
artisan bun with a zesty aioli spread.”
Mention dietary information: If there are any vegetarian, vegan, gluten-free,
or other special dietary options, make sure to highlight them. This will make it
easier for customers to find dishes that meet their dietary needs.

49
Include prices: Make sure to include the prices of each dish on the menu.
This will help customers plan their order based on their budget.
Proofread: Before finalizing the menu description, proofread it for spelling
and grammatical errors. You want to make sure that the description is clear
and easy to read.
What are 5 important components for a
Careful planning and thought must go into creating great cuisine. Here are
five crucial elements to remember:
Variety: A successful menu should provide a range of foods that satisfy
various preferences, dietary requirements, and tastes. This may include
vegetarian selections, gluten-free or low-carb choices, and a variety of flavor
profiles.
Pricing: Menu prices should be reasonable and representative of the entire
eating experience. Offering offers or discounts on particular days or times of
the week is one way to do this.
Consistency: It is crucial to include consistency to your menu, which builds
consumer trust and delivers a satisfying eating experience. This includes
maintaining uniformity in flavor profiles, cooking methods, and portion
proportions.
Seasonality: Incorporating seasonal ingredients or dishes can create a sense
of excitement and freshness on the menu. This can include highlighting local
produce or changing the menu with the seasons.
Marketing: Effective marketing of the menu can help generate interest and
drive sales. This can include using social media to showcase dishes, offering
specials for certain times of the day, and promoting the menu with eye-
catching visuals.
To write a good description of a menu, you should follow these steps:
Start with a delicious introduction: Begin by describing the type of cuisine
or theme of the menu. This could include the cultural background, special
ingredients or flavors, or unique cooking techniques. This will give the reader
a general idea of what to expect from the menu.
List the dishes: List the dishes in the menu, starting with appetizers, then
entrees, and then desserts. You can group similar dishes, such as vegetarian
or seafood.
Use descriptive language: Use descriptive language: Use adjectives to
describe the dishes, highlighting their key ingredients, textures, and flavors.
50
Be creative with your language and try to make the dishes sound as delicious
and tempting as possible. For example, instead of saying “chicken sandwich,”
you could say “succulent grilled chicken breast served on a freshly-baked
artisan bun with a zesty aioli spread.”
Mention dietary information: If there are any vegetarian, vegan, gluten-free,
or other special dietary options, make sure to highlight them. This will make it
easier for customers to find dishes that meet their dietary needs.
Include prices: Make sure to include the prices of each dish on the menu.
This will help customers plan their order based on their budget.
Proofread: Before finalizing the menu description, proofread it for spelling
and grammatical errors. You want to make sure that the description is clear
and easy to read.
A few standard procedures to consider while listing the meals on a menu
regarding their appropriate sequence. Here are some suggestions:
Appetizers or starters: These foods, often in smaller servings or on
shareable plates, should be included first. They could be dips, little snacks,
soups, or salads.
Main Courses: These courses, including entrees, main dishes, or larger
quantities, should be listed after the appetizers. They can be arranged
according to the type of cuisine, protein source, or cooking technique.
Sides: vegetables, cereals, and other add-ons can be listed as sides following
the main courses if necessary.
Desserts: These dishes can be listed at the end of the menu and can include
various sweet options.
Beverages: Lastly, beverages such as alcoholic and non-alcoholic drinks can
be listed at the end of the menu.
25 Types of Menu in Restaurant (With Examples)
In this article, we present 25 types of menus with examples divided into three
categories: ways items are sold, food categories, and ways of display.
Key takeaways
Offering a variety of menu types in your restaurant can cater to diverse
customer preferences and enhance the dining experience.
Utilize menu formats like cycle menus, prix fixe menus, and tasting menus to
introduce variety and showcase your chef’s talents.
Create children’s menus and dessert menus to attract families and offer a
more comprehensive dining experience.
Use menu engineering techniques to design a menu that increases sales and Overall, creating different types of menus can help a restaurant meet the
profit margins. needs and preferences of its customers, increase revenue, showcase
Always provide a QR code menu to enable customers to access the menu specialties, and offer variety.
online. Types of menus based on ways of display
Create an online menu using restaurant menu templates to start selling online 1. QR Code Menu
(with your own food ordering system).
Consider various ways to display your menu, such as sandwich boards, menu
boards, and tabletop tent menus, to increase visibility and attract potential
customers.
Utilize menu management software for easy menu maintenance and
updates.
Avoid menu translation mistakes.
What is a restaurant menu?
A restaurant menu is a list of food and beverage options available at a
restaurant.
It typically includes a wide range of items such as appetizers, entrees, side
dishes, desserts, and beverages, along with descriptions, pricing information,
and dietary information. A QR code menu is a digital menu that customers can access by scanning a
Restaurant menus may also feature seasonal or specialty items, and can be QR code with their smartphone.
presented in a variety of formats, such as printed menus, digital menus, or Why it is important to create a QR code menu?
chalkboards. It offers a contactless and convenient way for customers to view the menu,
Why is it important to create different types of menus in restaurants? reducing the need for physical menus and improving hygiene. Also decrease
Creating different types of menus in a restaurant is important for several labor costs.
reasons: Ideal for:
Increasing revenue: By offering different menus, a restaurant can appeal to All types of restaurants with dine-in area
different customer groups and generate additional revenue. For example, a
well-designed kids menu can attract families with young children, while a
brunch menu can appeal to customers looking for a weekend treat.
Showcasing specialties: A restaurant may have a particular cuisine,
ingredient, or theme that it wants to highlight. By creating a special menu that
emphasizes these specialties, a restaurant can set itself apart from the
competition and showcase its unique offerings.
Offering variety: Customers appreciate variety and may be more likely to
return to a restaurant that offers different menus with new and exciting Table Ordering
options. By changing up the menu seasonally or introducing new menus QR Code Ordering & Payments
periodically, a restaurant can keep things fresh and interesting for its Allow customers to order and pay directly from their table to enhance
customers. customer service and boost the average order value
51
Learn more
2. Online Menu (Online Food Ordering System)

A paper menu is a physical menu printed on paper, often presented to

customers in a menu cover or holder.
Why it is important to create a paper menu (in menu covers)?
An online menu is a digital version of the restaurant’s menu, typically found on
It provides a tangible and traditional way for customers to view the menu,
the restaurant’s website with restaurant online ordering system.
adding a sense of familiarity and comfort to the dining experience.
Why it is important to create an online menu (online store)?
Ideal for:
It allows customers to view the menu and place orders from the comfort of
All types of restaurants, from casual to fine dining.
their home or office, increasing the restaurant’s reach and potential revenue.
4. Menu Holder
Ideal for:
A menu holder is a stand or holder designed to display paper menus, making
Restaurants looking to expand their online presence, attract more customers,
them easily accessible and visible to customers.
and increase sales.
Why it is important to create a menu holder?
It keeps menus organized and easy to find, improving the overall customer
experience.
Ideal for:
All restaurants, cafes, and bars that use paper menus.
5. Displayette (Tabletop Tent Menus)

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3. Paper Menu (In Menu Covers)
Displayettes, also known as tabletop tent menus, are small, freestanding
menu displays placed on tables, showcasing daily specials or featured items.

52
Why it is important to create displayettes (Tabletop Tent Menus)?
It highlights specific dishes or promotions, encouraging customers to try new
items or take advantage of special offers.
Ideal for:
Casual dining establishments, bars, and cafes looking to promote featured
items or daily specials.
6. Menu Sign (Menu Board)
A menu sign, or menu board, is a large display that showcases the
restaurant’s menu, often placed near the entrance or above the counter.
Why it is important to create a menu sign (menu board)?
It provides an at-a-glance overview of the restaurant’s offerings, helping
customers make their decisions quickly and efficiently.
Ideal for:
Fast food establishments, quick-service restaurants, and cafes with counter
service.
7. Disposable Menus
Disposable menus are single-use paper menus that are discarded after each
use, reducing the risk of cross-contamination and improving hygiene.
Why it is important to create disposable menus?
It promotes cleanliness and safety, especially in situations where the risk of
transmission is a concern, such as during a pandemic.
Ideal for:
Restaurants looking to improve hygiene, establishments with high customer
turnover, and businesses operating during public health crises.
8. Sandwich Boards
Sandwich boards are portable, freestanding signs placed outside the
restaurant, often used to display daily specials or promotional offers.
53
Why it is important to create sandwich boards?
It attracts passersby, increasing foot traffic and enticing potential customers to
enter the establishment.
Ideal for:
Restaurants, cafes, and bars located in busy areas with high foot traffic, such
as shopping centers or city streets.
Types of restaurant menus based on the ways items are sold
9. A la carte menu
An a la carte menu allows customers to order individual dishes from a range
of choices, with each dish priced separately.
Examples of items commonly found on an a la carte menu:
appetizers, salads, entrees, and desserts.
Why it is important to create an a la carte menu?
It gives customers the flexibility to choose what they want, helping to cater to
individual tastes and preferences.
Ideal for:
Fine dining restaurants, casual dining restaurants, and cafes.
10. Static menu
A static menu is a fixed menu that remains unchanged for a long period,
offering a consistent selection of dishes.
Examples of items commonly found in a static menu:
signature dishes, specialty entrees, and house favorites.
Why it is important to create a static menu?
It allows for consistency in quality and presentation, making it easier for the
kitchen to perfect the dishes and manage inventory.
Ideal for:
Fast-food restaurants, diners, and establishments with a strong brand identity.
11. Du jour menu (daily menu)
A du jour menu changes daily, offering a variety of dishes based on the
availability of ingredients and chef’s preferences.
Examples of items commonly found in du jour menu:
Daily specials, seasonal dishes, and chef’s creations.
Why it is important to create a du jour menu?
It keeps the menu fresh and exciting, encouraging repeat visits and allowing
the chef to showcase their creativity.
Ideal for:
Fine dining restaurants, farm-to-table establishments, and bistros.
12. Cycle menu
A cycle menu is a series of menus that rotate after a specific period, such as
weekly or monthly.
Examples of items commonly found in cycle menu:
rotating entrees, seasonal dishes, and regional specialties.
Why it is important to create a cycle menu?
It offers variety while still allowing for consistency and efficient inventory
management.
Ideal for:
Restaurants with a focus on seasonal ingredients.
13. Fixed menu
A fixed menu offers a limited selection of dishes that do not change.
Examples of items commonly found in fixed menu:
set meals or combos.
Why it is important to create a fixed menu?
It simplifies decision-making for customers and streamlines kitchen
operations.
Ideal for:
Fast-food establishments and quick-service restaurants.
14. Prix fixe menu
A prix fixe menu offers a set number of courses for a fixed price, allowing
customers to choose from a limited selection of options for each course.
Examples of items commonly found in prix fixe menu:
appetizer, entree, and dessert options.
Why it is important to create a prix fixe menu?
It provides a complete dining experience at a predictable cost, encouraging
customers to try multiple dishes.
Ideal for:
Fine dining restaurants, special occasions, and themed events.
15. Tasting menu
A tasting menu is a multi-course dining experience where the chef curates a
selection of small dishes, showcasing their culinary skills and creativity.
Examples of items commonly found in tasting menu:
unique flavor combinations, seasonal ingredients, and innovative
presentations.
Why it is important to create a tasting menu?
It offers a unique and memorable dining experience, allowing the chef to
54
showcase their talents and giving customers the opportunity to explore new
flavors and dishes.
Ideal for:
Fine dining restaurants, chef-driven establishments, and special occasions.
Types of restaurant menus based on food categories
16. Main menu
The main menu includes all the primary dishes and courses offered by the
restaurant, excluding beverages and desserts.
Examples of items commonly found on a main menu:
appetizers, soups, salads, entrees, and side dishes.
Why it is important to create a main menu?
It showcases the restaurant’s main offerings and helps customers navigate
the dining experience.
Ideal for:
All types of restaurants, from casual to fine dining.
17. Children’s menu (Kids Menu)
A children’s menu offers smaller portions and kid-friendly dishes, catering to
the tastes and preferences of younger diners.
Examples of items commonly found on a kids menu:
chicken fingers, mac and cheese, mini burgers, and fruit cups.
Why it is important to create a kids menu?
It appeals to families, making the restaurant more inclusive and
accommodating to guests with children.
Ideal for:
Family-friendly restaurants, casual dining establishments, and theme parks.
18. Wine Menu
A wine menu is a curated list of wines offered by the restaurant, often
categorized by varietal, region, or style.
Examples of items commonly found in wine menu:
red wines, white wines, sparkling wines, and dessert wines.
Why it is important to create a wine menu?
It enhances the dining experience, offering guests a selection of wines that
complement the food and cater to various preferences.
Ideal for:
Fine dining restaurants, wine bars, and establishments with a focus on food
and wine pairings.
19. Beverage menu (Drinks menu)
A beverage menu lists the non-alcoholic and alcoholic drinks available at the
restaurant, including cocktails, beers, and soft drinks.
Examples of items commonly found in beverage menu:
sodas, juices, cocktails, beers, and coffee.
Why it is important to create a beverage menu?
It completes the dining experience, providing guests with a range of drink
options to enjoy alongside their meal. Increase profit margin.
Ideal for:
Bars, pubs, and restaurants of all types.
20. Vegetarian Menu
A vegetarian menu offers dishes made without meat, fish, or poultry, catering
to guests who follow a vegetarian diet or prefer meat-free options.
Examples of items commonly found in vegetarian menu:
vegetable-based entrees, plant-based protein dishes, and meatless pasta
dishes.
Why it is important to create a vegetarian menu?
It appeals to a wider audience, accommodating dietary preferences and
making the restaurant more inclusive.
Ideal for:
Health-focused restaurants, cafes, and establishments looking to cater to
diverse dietary needs.
21. Dessert menu
A dessert menu features sweet dishes and treats, typically served after the
main course.
Examples of items commonly found in dessert menu:
cakes, pies, ice cream, and fruit-based desserts.
Why it is important to create a dessert menu?
It enhances the overall dining experience, providing guests with a satisfying
end to their meal.
Ideal for:
All types of restaurants, bakeries, and cafes.
22. Gluten-Free Menu
A gluten-free menu offers dishes made without wheat, barley, or rye, catering
to guests with gluten sensitivities or those following a gluten-free diet.
Examples of items commonly found in gluten-free menu:
gluten-free pasta dishes, grain-based salads, and gluten-free baked goods.
55
Why it is important to create a gluten-free menu?
It caters to a growing demand for gluten-free options, making the restaurant
more accommodating to guests with dietary restrictions.
Ideal for:
Health-focused restaurants, cafes, and establishments looking to cater to
diverse dietary needs.
23. Brunch Menu (Lunch Menu)
A brunch menu offers a selection of breakfast and lunch dishes, typically
served during late morning and early afternoon hours.
Examples of items commonly found in brunch menu:
omelettes, sandwiches, salads, and pastries.
Why it is important to create a brunch menu?
It caters to a specific dining occasion, attracting customers who prefer a
combination of breakfast and lunch offerings.
Ideal for:
Cafes, bistros, and restaurants that serve breakfast and lunch.
24. Takeout Menu
A takeout menu features dishes that are available for customers to order and
take away from the restaurant, rather than dining in.
Examples of items commonly found in takeout menu:
sandwiches, salads, entrees, and sides.
Why it is important to create a takeout menu?
It expands the restaurant’s customer base, catering to those who prefer to eat
at home or on the go.
Ideal for:
Fast food establishments, quick-service restaurants, and casual dining
establishments.
25. Catering Menu (Delivery Only Menu)
A catering menu offers a selection of dishes specifically designed for off-site
events, such as parties, weddings, or corporate functions.
Examples of items commonly found in catering menu:
party platters, buffet items, and finger foods.
Why it is important to create a catering menu?
It expands the restaurant’s services, opening up new revenue streams and
reaching customers who require food for special events.
Ideal for:
Restaurants with a focus on catering, event venues, and establishments
looking to grow their business through off-site services.
Module 7
Fundamentals of Revenue Management
• Definition of Revenue Management
• Revenue Management vs. Yield Management
• Importance of Revenue Management
• Strategies for Revenue Management
• Revenue Management Pricing Strategies
Restaurant revenue management is the process of optimizing a restaurant's
financial performance by strategically managing pricing, inventory, and
customer demand. This involves using data analytics and other tools to
forecast demand, adjust pricing, and manage inventory to maximize revenue
and profits.
The goal of restaurant revenue management is to create an environment in
which guests are willing to pay the highest possible price for their dining
experience, while also ensuring that the restaurant is able to manage its costs
and generate a profit. To achieve this, restaurants must be able to accurately
predict demand and understand how their pricing, menu offerings, and
promotional strategies impact customer behavior.
One key aspect of restaurant revenue management is pricing strategy. This
involves analyzing data on customer behavior, such as how much they
typically spend on meals, when they dine, and what they order. Based on this
information, restaurants can adjust their pricing to encourage guests to order
more, such as by offering discounts for larger parties or by pricing certain
items more competitively.
Additionally, restaurants can use data analytics and other tools to optimize
their promotional strategies. For example, by tracking the effectiveness of
different marketing campaigns and promotions, restaurants can identify which
promotions are most effective at driving traffic and boosting revenue.
Restaurant revenue management requires a combination of strategic
planning, data analysis, and operational expertise. Fortunately, there are
many tools and technologies available to help restaurants optimize their
financial performance and achieve long-term success. Here are some of the
key tools to consider:
56
Point-of-Sale Systems: POS systems are essential tools for managing
inventory, tracking sales, and analyzing customer behavior. They can provide
real-time data on menu performance, sales trends, and customer
preferences, helping restaurants make data-driven decisions about pricing,
promotions, and menu design.
Reservation Systems: Reservation systems such as OpenTable or Resy
provide valuable data on customer demand, reservation patterns, and wait
times. By analyzing this data, restaurants can adjust staffing levels and
optimize table turnover to maximize revenue.
Menu Engineering Software: Menu engineering software can help restaurants
design menus that maximize profitability by analyzing the popularity and
profitability of menu items. It can identify which items are most profitable,
which should be featured prominently, and which should be removed from the
menu altogether.
Loyalty Programs: Loyalty programs can help restaurants build customer
loyalty and increase revenue by offering discounts, rewards, and incentives to
frequent customers. By tracking customer behavior and preferences, loyalty
programs can also provide valuable data on customer preferences and
trends. You could use a CRM to manage customer data, track preferences,
and create targeted marketing campaigns.
Social Media and Online Reviews: social media and online reviews are
powerful tools for building brand awareness, attracting new customers, and
engaging with existing customers. By monitoring social media and review
sites, restaurants can identify customer feedback and trends, and adjust their
strategies accordingly.

Business Intelligence: BI systems like Avero use data visualization and

analytics tools to provide a comprehensive view of restaurant operations and
identify trends and opportunities for growth.

Restaurant revenue management is a complex and dynamic process that

requires careful analysis, strategic planning, operational expertise and a
willingness to adapt to changing market conditions. By leveraging the right
tools and technologies, restaurants can optimize their financial performance,
increase revenue, and achieve long-term success in an increasingly
competitive industry
5 Steps to Effective Restaurant Revenue Management
The Restaurant Revenue Management journey may seem like a daunting
task. But with a structured approach, you can set each of your teams up for
success.
The InTouch Team
May 15, 2022

Embarking on the Restaurant Revenue Management (RRM) journey may

seem like an overwhelming task at first glance. But let’s take a step back and
look at the core purpose of RRM and the stakeholder’s responsibilities in the
RRM process, to break it down into bite-sized pieces for easier digestion.
The main objectives of RRM are to increase restaurants’ traffic, sales, profit,
and guest satisfaction & restaurant reputation. RRM engages different
departments and breaks down traditional silos to achieve these objectives.
With a structured approach and a well-guided process, each department will
have different responsibilities.
57
1. Establish Baseline Performance
As a first step, look at your restaurant’s performance through specific key
performance indicator (KPI) measurements that you’ve deemed most
relevant. Many of these KPIs may be difficult to calculate on your own, but
intuitive dashboards and reports that can be generated through and based on
your POS data, make the process painless and simple.
If you’re building a strategy to maximise your hotel restaurant’s profitability,
you need to understand the performance of your restaurant as it stands. To
gain a clear picture of your baseline performance, there are three key
performance indicators (KPIs) you should pay attention to:
Revenue Per Available Seat Hour (RevPASH) = Total Revenue / Seat
hours
(Seat hours = Total Number of Seats x Hours Open)
Seat Occupancy = Total Number of Seats / Number of Seats Filled
Average Check = Total Revenue / Number of Covers in the Restaurant
RevPASH calculations let you decide when to upsell and when not to, and if
your marketing and promotional efforts are effective. Seat Occupancy
analysis tells you when you need to attract more customers, or when your
demand is outstripping your supply of seats. And, finally, comparing table mix
with your party sizes helps you make sure you have the right combination of
table sizes so that you aren't losing possible revenue.
2. Understand Demand Drivers
This next step is following a best-practice revenue management demand
analysis. Once actionable steps that could improve performance are
identified, be it traffic (covers), sales (average check), or service (consistency
in service, reputation, and guest satisfaction), each of your departments will
have better insight into what responsibilities they have in optimising their
operations and boosting revenue.
Understanding what attracts people to your restaurant (and keeps them
coming back) is essential in boosting F&B profitability. You should break
down your demand analysis into three core categories:
Traffic
First, you need to understand the traffic coming to your restaurant. What are
your peak arrival times and meal periods? What are the average and median
party sizes that your restaurant attracts? What guest segments spend the
most money at your restaurant?
Comparing metrics like table mix with your party sizes helps you make sure
you have the right combination of table sizes so that you aren't losing possible
revenue.
Sales
Second, your sales will give you insight into how much revenue your
restaurant receives from each guest. Use the Average Check per Cover
(APC) to calculate how much each guest is spending when they visit your
restaurant.
Average Check per Cover (APC) = Total Number of Sales / Total Number of
Customers
Guest Experience
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Finally, analysing your restaurant’s guest experience allows you to
determine the quality of service your restaurant is providing. Two indicators
you can use to measure guest experience are meal duration and guest tribe.
Measuring dining duration helps you keep tabs on your service quality, while
spending-per-hour calculations can help you fine-tune how your servers
optimise their sales.
Tribes are created to visualise your guests’ purchase behaviour on a high
level. Are your guests buying the set menu you have created, or most often a
main course +1 (starter or dessert)? How does this impact revenue and profit
performance? What tribes contribute to the highest average check and
ultimately the profit and revenue performance of your restaurant? This is all
validating your strategies or pinpointing where you need to focus to achieve
the results you anticipate.
To gain a full picture of your traffic, sales, and guest experience, measure
your demand generation per hour, per day of the week, and per month. This
will allow you to identify patterns and trends in your restaurant's demand and
help inform your profit strategy and targets.
3. Develop Strategies & Set Targets
There’s no “right” strategy for growing your restaurant’s profitability, rather the
best plan will focus on increasing demand drivers (traffic, sales, and guest
experience) and reflect your business objectives. At this stage, you need to
determine what your goals are, how you’ll achieve them, and when you want
to achieve them.
Try setting SMART goals to make your objectives as clear to your team as
possible. SMART goals should be Specific, Measurable, Achievable,
Relevant, and Time-bound.
For example, our goal is to increase the Average Check Per Cover by 15% by
the end of this quarter. We will accomplish this goal by training servers to
recommend an ideal wine pairing with each guest’s dinner. Accomplishing this
goal will result in higher wine sales.
By using the SMART goal structure, you can take the guesswork out of
implementation and set clear timelines for success.
4. Implementation
Implementing your F&B profitability plan is all about developing activities that
help you achieve your targets. These activities can be broken down into two
categories:
‘Hot & Cold’ Activities
'Hot & Cold’ Activities are activities that alternate between requiring a great Keep an eye on performance trends so you can track performance over time
amount of time and resources and requiring less of your focus. Here is a list and ensure your KPIs are moving in the right direction. Tracking KPIs, like
of activities that fall into this category. RevPash, Seat Occupancy, and Average Check throughout the
Table Mix Optimisation implementation process will allow you to monitor your progress in real-time.
Customer Segmentation Final Thoughts
Reservation Management Leverage technology and data to ensure you have accurate information and
Pricing & Promotion can make smarter decisions. Tools like hotel Business Intelligence
Marketing software (BI) provide insights into restaurant customers' purchasing
'Always On’ Activities behaviour and enable you to predict their reaction to future revenue initiatives
‘Always On’ Activities are more hands-on initiatives that you should on a single platform.
continually work on throughout the implementation process. These activities Access to structured data and intuitive visualisation will excel your team’s
can be broken down further into two main segments: performance, your restaurant profits, and reputation – the main drivers of a
Front of House activities are focused on improving guests’ experience by win-win strategic process for any restaurant.
investing in the skills of your servers. In an easy-to-understand report basket, A BI tool like InTouch BI provides a single, easy-to-use touchpoint your entire
all aspects of servers’ performance can be examined and analysed; team can use to optimise your Restaurant Revenue Management. Position
empowering your restaurant managers and team leaders to guide and train your F&B department for success today by requesting a product tour of
the staff and make data-driven decisions. Some examples of Server Coaching InTouch BI and experience the next frontier of hotel data analysis and
activities are: forecasting.
Server Coaching 5 Ways To Master Revenue Management At Your Restaurant
Upselling
Sales and Product Training
Back of House activities work to ensure that the items on your menu are
optimised for profitability. Ready-to-use reports using POS data, such as
menu matrix, top, and bottom selling dishes in terms of quantity and
profitability versus item pricing, are provided in easy-to-read formats, saving
your BOH team hours of data crunching. These include:
Product Mix Table of Contents Hide
Menu Engineering What Is Included In Restaurant Revenue Management?
Menu Pricing Restaurant Revenue Management- Things To Include In Your Plan
Menu Design 1. Capacity Management
Measure Success “Unless you don’t get to know what’s working in the market every day, you
Measuring the success of your plan can be tricky. It’s important to capture can’t improve. For instance, I get an automated email every day through my
accurate data so you can confidently analyse performance trends, KPI, and POS of what was sold the previous day along with the sales made. Thus, we
demand forecasting data. know how to innovate our menu and serve our customers by keeping up with
Pro tip: For a complete guide to hotel F&B forecasting, check out this the trends,” mentions Harish Mithra from True South, a Bangalore based
blog. restaurant.
4. Price Management
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The Need For Integrated Data
Restaurant revenue management is using your fixed and perishable
resources by charging different prices for the same services at different times.
The difference could be because of higher demand, low sales, and so on. The
most important thing to be noted here is the integration of data. Without data,
be it from the customers’ end or your restaurant, it will be tough for you to
analyze your cash inflows and outflows.
Some constraints that might come in your way while thinking of revenue
management in the restaurant sector is the limitation of space and uncertainty
in the service duration. Unlike the hotel industry, where the service time is
almost always fixed in terms of check-in and check out, as a restaurant
owner, you can never estimate the time a customer would take to finish
his/her meal.
These factors may hinder the targeted table turnover rate, and thereby your
entire revenue management plan. Nevertheless, we have made you a
comprehensive program that you can follow to ensure that your overall
revenue is in order.
What Is Included In Restaurant Revenue Management?
Before digging into the plan, you must understand the driving factors of your
revenue management.
Managing revenue for your restaurant is a broad term that refers to efficiently
using the limited resources at your restaurant, with an essential goal of
maximizing restaurant profits. Extending your operation hours, training your
staff to upsell orders, offering special discounts on low business days,
additional food services and adding seats at your restaurant are all ways of
managing revenue for your restaurant.
Restaurant revenue management generally includes segmenting your
customers, managing the capacities of your restaurant, setting the right
prices, and managing inventories all together to maximize the restaurant
profits.
Restaurant Revenue Management- Things To Include In Your Plan
One thing you need to understand about revenue management is that it’s
applicable for restaurants that have a higher demand than what they can
accommodate during their peak times. For instance, if a restaurant has long
queues of people waiting outside for a Friday dinner, the restaurant needs to
manage its resources so that its ability to cater to more people at the same
time.
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Revenue Management generally includes these broader arenas:
1. Capacity Management
When we talk about capacity, we don’t mean the physical space of a
restaurant. Instead, we expect the highest quantity of output possible in a
given period, with constant support from your staff and resources.
Capacity management is not an issue for all restaurant formats. For instance,
take away restaurants that only market themselves to increase the sales of
their products, and not the overall footfall, do not need to worry about
managing their space.
Here are some tips you can use to manage your restaurant’s capacity at any
given point in time:
Try changing your table layout to cater to more customers. This doesn’t
necessarily include getting more number of tables, but managing your tables
efficiently.
During peak hours, incorporate your technology to take orders while your
customers are waiting for their tables. This way, you would be able to serve
them faster and thereby improve your revenue.
Extend your operation hours, or open a delivery window to increase your
generated revenue.
2. Time Management
The critical factor for better revenue management is the time your customer
spends at your restaurant. We don’t mean that you should be in a hurry to
serve your customers, but you must also take note of the time they are
spending occupying the tables. After all, since time is money, you need to be
able to politely prevent your customers from lingering on in your restaurant
after their meals.
Furthermore, you must also ensure that your service and delivery time is
optimized. A lot of restaurateurs rely on technology solutions like automated
POS systems to achieve the same. When orders placed by the customers are
directly pushed to your kitchen, it saves time for your restaurant to serve them
and thereby enhances your revenue.
On a similar note, Animesh Lodha, founder of Cheelizza, says “Delivery
orders are pushed directly to the POS. There is no need to punch orders
separately. It, therefore, saves time and increases efficiency.”
3. Menu Management
Understanding that not all menu items would work the same in all seasons of
the year is the first step. The next thing to realize about menu items is the
difference between your food costs. Typically, if your food costs are beyond
25-30%, you might be selling a high-cost menu. In that scenario, it’s always
recommended that you analyze your menu items, and categorize them under
Stars, Plow Horses, Puzzlers and Dogs. This categorization will help you
decide on your food costs better.
Apart from that, you must always be on a constant lookout for upcoming
trends.
“Unless you don’t get to know what’s working in the market every day,
you can’t improve. For instance, I get an automated email every day
through my POS of what was sold the previous day along with the sales
made. Thus, we know how to innovate our menu and serve our
customers by keeping up with the trends,” mentions Harish Mithra from
True South, a Bangalore based restaurant.
Once you’ve understood the basics of your menu, you can have a separate
menu for your peak hours, for dull days and so on. This way, you would be
able to provide different discounts during peak hours and sell your bestsellers
to varying prices at different times. You can also automate the process using
your restaurant management software. All you need is your customer data,
based on which you can run multiple campaigns for different days and
trends.
4. Price Management
Setting the right prices for your products at the right time is a crucial step in
revenue management. Unlike more stable industries, like the airlines and
hotel industry, where rates are hugely dependent on demand and availability,
you can’t afford to increase your costs excessively at your restaurant.
This is why you need to pick up different practices to manage your pricing.
Encourage customers to have meals on slow days by offering them midweek
discounts or offers.
Try incentivizing your staff to retain them. This saves majorly on your hiring
costs.
Many restaurateurs also believe that getting reports in real-time helped them
make better decisions on managing their restaurant revenue.
“Time-wise data, when are we coming, what are the peak hours for your
restaurant and how do they vary for each of your outlets. I get daily payment
reports in real-time, and that helps us minimize negative feedback from
diners. Monthly, we do a sales mix and menu mix and understand why one
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item is working in one outlet and what’s not through these integrated reports,”
adds Mithra.
5. Customer Management
As a restaurateur, you should understand that managing a decent relationship
with your customer is a critical factor for your restaurant growth. You always
need to be better than your existing competitors in terms of food quality,
service and much more to be able to sustain longer. According to the NRAI
FoodServices Report 2019, 23% of customers come back to the same
restaurant because of the quality of food and the services provided.
There are multiple ways you can manage your customer to generate higher
revenue.
Number one, and the golden rule for all restaurant formats, is getting the right
feedback. An efficient feedback system works wonders for your brand.
Run multiple loyalty programs for your customers and make them excited
about using the application.
Your customer service needs to be on point. Since your front line staff
becomes the face of your brand, ensure that they undergo extensive training
to achieve your desired goals.
Use customer data to understand your customers better. Your restaurant
POS will be able to help your staff while upselling a particular order since you
have all your customers’ previous orders at one place.
Talk to your customers! Sometimes, the presence of your restaurant manager
on the floor enhances your brand image, and thereby boosts sales!
The Need For Integrated Data
Like mentioned earlier, the basic need to manage revenue for any restaurant
is data! Without data, you have a vague plan with no specificities. While
handling your restaurant operation, you must have understood that you need
a regular analysis of your business to make better financial decisions.
Through an integrated reporting system, you get multiple reports on one
platform. Here is an example of one such revenue report for your analysis.

A screenshot of a particular
restaurant’s growth report
Having such comprehensive reports in real-time helps boost your business
growth. Therefore, restaurateurs must understand the importance of accurate
data.
All in all, your restaurant revenue management plan would have some
constraints and limitations since the service time is not always constant.
However, by making a few adjustments like changing your table layout to fit
more customers, or taking advance orders while your customers are waiting
for their tables, or making customers shift to a smaller meal if they are
comfortable would help you manage your sales and revenue, better. Apart
from these practices, you must also analyze your restaurant’s performance in
terms of daily sales made, the net profits, the menu items that work and the
ones that don’t, and so on.
Restaurant Marketing Strategies
Every business needs a great marketing strategy, which is doubly true for
restaurants. Getting your marketing strategy right can mean the difference
between failure and the roaring success you deserve. Even if you’re already
succeeding in the tough world of restaurant ownership, you can always build
up your business further.
Putting together an effective restaurant marketing strategy is more of an art
than a science, but certain key principles will help you on your journey. To
discover what makes a great restaurant marketing strategy, digital marketing
for restaurants, and more, read “Marketing Strategy for Restaurants: How to
Succeed“ today.
Point-of-Sale (POS) Systems for Restaurants
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Getting the right POS and using it effectively can have a major impact on the
profitability of your business. A POS is an electronic system that processes
payments — but it’s so much more besides. Your POS can be an invaluable
source of data on sales, revenue, inventory levels, and more. Like any
technology, POS systems are evolving all the time.
In “Restaurant POS Systems: The Latest and Future Trends,“ you’ll learn how
data from your point-of-sale system can benefit your business, and how new
trends will affect your business and its customers.
Hopefully, this article has satisfied your curiosity about revenue
management for restaurants. You’ve learned revenue management and
why it’s critical for your business. You’ve also discovered ways to
implement revenue management going forward.
More Tips to Grow Your Business
Revfine.com is a knowledge platform for the hospitality & travel industry.
Professionals use our insights, strategies and actionable tips to get inspired,
optimise revenue, innovate processes and improve customer experience. You
can find all hotel & hospitality tips in the categories Revenue Management,
Marketing & Distribution, Hotel Operations, Staffing & Career, Technology
and Software.
3 Tips for Successful Restaurant Revenue Management
This section will teach you three of the most important tips for implementing a
successful restaurant revenue management strategy.
Regularly Change Menus
Changing up your menus regularly is a must for effective restaurant revenue
management. Testing and rotating your menus will keep things fresh and
interesting for your customers and allow you to identify the items that will be
most successful.
To do this, you will need to use data from your restaurant’s POS (point of
sale) systems, which will tell you what items have been performing well and
which can safely be substituted for new options without disappointing
customers. Rotating your menus makes it easier to offer seasonal dishes
without employing too much guesswork.
Implement Inventory Tracking
Inventory tracking can be a major headache for restaurateurs. You’re dealing
with perishable items, so you don’t want to buy too much. On the other hand,
you also need a sufficient quantity of key ingredients so that you don’t run out
during periods of high demand.
This is a difficult balancing act to strike. A good restaurant revenue
management system with inventory tracking features can help you stay on top
of your inventory so that you don’t run out of important ingredients, while also
highlighting ingredients that should be used up.
Learn Customer Management
In the hospitality industry, customer service is ultimately your stock-in-trade.
This is especially true for restaurant businesses. Dining out is a leisure activity
for most people; they are paying for the dining experience as much as the
food.
You need to outdo your competitors in terms of food quality but in terms of
customer service, atmosphere, and overall value. The key metric here will be
the feedback you get from your customers. You can reward your customers
with loyalty schemes and use these to generate feedback on their dining
experience.
Choosing a Target Market for Your Restaurant for Optimized Restaurant
Revenue Management
A foundational step in implementing restaurant revenue management
successfully is identifying your target market. If you’re opening a new
restaurant, consider where your establishment will be located, your likely
customer base, and the hours of operation you plan to keep.
A local diner will have a different customer base than an upscale fine dining
business, with a different set of customers to a small bakery and tea shop. If
you’re already running a restaurant, you probably have plenty of information
you can draw on to identify your current customer base. However, you still
need to consider how you’ll draw in new customers.
You need to consider the demographics you’ll be serving: what they need and
expect from your business, how much disposable income they have, and how
far they’re likely to travel to get to you. This will help you to set prices and
select menu items.
4 Popular Restaurant Revenue Management Strategies
In this section, you’ll discover four key restaurant revenue management
strategies you can apply to your business.
Demand Forecasting
Demand forecasting is a key restaurant revenue management strategy. It
involves taking data from various sources and analyzing it to predict demand.
This helps restaurants in two main ways. Firstly, a broad, big-picture overview
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of future demand and profit helps to set business goals and develop more
realistic and detailed plans.
Secondly, demand forecasting helps on the day-to-day level of operations. A
restaurant can make better decisions regarding ordering inventory by looking
at the demand for specific dishes and other products.
It also helps inform staffing decisions, such as how many people to hire and
how many shifts to arrange. Demand forecasting uses data collected over the
restaurant’s operating history and can also factor in data from external
sources, such as industry competitors or general economic trends.
Video: What is Demand Forecasting?
Dynamic Pricing
Dynamic pricing is a revenue management strategy that most restaurants use
without realizing it. Do you have a happy hour, discounts for children or
seniors, or other special rates for certain items or times of day? If you do,
you’re already using dynamic pricing.
More sophisticated dynamic pricing might involve real-time price updates.
During periods of low demand, it can be helpful to reduce prices or offer
discounts on specific items to use up perishable inventory, avoid waste, and
encourage custom. Guests attracted by discounts on certain menu items will
often buy additional items, like drinks or side dishes.
On the other hand, prices can be increased during peak periods to maximize
revenue. This is a common strategy across many industries: time-based,
demand-based, or surge pricing. Dynamic pricing is most relevant for
businesses that experience fluctuating demand or customer interest.
Table Turnover Optimization
Table turnover optimization refers to the strategy of seating the optimal
number of guests during a given period. This can be a tricky restaurant
revenue management strategy to implement. You will need to strike a balance
between encouraging turnover and allowing your guests to enjoy their meals
without making them feel pressured or rushed.
A good starting point is calculating the average turnaround time and
maintaining that. Your average table turnover during a specific period is easy
to find: simply divide the number of dining parties by the number of tables that
you have available.
This will give you an idea of the goals you should be setting. Ensuring that
guests are seated and served promptly can help improve your table turnover
rates; the expense of having additional staff available to look after patrons
can be offset by the additional guests who might be served.
Menu Engineering
Another strategy that you probably already employ is menu engineering. You
already set your menu prices based on sales data, current market rates, and
the cost of ingredients. You can refine this strategy further by clearly showing
the costs and profits associated with each item on your menu.
Consider the item’s popularity, the cost per serving for the ingredients and
preparation, and its overall profitability. Sometimes, removing an
underperforming dish from your menu may be necessary or finding a way to
prepare it more cheaply.
On the other hand, items that perform well in sales while also delivering a
high-profit margin can be highlighted and prioritized on your menu. Pricing
can be adjusted, and your most popular and profitable items can be given top
billing on menus and in restaurant advertising.
This makes revenue management especially relevant. Using revenue
management strategies will help you fine-tune your purchasing and set your
prices optimally. Understanding revenue management can be difficult; it’s a
complex topic with many factors. If you want to gain a deeper understanding
of revenue management, read “Revenue Management: clearly explained!“
right now.
Why Is Restaurant Revenue Management Important?
Restaurant revenue management is vital to running a successful restaurant
business. Revenue management is perhaps more important for restaurants
than elsewhere in the hospitality industry. While hotels and transportation
companies can rely on schedules and a specific duration of service,
restaurants must contend with varying numbers and service durations.
Some guests may only spend an hour or so over their meals, while others
may linger for two or three. Restaurants can also vary their capacity in a way
a hotel cannot. Tables and chairs can be added or removed, depending on
whether space or seating is the priority. Pricing can also vary dramatically
from season to season and throughout the day.
Revenue Management System (RMS)
Restaurant industry revenue management is a hugely complicated endeavor.
Fortunately, restaurant technology provides the answer. Revenue
management systems (RMS) are software solutions that automate multiple
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aspects of revenue management, making life easier for a busy restaurant
owner or restaurant manager.
There are many systems on the market, each with features and functions.
Restaurants and other businesses in the hospitality industry can benefit
significantly from adopting these systems. Selecting the right system for a
specific business can be challenging, especially if you haven’t used RMS
software before.
To help you understand RMS and choose the right solution for your business,
read “Revenue Management System (RMS): What Are the Advantages?“ This
is a detailed explanation of RMS technology and how it can benefit your
restaurant. You’ll discover the key features of an RMS and what to look for in
a solution.
Introduction
Revenue management is concerned with optimizing financial results and is
especially popular in industries like hospitality, which must contend with high
fixed costs and a perishable inventory. For example, hotels have a certain
number of rooms and fixed costs which must be met, regardless of how many
rooms are sold. In such industries, revenue management is employed to
predict demand and optimize inventory and price availability. When utilized
correctly, this will ultimately result in higher revenue.
History of Revenue Management
The history of revenue management can be traced back to the 1980s,
originating in the airline industry. To optimize financial results, airlines began
introducing a dynamic pricing concept. Businesses like American Airlines
successfully applied price discrimination techniques and anticipated
consumer demand.
What is Revenue Management?
So what is revenue management, and what does it entail? Broadly, it can be
described as the use of analytics, which helps to predict the behavior of
customers, so that product availability and price can be optimized to generate
the maximum amount of revenue possible.
Within the hospitality industry, the chief purpose is to increase revenue while
selling the same number of products or services, such as hotel rooms. It is,
essentially, about matching supply and demand, and successful revenue
management involves understanding how customers think and what their
perceptions of value are.
This may mean also refusing to sell a room today so that you can sell it for a
higher price tomorrow, but it might also mean recognizing when demand is
low enough that you should sell at a discounted price.
The Most Common Definition of Revenue Management is:
Selling the right product to the right client at the right moment at the right price
via the right distribution channel with the best cost efficiency
Video “What is revenue management?”
Necessary Conditions for Revenue Management
For a business to employ a revenue management strategy effectively, several
conditions must be in place.
These conditions are as follows:
Different customers must be willing to pay different prices for the same
service or commodity;
The business must have some ability to predict the changing levels of
demand ahead of time;
Only a fixed amount of resources are available to be sold at any given time;
A perishable inventory e.g., the resources can no longer be sold after a
certain point.
Revenue Management vs. Yield Management
Revenue management can be considered to be quite similar to yield
management, and indeed, many business owners confuse the two concepts.
Yield management came first and is more tactical than strategic. It also has a
narrower focus, as yield management describes the price optimization part of
the process. By contrast, revenue management considers the bigger picture
more and may involve things like forecasting and in-depth analytics. To
provide an example concerning the hospitality sector, yield management
would be concerned with the sale of a hotel room, whereas revenue
management may take into account the full implications, including areas of
secondary spending and the cost involved in actually selling the room in the
first place.
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For more detailed information about the difference between revenue
management and yield management, please also read the article “Revenue
Management vs. Yield Management”.
The Importance of Revenue Management
As a strategy, revenue management allows businesses to adopt a data-driven
approach to decisions on what to sell them. It ensures that informed decisions
are made, and your business does its best to drive revenue upward while
selling the same amount of products and services as before. Revenue
management is often concerned with predicting demand and optimizing price
and availability, to boost revenue. An even more professional approach is
also to take into account all spending revenue per area per room and also
take into account all distribution and/ or operational costs. This will give
hoteliers an even greater insight into the actual performance of their hotel.
All About Forecasting
Forecasting can play a key role in revenue management strategies. Still, first,
it is essential to know what forecasting is, why it is so beneficial, and some of
the best ways to optimize its uses.
What is Forecasting?
Forecasting refers to the practice of predicting future events, based on an
analysis of past and present data. Within the hotel industry, this means
looking at past performance data, wider industry data, and information
available to your business right now. From there, forecasting typically relies
on identifying trends.
Once trends have been identified within the data, they can be taken into
consideration, alongside other information, to make more informed predictions
about what the future will bring. This may mean forecasting future revenue
generation, room occupancy rates, customer behaviors, etc.
Why is Forecasting So Important?
Forecasting is a useful tool for revenue management purposes because it
allows those involved with hotel management to anticipate future events and
plan for them ahead of time. For example, you may be able to adjust your
expenditure if your forecast suggests you will generate less revenue than the
previous year.
Accurate forecasts can be invaluable because they allow hotels to prepare for
bad news and mitigate damage, while also capitalizing fully on high-demand
periods. Although forecasting is never 100 percent accurate, it does mean key
decisions can be taken based on trends and relevant information, eradicating
some guesswork involved.
Useful Forecasting Tips
Below, you will find a breakdown of some useful tips that can assist you with
your forecasting efforts.
1. Maintain Accurate Records
Good forecasting relies on accurate data, so committing to organizing and
recording information properly is crucial. In particular, for hotel revenue
management purposes, you will want to maintain spreadsheets with revenue,
profit, occupancy rates, room rates, and other sales information. Ultimately,
because forecasting depends on data, the quality of the records you keep can
have a huge bearing on how precise your forecasts end up being.
2. Turn to Historical Data
One of the best tools at your disposal in terms of forecasting is historical data
because many patterns that can influence revenue management are
repetitive. While it cannot provide you with complete certainty, if your hotel
experiences much higher demand in June, July, and August than at other
times of the year, you can reasonably assume the same will occur again and
the same applies for periods of low demand too.
3. Examine Data Already in the Books
It is important to remember that the most reliable data available to you when
attempting to make forecasts is the data in the books already. For hotels, this
means room and restaurant bookings that have already been made and any
planned events scheduled within the premises. Essentially, data in the books
can be seen as “what you already know for sure” and, at times, this
information may contradict past hotel trends.
4. Remember Holidays and Events
Various holidays and events can have a significant bearing on levels of
demand, and this can, in turn, impact your revenue management strategy. For
instance, if there are upcoming events close to your hotel, you may be able to
forecast higher levels of demand than usual at that time of year. At the same
time, holidays like Christmas will often lead to increased demand for hotel
rooms, so these must also be considered.
5. Monitor Rival Hotels and Resorts
Another external factor to consider when forecasting for revenue
management purposes is the behavior of your competitors. To do this, you
will need to make sure you are aware of the various other hotels or
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accommodation options in the nearby area and hotels in other areas that
appeal to your target audience. Have any new competitors emerged? Have
existing ones made changes that may attract more visitors? Have any rival
hotels closed?
6. Additional Forecasting Tips
Furthermore, you need to consider wider industry and market trends, and you
will have to follow up on your forecast with different departments so that
strategies can be adjusted to maximize revenue generation. For instance, you
may need to change the distribution channels you use, or the regions you
target. For more forecasting tips, read the “9 Forecasting Tips to Improve
Your Revenue Management Strategy” article.
Strategies for Revenue Management
Below, you will be able to learn more about some of the different strategies
you can adopt for revenue management purposes, allowing you to optimize
your hotel’s financial results.
Get to Grips With Your Industry and the Market
Getting to know the market you are in and fully understanding your industry
are prerequisites for successful revenue management. You must be aware of
your competitors, not only in the hotel industry but also in other areas where
your business could potentially be impacted. You also need to understand
hotel technology trends and other trends impacting your industry, along with
your ability to appeal to customers.
Segmentation and Price Optimization
Another useful revenue management strategy involves segmenting your
customers into different types. Once you have done this, you can start to think
about how each type of customer behaves, when they book, how they book,
and so on. The benefit here is that you can approach different customer types
with different pricing strategies and marketing strategies, rather than trying to
appeal to everyone with a single, uniform approach.
Aim for Cross-Departmental Alignment
Hotels and other similar businesses achieve success when the various
departments pull in the same direction, to achieve common goals, and this is
relevant to revenue management too. Your overall approach here needs to be
based on evidence and data, and you can use this to bring individual
departments on board. From there, it is important that all departments then
work together to create consistent messaging and experiences for customers.
Choose the Best Pricing Strategy for the Moment
When it comes to pricing strategies, selecting the right strategy for the
moment you are in is important. There may, for example, be points in time
when demand is low and the priority is simply to fill a room in your hotel. At
such a moment, offering discount pricing makes sense. However, there may
be other points where demand is high, and you adopt a value-added
approach, or you may base your pricing on your competitors’ rates.
Make Direct Bookings a Top Priority
A key part of revenue management is using the right distribution channel to
find the right customer. While you want to reach as many people as possible,
the priority should be generating direct bookings when possible. When
bookings are made directly, you do not need to pay commission fees or other
fees to anyone else, maximizing revenue. Special offers, loyalty programs,
and a high-quality booking process are all ways to offer incentives for direct
bookings.
Additional Revenue Management Strategies
Several other revenue management strategies are worth keeping in mind.
Examples of this include everything from embracing digital marketing
strategies like search engine optimization and mobile optimization, to reach
more people, right the way through to enlisting the help of a freelance
revenue manager so that you can optimize your strategy. Read “9 Revenue
Management Strategies to Grow Your Hotel Business” to find out more.
The Main KPIs for Revenue Management
Ultimately, revenue management is about improving financial results.
However, you need to understand how your hotel is performing to do this.
Below are some of the most essential key performance indicators (KPIs) to
monitor.
Occupancy Rate
A hotel’s occupancy rate describes the number of occupied rooms at a
particular period in comparison to the number of rooms that can be occupied.
Essentially, the point of this key performance indicator is to identify how many
available rooms have been filled, which is expressed as a percentage.
Formula: Occupancy Rate (%) = Number of Occupied Rooms / Total Number
of Available Rooms
Average Daily Rate (ADR)
The average daily rate KPI tells a hotel the average amount it makes in rental
income per occupied room. It only considers rooms that are occupied through
paid bookings, so will not include empty rooms or rooms occupied by staff. It
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is a crucial metric for understanding how much money you are making, on
average, from each room you sell.
Formula: ADR = Room Revenue Earned / Total Number of Rooms Sold
RevPAR
RevPAR is one of the most widely used KPIs for hotel revenue management
purposes, and it stands for revenue per available room. This metric tells you
the amount of revenue that is being generated per room, irrespective of
whether those rooms are occupied. It is, therefore, a measure of your
property’s overall revenue performance.
Formula: RevPAR = Room Revenue Earned / Total Number of Available
Rooms
RevPOR
Revenue per occupied room, or RevPOR, shares similarities with the average
daily rate metric, because it is also concerned with revenue generated from
occupied rooms. However, while ADR is concerned with room rental income,
RevPOR takes a wider view, factoring in things like breakfast, room service,
spa services, etc.
Formula: RevPOR = Total Revenue from Occupied Rooms / Number of
Rooms Sold
GOPPAR
The GOPPAR metric stands for gross operating profit per available room. By
tracking and examining this, you can understand the real financial
performance of your hotel, because it is focused on profit, rather than
revenue. This factors in expenditure and is done based on the available
rooms, rather than the rooms sold.
Formula: GOPPAR = (Total Revenue – Total Expenditure) / Total Number of
Available Rooms
All Revenue Management KPIs
It is best to track as many key performance indicators as possible to get the
most from your revenue management efforts as possible, as this will equip
you with more information to use when making strategic decisions. Crucially,
each KPI will tell you something slightly different, giving you a holistic view
and certain problems may be easier to spot using one KPI than another.
Check out “The Most Used Revenue Management KPI’s for Hotels” to learn
more.
Revenue Management Pricing Strategies
Here, you will find a breakdown of some of the main pricing strategies that
may be adopted for revenue management purposes. Each strategy has its
unique benefits, but some strategies are best deployed at specific times.
Forecast-Based Pricing
Pricing based on forecasting allows hotels to adjust their rates seamlessly, in
line with anticipated demand. For example, when demand is expected to be
high, the hotel can charge higher room rates, whereas, during times of low
demand, the hotel can potentially fill rooms that would otherwise be left
unoccupied by offering discounted rates. This strategy does, however, rely
heavily on a high-quality forecasting strategy.
Rate Parity
The basic principle behind rate parity is consistent pricing across all available
distribution channels. It is a requirement to list your hotel on certain online
travel agency websites and it can help to generate trust from customers
because they will know they are all paying the same price for the same
rooms. However, it does make it harder for hotels to use pricing to attract
direct bookings and this might mean paying more commission to third parties.
Price Per Segment
Price per segment is another common strategy for revenue management
purposes and involves selling the same rooms at different prices to different
customer segments. For example, this might mean selling rooms at a lower
rate to business customers, because they are likely to use corporate facilities.
It may also involve selling rooms at a lower rate to travel agents, who will then
sell them on to customers as part of package deals.
Discount Codes for Direct Bookings
Direct bookings should always be prioritized, because they allow you to take
all of the money the customer spends, rather than paying a commission. One
of the strategies hotels adopt to encourage this is to offer discount codes.
These can be offered in advance, to attract bookings during times of low
demand, but can also be offered upon checkout, to encourage return
customers and persuade customers to book directly next time.
Package Room Deals
Package deals allow you to offer discounts on multiple room sales, making
them extremely effective for attracting group bookings. This can help your
revenue management efforts, especially at periods when you are looking to fill
as many rooms as possible. Although you will be selling the rooms for slightly
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less than they would sell individually, the guarantee of multiple rooms being
sold is often worth it, especially when demand is low.
More Pricing Strategies
Aside from those mentioned, there are a number of other pricing strategies
that can be of great use when attempting to optimize revenue. These include
a length of stay strategy, where you may be able to encourage guests to
extend their stay by offering a discount, as well as up-selling and cross-
selling. To find out more about these strategies and how they work in practice,
take a look at the “10 Pricing Strategies to Increase Your Hotel Revenue”
article.
Further Revenue Management Tips
Below, you can find some extra tips that will help you with your revenue
management strategy.
Build a Culture of Revenue Management
One of the best ways to enhance your revenue management is to create a
culture where revenue management matters to everyone. This means
creating awareness within your hotel of revenue management, its purpose,
and why it is so important to your hotel. When you create this kind of culture,
you boost the chances of individual departments and employees utilizing best
practices for recording data and making evidence-based decisions.
Keep Pace With Changes in Customer Behaviour
While past data is important in revenue management, you cannot neglect
what is happening today and tomorrow. This is especially true regarding
changes in customer behaviors and habits. For instance, you may notice that,
compared with five or ten years ago, more of your customers are booking
online rather than through travel agents. Keep a close eye on changing habits
and ensure your strategies are relevant for modern customers.
Emphasise Value Rather Than Price
It is not always possible to generate greater demand by lowering the price,
and it may not always be advisable to do so anyway. An alternative is to
emphasize value rather than price. After all, people are willing to pay more if
guaranteed a better level of service and a better overall experience. You can
also provide extras, such as discounts on additional nights, free breakfasts, or
other services while keeping your prices where you want them.
Only Use Automation in the Right Places
Automation has a major role in revenue management, but it is important not to
become overly reliant on it. While software can make calculations instantly
and algorithms can be set up to inform decisions, the best strategies require
nuanced thinking. Sometimes, you need to think outside the box, take
chances, or try something new, and a human touch will be required for this.
More Revenue Management Tips
There are several additional revenue management tips to keep in mind, from
mapping out where demand comes from, to making sure your website and
booking engines are all fully mobile-optimized. You can read more about
these tips and understand why they are important by reading “8 Revenue
Management Tips for Hotels”.
Open Pricing Strategy for Your Hotel
An open pricing strategy moves away from the fixed modifiers associated with
the BAR (best available rate) model that many hotels rely on, providing hotels
with greater flexibility to change the rate they are charging for a room, based
on the level of demand at the time, to maximize revenue.
This model also provides potential benefits for the customer, because it
means the hotel has greater flexibility to price rooms away from the
established BAR, which can sometimes result in a better rate for hotel guests,
especially in times when it suits a hotel’s revenue management strategy to fill
a room quickly.
Essentially, open pricing means many different incremental price points to be
plotted against a demand curve. Pricing can be moved away from BAR when
the situation requires it, or when it is beneficial. This wider range of price
points makes it easier to attract customers, meaning more rooms are filled,
and more revenue comes in.
Using a more fixed approach to pricing, hotels are sometimes required to
close off potential distribution channels or limit sales on particular days, even
if customers plan to stay longer. Open pricing provides freedom and avoids
closing off distribution channels or promotional opportunities. You can learn
more about this approach and its benefits by reading “Open Pricing: Why Is It
the Next Hotel Revenue Management Strategy?”
Explore Hotel Revenue Management Courses
If you are a hotel owner, general manager, or otherwise involved in key
strategic decisions around revenue management, it may be beneficial to take
a closer look at formal hotel revenue management courses. These will cover
everything from the basics of revenue management to the specific strategies
and the best tools.
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Read “Hotel Revenue Management Courses: Information + List of Educators”
for more information on how these courses can benefit you, and for a list of
some of the organizations that offer these courses.
How Can a Revenue Management System Help?
A revenue management system, or RMS, is a software solution, which allows
you to perform various revenue management-related tasks more easily. The
software can use data you input, as well as wider industry data, and perform
real-time analysis of the state of your business and your current financial
performance.
Using a revenue management system can help improve efficiency and
accuracy while offering useful insights. To learn more, read “Revenue
Management System (RMS): What Are the Advantages?”
Features of a Revenue Management System
Before investing in a revenue management system, it is a good idea to
familiarise yourself with the available features. These can vary from one
solution to the next but typically include things like pricing systems, integration
with other hotel software, data visualization, forecast management options,
and much more.
Read “RMS System: An Overview of the Most Important Features” for a more
in-depth breakdown of the main features, complete with an explanation of
how they work and why they may be useful to you.
What is Total Revenue Management?
To maximize profitability, hotels need to optimize the performance of multiple
different revenue sources, which may include food and beverages,
conferencing facilities, leisure activities, and more. This is the basic idea
behind total revenue management: applying revenue management
techniques to all applicable departments.
Check out “Total Revenue Management: How Hotels Can Maximise Their
Revenue” to learn much more about total revenue management as a concept,
how it differs from more standard hotel revenue management, the advantages
of using total revenue management, and some tips on implementing such a
strategy in your hotel.
The Latest Hotel Revenue Management Strategies, Tactics, Trends and
Tips
Revenue management involves selling the right room, to the right guests, at
the right price, through the right channels, to maximize your financial results.
In the category “Revenue Management”, you will be able to learn more about
some of the specific revenue management strategies and tactics that can
assist with this, as well as key trends. You will also find specific tips to help
you improve your revenue management efforts.
The Latest Hotel Marketing Strategies, Tactics, Trends and Tips
Hotel marketing encompasses various strategies and tactics, and it is
important to familiarise yourself with these. In the category “Hotel Marketing”,
you will find blog posts that offer all of the most critical information, as well as
details on some of the key trends within the hotel industry. Beyond this, you
can access tips, which can help you improve your hotel marketing and get the
most out of your financial investment in this area.
Revenue Management in Other Industries
It all began in the airline industry and is primarily associated with hotels, but it
can be employed in almost any business where changes in levels of demand
can be predicted, where fixed costs must be paid regardless of sales, and
where customers are willing to pay different prices for the same product or
service. In addition to its use within the hospitality industry, revenue
management has emerged as a popular strategy within car rental companies,
theatres, financial services, medical services, and telecommunications.
Want to Learn More About Management in Related Industries?
All hospitality, travel, and tourism-related industries have commonalities.
However, management in each industry is influenced by specific unique
factors. In the following articles, you can learn more about management within
related industries.
Hotel Management: Everything You Need to Know About Managing a Hotel
Hospitality Management: The Essentials About Hospitality
Tourism Management: All You Need to Know About Tourism
Restaurant Management: Everything You Need to Know
What is Travel Management?
Aviation Management: A Great Guide to Start Your Career in Aviation
Destination Management: How Tourism Adds Value to Your Destination
More Tips to Grow Your Business
Revfine.com is a knowledge platform for the hospitality & travel industry.
Professionals use our insights, strategies and actionable tips to get inspired,
optimise revenue, innovate processes and improve customer experience. You
can find all hotel & hospitality tips in the categories Revenue Management,
Marketing & Distribution, Hotel Operations, Staffing & Career, Technology
and Software.
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Fundamentals of Revenue Management
Jason K.
Jason K.
Revenue Generation Professional
Published Jan 29, 2023
+ Follow
Hotel revenue management is the process of maximizing revenue for a hotel
by effectively managing room inventory, pricing, and distribution channels.
The goal of revenue management is to optimize revenue and profit by filling
rooms at the highest possible rate.
Some key strategies for hotel revenue management include:
Dynamic pricing: Adjusting room rates based on demand and occupancy
levels, using data from past bookings and industry trends to predict future
demand.
Inventory management: Managing room inventory to ensure the right number
of rooms are available at the right time, while also preventing overbooking
and underbooking.
Distribution management: Utilizing a variety of distribution channels, such as
online travel agencies, hotel website, and directly to the hotel, to reach the
widest possible audience and increase bookings.
Yield management: Monitoring and adjusting prices based on different factors
such as the day of the week, season, special events, and business/leisure
travelers.
Segmentation: Identifying and targeting specific customer segments, such as
business or leisure travelers, and tailoring pricing and promotions to their
needs.
Analyzing data: Regularly analyzing data on occupancy rates, booking
patterns, and customer demographics to inform revenue management
decisions and improve performance.
Overall, effective hotel revenue management requires a deep understanding
of the market, the hotel's target customers, and the tools and technologies
available to optimize revenue and profit.
Module 8
The Impact of Packaging on Consumers Behavior
• Packaging Images and Typography that Influence Customer Decisions
• Branded Packaging’s Influence on Consumer Behavior
• Customers Respond to Product Finish, Material and Shape
• Appealing Graphics that Attract the Consumer
The science behind a profitable menu
Menu engineering can feel like a daunting task, but it doesn’t have to be done
overnight. Select a timeframe, cost your menu, categorize each dish based on
its popularity and profitability, redesign your layout (either by hiring a designer
or using our handy menu templates) and measure the impact of the changes
you make.
By following these steps and building a menu the right way, you’re setting
each sit-down, takeout or delivery order to be a profitable one.
Looking for data and insights to back up your menu revamp? Talk to one of
our experts to find out how Lightspeed can help.
Objectives of the Study
1. To identify the packaging impact on the consumers buying decision.
2. To find out the impact of the packaging elements on consumers purchasing
behavior.
3. To measure the role of each packaging element on the consumer.
4. To identify the elements of packaging, which should be highlighted to
attract consumers?
How Packaging Influences Consumer Behavior
15 April 2022 //
Project Planning
The design of a product’s packaging will often influence customers to buy
something if they are convinced that the item is reliable and trustworthy.
Packaging can convey emotions through design aspects like color, logos or
text and persuade consumers that a specific brand offers the perfect solution
to a person’s needs.
Companies can use knowledge of the current market and typical customer to
their advantage and create a package that positively influences consumer
behavior.
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How Does Packaging Influence Behavior?
A product’s packaging can influence consumers’ emotions through aspects
like color, typography and material. Bright colors, readable font and quality
material can convince customers that your product is reliable. There are a few
emotions and responses that describe how product packaging affects
consumer behavior:
Spontaneity: A customer will respond to an advertisement or display, such
as a child looking at a brightly colored Barbie, and buy something they didn’t
plan to.
Compulsion: Some packaging conveys an urgency to make purchasing
decisions, such as limited-edition products or items on sale.
Excitement: Customers may feel excitement or happiness when products are
appealing or mysterious.
Inclusivity: Packaging can convey feelings of inclusiveness or a desired
lifestyle. It can also promote a product to a certain income bracket or social
group.
Cohesion: Customers may find packaging instantly appealing and are often
motivated to impulsively buy products due to the packaging. For example,
food packaging that looks appetizing will appeal to hungry customers.
What Consumers Are Looking for Today
Today’s consumers are drawn to packaging and products that meet their
needs. A customer looking to buy an item will be more convinced to purchase
it if the packaging promotes the brand as a solution to their problems.
Leverage that consumer behavior and keep these factors in mind for your
packaging:
Solving a Problem
These product packages address specific issues or needs within their
consumer base. For example, food products may require different packaging
designs if consumers don’t find the food appealing. Problems are addressed
through packages that attempt to solve the issues and promote a solution to
each customer.
Aesthetic Experience
A brand’s packaging should stand out among other products. When most
brands stick to a particular design, switching up the typical aesthetic may
draw more consumers to your product.
Transparent Communication
Packaging should be transparent about the product and clearly state what the
product does. All labeling and other information communicate how the item
can help the consumer. For example, any item that claims to be a skincare
product should be healthy for the skin and communicate that benefit through
packaging.
Minimalist Packaging
Today’s product packaging is more minimalistic while maintaining a vintage
aesthetic. Brands that want to attract consumers should keep this in mind
when designing packaging that will convince people to buy the product.
Sustainability
As the world becomes environmentally aware, current packages must portray
products as eco-friendly and sustainable. Marketing strategies should
emphasize this to ensure the company is focused on protecting the
environment. Younger consumers may search for brands that care about
recyclable materials and biodegradable boxes.
Local Impact
Taking a local approach to packaging may be essential for a brand’s impact in
specific areas. Companies can identify what their local customers need and
appreciate while adapting their packaging to market to those consumers. For
example, regions that enjoy specific foods from an area will continue to buy
products catered to this demographic.
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The Impact of Packaging Color on Consumer Behavior
Color is one of the most influential parts of product packaging. It conveys
specific emotions or appeals to consumers through brand awareness and
nuance. Color can also help communicate the product’s attributes or explain
the expectations of happiness or satisfaction that consumers may have when
they buy an item.
While it is often used to help customers decide what brand to purchase,
packaging color is integral in creating trust in the consumer before they buy a
product. There are several ways that different colors can convey emotion and
best promote specific brands.
Red
Red is often used to promote reliability and draw the buyer in through high-
energy emotion. This color can increase the heart rate and signal an
adrenaline rush that conveys intense emotions to the customer. It is also
associated with feelings like love and sensuality. Red encourages impulse
buying and creates a sense of urgency, which is why it is often used in
clearance sales.
Red can also be used for safety products since the color is associated with
visibility. Consumers link red to safety through products like first aid kits or
stop signs. Other safety brands can take advantage of this when designing
their packaging.
Orange
Orange is an attention-grabbing color, so using it in small packaging areas
can make it stand out among other colors. Consumers find orange appealing
and pleasant, giving off emotions of happiness and positivity. It can also
evoke joy, enthusiasm and determination while motivating customers to buy
your product. Orange is a wonderful color to use in packaging food products,
hardware tools or items that want to invoke freshness.
Yellow
Yellow can be a bright color that attracts a customer’s gaze. It is a popular
choice for clearance sales and gives off feelings of warmth, happiness and
optimism. Yellow can also boost energy and heighten mental activity.
However, overuse of the color can give customers feelings of anxiety.
Green
Green reminds consumers of nature and freshness, making it an excellent
packaging color for environmentally friendly products. It is also the go-to color
for products that involve a call to action and can invoke various feelings, from
invigoration and productivity to relaxation and calmness. Since this color is
associated with nature, purity and health, products that involve cleanliness or
growth work best with green packaging.
Blue
Blue is a calming color that tends to dispel nervous or anxious energy. It can
promote calmness or tranquility in customers who associate the color with
water or the sky.
For difficult purchasing decisions, blue may assist customers in making hard
choices, as it also produces calming hormones, slows breathing and lowers
the heart rate. This relaxing color is great for products that want to display
enthusiasm for their product or sincerity in their brand image.
Purple
Purple is not often used in packaging and can give consumers a sense of
freshness when buying the product. The color is often associated with royalty
or luxury and induces feelings of power and dignity. Using bluer purples may
promote feelings of relaxation, while redder purples represent ambition. A
violet shade will also remind customers of wisdom, mystery or creativity.
Pink
Pink is gentler than red and has an innocent and tender appearance. This
color is often associated with children or youth and represents positivity and
hope. Pink tends to be associated with femininity and is often used in
packaging aimed toward women or young girls.
Remember that some customers may be wary of pink due to perceptions of
the “pink tax” — products marketed toward women having a higher cost —
making them avoid the product altogether.
Black
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Black is a versatile color and pairs well with other color schemes. This color
represents elegance, power and sophistication. High-end products and luxury
brands often use black to communicate this.
White
White reminds customers of purity and simplistic ingredients. It is an elegant
color, often representing innocence or a sterile environment. White is an
excellent accent color when paired with the brand’s primary palette and can
be used in product packaging to symbolize newness or youthfulness.
Gray
Gray is a neutral color. It can invoke feelings of relaxation, calm and balance
or convey a lack of energy. Gray also symbolizes maturity and is best used as
an accent color paired with the primary color used by the brand.
Each color carries with it an explanation of the customer’s sensory
experience. A package that contains a scented product will usually match its
corresponding color. For example, natural scents like pine, tea tree or
eucalyptus are associated with the color green. Floral scents like lavender or
cherry are often paired with purple or bright pink, and consumers will expect
these color pairings when buying a product.
Branded Packaging’s Influence on Consumer Behavior
A well-established brand will make it easier for consumers to make
purchasing decisions when it comes to different products. Someone with little
to no knowledge of an item is more likely to prefer the well-known brand name
product over anything else.
Strong brand influence also builds trust within consumers. People will share
their purchasing decisions with friends or family and spread brand trust
through word-of-mouth, extending this trust to other products made by the
same company. Consumer’s who enjoy a product will buy it again and again.
Branding can communicate the benefits of a product or company’s service
while enabling the audience to understand a brand’s goals. Companies can
build brand loyalty by ensuring their packaging conveys a mission statement,
the company’s core values and how the product solves an issue.
If your company offers a variety of products, consider a cohesive design
among them. Customers may recognize your brand logo, colors and
packaging shapes on a product they wouldn’t usually buy. Their awareness
with your brand may encourage them to purchase something new.
A brand that incorporates its image on the packaging can become better at
advertising. Packaging can tell a narrative to the customer and increase brand
awareness. Packages that act as advertisements can create curiosity around
the company and increase the number of customers who check out the
product and will potentially buy the item.
How Packaging Images and Typography Influence Customer Decisions
The packaging’s images, symbols and typography convey the product’s
branding and make it easy for consumers to recognize the item. Logos
become shorthand for the brand that exists behind the symbol. For example,
the golden arches of McDonald’s or the Apple logo of the iPhone are well-
known among customers who trust the brand and instantly recognize their
symbols.
Icons, logos and designs can attract customers when they are placed
prominently on the packaging. Using symbols in the place of text may also
provide a less cluttered look and convey information about the product and
brand quickly.
Appealing Graphics Attract the Consumer
Cluttered layouts, hard-to-read fonts or excessive content may deter
consumers from buying a product. The graphics of a packaging design are
integral in conveying the characteristics and usage of a product and the
influence it will have on a customer.
Here are a few ways brands can use graphics to attract consumers:
Limit the number of fonts: Stick to two fonts and avoid fitting too much
information into small areas.
Use white space: Avoid clutter by utilizing white space — or blank areas,
depending on your packaging color — and realize that less is more.
Watch for printing limits: Design aspects may push the printing or
reproduction quality boundaries.
Adhere to regulation requirements: Packaging designs should adhere
to graphic regulations to avoid delays.
Steer clear of intricate designs: Detailed illustrations may make printing
difficult, especially on smaller packaging.
How Customers Respond to Product Finish, Material and Shape
The product packaging material may deter a customer from choosing a brand.
Material that seems flimsy or prone to breakage may stop a consumer from
buying a product. It is essential to design packaging that is high-quality, eco-
friendly and shaped interestingly to draw in customers and promote the brand.
Shape and Branding
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Companies can use the shape of a package for branding. Uniquely shaped
boxes will set the product apart within the marketplace of similar products and
attract customers to the item. Sometimes, larger packaging will draw in
consumers who perceive larger things as more significant in value. Just
ensure the product inside the box meets those expectations.
Elongated shapes tend to be more attractive than conventional shapes, while
unusual or eye-catching packages can appeal to specific demographics. For
example, children may gravitate to animal-shaped boxes or packaging with a
favorite character displayed on the front.
Eco-Friendly Packaging
Using recyclable and biodegradable material in packaging says that a
company cares about the environment. Some consumers will gravitate toward
packages that display an effort to be eco-friendly. Brands should be authentic
about their recyclable packaging, as poor products could create distrust within
consumers who feel that the company is not being truthful about its
environmental efforts.
Quality Material
Quality material is attractive to customers who look for packaging that is
properly fastened and made with a sturdy design. Consumers may be less
inclined to buy an item if they think the packaging is of poor quality. Different
materials can also convey additional messages. For example, velvet boxes
imply wealth or luxury, while a plain box made from recycled cardboard says
that the company is eco-friendly.
Use EDL Packaging to Create Custom Packaging Solutions
At EDL Packaging, we focus on secondary packaging through advanced
designs. Our company is dedicated to helping our customers succeed and
provides cost-effective options for protecting products that need transporting,
storing or retailing.
EDL Packaging applies more than 50 years of packaging experience to meet
customers’ unique requirements. We offer shrink wrappers and bundlers,
corrugated tray formers and loaders, roll wrappers and semi-automatic
wrappers. Contact us online to talk to a representative.
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