Menu Engineering 1-2-3-4 for QSRs [Expert Corner]

In this installment of Expert Corner, we get Rick Zambrano's perspective on the very critical lifeline topic of menu engineering for restaurants. Below is the contribution from Kandessa's founder:

Menu engineering is the process of creating a menu that is both profitable and appealing to customers and one that increases frequency.  The concept has been around for years yet it’s often misunderstood by smaller restaurant chains and independents; basically, it encourages people to buy more expensive items and steers them away from cheaper ones.

In my book, there are four main precepts to menu engineering:

1.  Establish a menu that increases item contribution margin: Profitability is needed at the menu item level, and it starts with the owner-operator.

2.  Develop seasonally changing items and optimize existing supply chain ingredients to minimize waste.

3.  Build a menu that is responsive to customer feedback with tastes that incorporate some of the latest trends on the dining scene; and

4.  Partner with suppliers to understand ingredient options and timelines in the supply chain.

Here’s how to make them work for your business.

Establish a menu that increases item contribution margin

Successful chain leaders understand that managing food costs with every menu item is paramount to increasing profitability.  In made-to-order items, that starts with the supply chain, but also encompasses portion control, prep discipline, and understanding your most popular items (supply/demand) to reduce waste.

In pre-made items, it's key to both understand current demand and product mix, because once demand is understood, the restaurateur is optimizing opportunity with guests.  Merchandising will do nothing if demand is low and supply is high for the least popular items.  I've worked with restaurant professionals who believed that having leftovers in a "grab n' go" setting is a bad thing.  Don't be fooled.  You always want to see that you didn't run out, that you didn't squander the opportunity to increase your sales for the day.

Revenue Management Systems, based in Tampa, Florida, is one example of a company that offers chains price sensitivity and menu profitability enhancement options. There are many other advisors in this complex area - the bigger your company, the more help you may need in analyzing product mix and item contribution margin.

Develop seasonally changing items and optimize existing supply chain ingredients

Just as you or I choose to have variety in our diets, so do your customers.  It's important to bring in limited-time offers (LTO) and seasonal rotation.  For fall, incorporating the seasonal flavors of pumpkin and cranberry not only appeal to current trends and taste buds, but optimize the bountiful ingredients that are already out there.  Supply is not always this predictable, however, so be sure to work with suppliers on the current pipeline.

I come from a culture of optimizing ingredients to reduce the complexity of the menu and to reduce the ingredient portfolio.  This may end up saving you thousands or even hundreds of thousands of dollars over the long term as you can build in cost effective supplier contracts on fewer key ingredients.  In making the rounds, I still see a lot of opportunity out there, particularly with fast casual chains and independents.

Build a menu that is responsive to customer feedback and tastes.

Your best customers are already telling you what your hits are.  So ask yourself: What is unique or different about their flavor profiles, and what can I bridge over to future products?  Be thorough in your company's review of sales results, product mix, customer feedback, surveys, and consumer testing and focus group activity.  These lessons translate well into longterm success each time you rotate your menu.

Have your culinary person (or team, depending on your size), be on the lookout for new trends and flavors.  While you want to keep your faithful customer base, you don't want to be the only one not serving "salsa" or "organic greens" on the menu.  A study of your competitors, food publications, and even more complex intelligence and business reports will go a long way.

Partner with suppliers to understand ingredient options and timelines in the supply chain

Your best asset is the relationship you already have with current suppliers.   One is more likely to go further with suppliers that are providing valuable information and realistic timelines rather than those that promise the sky.  I've seen changes in the supplier lineup only lead to additional costs when timelines can't be met or recipes can't be replicated to your exact specifications.  Be sure you understand the true "opportunity cost" when switching suppliers like you do clothing.

A word to independents: Consider reviewing your current supplier relationship to see if it's working for you.  Just because Harry, your deli meat supplier, knocks on your restaurant's door each week, doesn't mean he has the ability to grow with you or obtain harder-to-find ingredients.

Rick Zambrano is the founder of Kandessa Media Solutions LLC and lives in Boston, Mass.  After nearly a decade of working at Au Bon Pain, mostly in support of the Finance, Operations, and Culinary groups, he founded Kandessa and launched qsrbuzz™. Zambrano can be reached at rickz@qsrbuzz.com.