Menu Engineering 101: How to Design a Menu that Sells

Menu Engineering - Sell the things that make you money.

Too often, restaurant operators let their menu construction become an afterthought. Your menus are inherently sales tools, whether you treat them like it or not. They aren’t a place to feature the owner’s favorite dish, or try new designs and concepts on the fly - they’re far too important for that. They are the one tool in your restaurant that drives the decisions of every guest who walks in the door, and they do so with no added effort from your staff. They should be working for you, increasing efficiency and profit.

Step 1 - Know your menu - Popularity Index and Contribution Margin

In order to make the right decisions regarding your menu’s direction, you need to know your items and how they’re performing. Measuring one item against another based strictly on food cost or revenue doesn’t always tell you the whole story - instead calculate Contribution Margin and Popularity Index.

Contribution Margin - the amount of revenue left over after food cost. Say you have one dish priced at $40 with 39% food cost, and another $30 dish with a 32% food cost. On its face, the higher margin item is preferable, but in reality the lower margin item drives more revenue. 

Dish 1 - $40 - 39% COGS = $15.60, Contribution margin is $24.40

Dish 2 - $30 - $32% COGS = $9.60, Contribution margin is $20.40

Every time you sell dish 1, you make an extra $4 in margin versus dish 2. 

Popularity Index - How popular is a dish relative to its standardized, expected popularity? Keep comparisons in general categories - compare entrees for example, or compare sandwiches, salads and flatbreads collectively on your lunch menu. Divide the total amount of items in your category by 100 to yield the expected popularity (10 items? 10% expected popularity. 20 items? 5% expected popularity). This assumes all items are ordered at the same rate. Now, divide the total amount of orders for a menu item by the total amount ordered within that category. You sold 1000 entrees. Entree 1 sold 50 times, entree 2 sold 200 times. Entree 1’s actual popularity is 5%, entree 2 is 20%. Last divide actual popularity by expected popularity to get the index. Entree 1 is 0.5, Entree 2 is 2.0. Any index value below 1 indicates underperforming items, while values above 1 are overperforming. 

The best practice is to build a table with all of your menu items, the food cost, contribution margin and the popularity index. Once your table is complete, you have all of the diagnostic data you need to engineer the perfect menu. (We will also have a pre-built menu engineering tool here at SHS in the very near future, stay tuned.)

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Step 2 - Interpreting the Data - the Menu Engineering Matrix

The classic menu engineering matrix is based on breaking your menu items out into four categories:

1. Stars - high profit, high popularity - Your best performers, they sell themselves.

2. Plow horses - low profit, high popularity - Volume drivers ultimately hurting your margin.

3. Puzzles - high profit, low popularity - Good items you want to drive more sales towards.

4. Dogs - low profit, low popularity - Wasted space on your menu.

   
   

Feel free to use different names for the metrics, but it is helpful to have your menu items broken out into these four performance categories. You now have a solid picture of which items are carrying you, which items need a price adjustment, and which items should be cut entirely. Your stars are not to be messed with, and should be featured prominently. You can test price increases or portion size decreases with your plow horses, or feature them in a way that they promote the sale of higher margin items. Puzzles need to be discovered and should have their menu placement and description reworked. Dogs are costing you time and money and should be eliminated.

Step 3 - Menu Psychology and Design

When we sit down at a restaurant and pick up the menu, all kinds of subconscious cues and triggers start firing, telling us what we’re going to order without our conscious self being aware of the specific reasons why. These subconscious cues are all over your menus, whether you intentionally designed them or not, so it’s very important to be strategic with your menu design in this regard. 

The first thing to think about is where menu items physically live on the menu, their placement. It is most common for people’s eyes to initially focus on the upper center area, then move up to the right, then to the top left. You can use this to manipulate an item's popularity. Your “stars” should be prominently placed, but save the very best spots for "puzzles," the high-margin dishes with a popularity index below 1.0.

Anchor pricing and decoys are another classic psychology trick that works. The first price a guest sees when they look at your menu (and when they look at a section) “anchors” their expectations going forward. If they see your most expensive items first, your less expensive items feel like a good deal. If they see your cheaper items first, your higher priced items feel more unreasonable. Similarly, a “decoy” is priced high to encourage guests to gravitate towards the cheaper target you want them to choose. 

Here are a couple of simplified examples. A high end steakhouse has three cuts, a Sirloin for $28, a Strip for $41 and a Filet for $53. The strip is the target; it has the best margin and contribution index. The filet is the anchor and the decoy. It makes the strip look like a better deal, and encourages customers to choose it rather than the "lowest-tier option." Another example - you offer fries as an upcharge on sandwiches. Instead of just one option, you have regular fries for $4, and truffle parmesan fries for $8. Having the truffle fries as an anchor and a decoy makes it easier for your guests to say yes to the regular upcharge.

It comes down to this - your items with the most profitable, scalable margin are the items you want your guests to choose. The most important metric here is contribution margin, but popularity is important too, as is - leading into the next section -  your team and your kitchen’s ability to scale the production of that menu item. 

Step 4 - Know your restaurant and team

Your team and your facility will naturally have strengths and weaknesses. Certain dishes and prep procedures are a breeze thanks to the equipment you have, or the talent. Others are a challenge. You need to build your menu to suit your strengths and hide your weaknesses. What are your kitchen’s bottlenecks? What is your service staff good at selling? What do your customers want? These are all questions you need to know the answers to if you don’t already. 

If you can only handle making four orders of pasta at a time, you do not want to try to make a pasta dish one of your stars. Observe the line during service on busy nights, and look for trends. What station is in the weeds? Which cooks are standing around without much to do?

You can spend hours making the perfect menu that adheres to every menu engineering rule, and still end up in a worse spot if you don’t anticipate your real-world strengths, weaknesses and limitations. Design a menu that sells what makes you the most money, and design it so those high-contribution margin items that make you money are what your team and your kitchen can produce and serve at scale. 

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Step 5 — Build monthly review momentum

This is the most important step. If you learn to use these tools to your advantage, you're already three steps ahead of your competition. But tools only work if you use them consistently.

Block 60–90 minutes on the same day every month. Pull your sales mix from your POS for the prior month. Run your contribution margin and popularity index across your categories. Drop each item into the matrix: stars, plow horses, puzzles, dogs. Then ask three questions:

What changed from last month? A former star slipping into plow horse territory usually means a cost creep you missed or a portion that drifted. A puzzle moving into star territory means your staff is selling it — figure out why and replicate the pattern elsewhere.

What's one item I'm going to act on this month? Not five. One. Maybe you reprice a plow horse. Maybe you move a puzzle to the upper-center of the menu. Maybe you cut a dog entirely. Pick one move, execute it, and measure it next month.

What's the kitchen telling me? Your data tells you what's selling. Your line tells you what's sustainable. If your newly-promoted puzzle is crushing the grill station every Saturday, that's a problem the matrix won't catch.

The operators who do this successfully aren’t superheroes, they’re just consistent. Six months in, your margin looks different. Twelve months in, your menu is a machine. Most restaurants never do this. The ones that do pull away from their competition quietly, month after month, while everyone else is still guessing.

Conclusion

You don't necessarily need more customers to make more money — you need to guide the ones you already have. Your menu is guiding your customers whether you designed it to or not. The question is whether it's guiding them toward the items that work for your business, or whether it's guiding them away from them.

Menu engineering is a habit. And it's one of the few habits in this industry that pays you back every single service, without requiring more staff, more marketing, or more hours on the floor. Start with the data. Build the matrix. Make one change this month. Review it next month. Repeat.

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Want an outside read on your menu? The Restaurant Health Check includes a full menu analysis — we pull your sales mix, run the matrix, and show you exactly where your contribution margin is leaking. Get your Health Check →