Menu engineering is a way for coffee shop owners and operators to maximize the profitability of their menu — both overall and on an item-by-item basis.
In practice, menu engineering consists of isolating each of your coffee shop’s menu items, assessing the profitability and popularity of each item, then using that data to optimize your menu and improve your business’s bottom line.
(But don’t worry — we’ll tell you more about those steps in, like, 10 sentences.)
Why does menu engineering matter?
Now, at its core, menu engineering is designed to help you improve your coffee shop’s profitability… but that’s not all it can do.
Other benefits of menu engineering include:
- More strategic marketing efforts — Once you know which menu items are the most profitable and popular, you can make more strategic decisions on which items to push (and which ones to pull back on).
- Better customer satisfaction — Understanding the profitability and popularity of each menu item helps you pinpoint exactly what your guests like, guiding future efforts to give them more of what they love (like seasonal specials!).
- Streamlining day-to-day operations — Knowing which items are your menu’s “breadwinners” can help you streamline your daily operations, reducing your ingredient costs, need for labor, and time spent on prep.
Easier menu engineering — and a more profitable menu — is just one download away.
The 5 steps of menu engineering
Step 1 — Choose a time frame to focus your menu analysis
The first step of menu engineering is picking a specific time frame to guide you through the entire process.
Narrowing your exploration to a specific time frame or window is key to successful menu engineering for two main reasons.
First, it helps you focus your efforts by exploring the profitability and popularity of a specific menu item during a specific time.
Think about it like trying to find a needle in a haystack. You can search the entire haystack, blindly digging around until the needle finds you (ouch). Or, you can split the haystack into easier-to-manage pieces, strategically searching for the needle and using fewer Band-Aids.
The latter is what picking a time frame helps you do.
Second, it highlights less obvious (but incredibly helpful) performance data about your menu items that an “all-time” snapshot simply can’t.
Say you’re looking at your coffee shop’s Pumpkin Spice Latte sales, outlined in the table below.
|
Month |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
|
PSLs sold |
0 |
2 |
1 |
1 |
0 |
0 |
0 |
3 |
15 |
25 |
10 |
5 |
If you try to explore menu engineering based on the entire year, you’d probably deduce that your PSL was a total bust — after all, you only sold an average of 5 a month, right? But, if you explore a narrower time frame, like Q3 on its own, you’d realize that your PSL was actually a seasonal slam dunk.
So, before you go any further in the menu engineering process, pick a specific time frame and stick to it.
It’s the only way to get anything meaningful out of this exercise!
Step 2 — Calculate your menu items’ profitability and popularity
The second step of menu engineering is calculating how profitable and popular each of your menu items is.
This step is a “must” because you can’t move on to any of menu engineering’s profit-building steps without knowing which menu items are the most profitable and popular in the first place.
(And profit is really the whole point of menu engineering in the first place!)
There are four calculations involved in figuring out profitability and popularity:
Calculation 1: Food cost per menu item
This calculation helps you understand what your coffee shop spends to make each menu item, including the cost of ingredients, ingredient delivery fees, packaging, etc.
Ingredient costs + purchasing costs
= food cost per menu item
Calculation 2: Menu item contribution margin
This calculation helps you determine the profit for each item on your coffee shop’s menu. You’ll need to have two numbers handy to calculate your menu item’s contribution margin: food cost per menu item (the first calculation in this section) and price per menu item.
Price per menu item — food cost per menu item
= menu item contribution margin (or profit)
Calculation 3: Menu item popularity
This “calculation” — or, more accurately, this “observation” — uses different data types to help you identify your coffee shop’s most popular menu items. Both quantitative and qualitative data can help determine menu item popularity, such as:
- Sales stats from your POS system showing how many of a certain menu item were sold during a specific period (quantitative)
- First-hand data from your front-of-house staff about which items they’ve been selling more or less of recently (qualitative)
Pinpoint your menu’s Stars with our free, easy-to-use menu engineering template.
Step 3 — Categorize your menu using the Menu Matrix
After costing your menu, it’s time to categorize your menu items using the Menu Matrix.
The Menu Matrix is a tool that helps coffee shop owners and operators organize their menu items based on each item’s popularity and profitability. Depending on each item’s popularity and profitability, it’s assigned to one of four quadrants in the Matrix:
- Plowhorse — for menu items with high popularity and low profitability
- Star — for menu items with high popularity and high profitability
- Dog — for menu items with low popularity and low profitability
- Puzzle — for menu items with low popularity and high profitability
Then, after you’ve categorized every one of your menu items as a Plowhorse, Star, Dog, or Puzzle, you can start making strategic, Matrix-informed menu changes that maximize profits.
Step 4 — Maximize profits with menu engineering strategies
How your coffee shop leverages menu engineering to maximize profits is unique to you, your offerings, and your long-term goals.
But, that being said…
There are several high-level strategies coffee shops of all shapes and sizes will generally find effective — no matter what’s on your newly engineered menu.
Improve the profitability of your menu’s Plowhorses by:
- Substituting a lower-cost ingredient in a Plowhorse (or Plowhorses) to reduce the item’s food cost while increasing its profit
- Example: switch your Plowhorse’s main ingredient to something you can order in bulk for cheaper
- Assessing your kitchen prep processes for a Plowhorse item (or items) to identify profit-hurting issues like waste or yield
- Example: use a digital coffee scale to ensure consistent Plowhorse portions
Maximize the value of your menu’s Stars by:
- Putting your Star (or Stars) in your menu’s Golden Triangle, increasing the number of guests likely to spot it while browsing
- Example: draw attention to your Star with a “featured” spot on your menu
- Highlighting your Star(s) in a social media or email marketing campaign that emphasizes its best-selling features
- Example: regularly promo your Star(s) in your coffee shop’s newsletter
Boost the popularity of your menu’s Puzzles by:
- Offering a limited-time promotion or discount on your Puzzle (or Puzzles), enticing guests to come and try the item sooner rather than later
- Example: invite customers to try a Puzzle for 50% off after 5 PM
- Improving the visual appeal of the Puzzle(s) through better product photos or a more engaging item description
- Example: try replacing Puzzle photos that aren’t visually exciting
Evaluate the potential of your menu's Dogs by:
- Reinventing a Dog item (or items) to test on your guests, evaluating whether the item just needed a makeover or it truly needs to go
- Example: test out a Dog item iced instead of hot (or vice versa)
- Transforming an “evergreen” item into a “limited-time” item, so you don’t have to spend as much on Dog-item(s) ingredients
- Example: limit Dog items to when the ingredients are in season
Step 5 — Evaluate performance and continuously optimize
After your first round of menu engineering is complete — and you’ve got a few trial months under your belt — you can start evaluating (and optimizing) your reworked offers.
To do this, you can revisit some of the calculations we introduced in Step 2, exploring the food cost, menu contribution, and popularity of your re-engineered menu items during the trial. Once you have those calculations, ask yourself:
- Did any menu items have a contribution margin increase or decrease?
- Did any menu items’ popularity increase or decrease?
If a menu item’s contribution margin or popularity decreased (or didn’t increase as much as you’d like), don’t worry — menu engineering isn’t limited to one-time use! As you gather more up-to-date profit and popularity data, you can (and should) take another shot at menu engineering.
And remember: success isn’t linear, and neither is menu engineering!
Start Engineering Your Menu With Craver’s Menu Matrix
Ready to give menu engineering a shot?
We’ve got a little something to help you get started!
Craver’s Coffee Shop Menu Matrix is a free, downloadable template, designed to make categorizing your coffee shop’s Plowhorses, Stars, Puzzles, and Dogs fast ‘n’ easy.
We’ve also added recommendations for each Matrix category, sharing data-driven tips for everything from maximizing your Stars to analyzing your Dogs.
(Betcha never thought you’d read a sentence like that in your life!)
Mastering menu engineering is within reach — get your Template copy below!
Make It Happen with Craver. Categorize your menu faster than you can pull a double shot with our FREE template!
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