How to Increase Menu Profitability in 7 Simple Steps

Menu profitability is a core success factor for any restaurant business. To help you increase profits, we’ve put together this guide that focuses on restaurant profit margins, menu pricing, and how to tweak your menu to boost profitability. Let’s get started!

How to Calculate the Profit Margin for Restaurants

To track your profitability, you need to keep a close eye on your profit margin, which is the percentage of sales revenue that you’re left with after you pay your expenses.

You can measure your gross profit margin, which refers to the total profits before deducting expenses, or the net profit margin, which refers to the total after deductions like rent, payroll, utilities, and so on.

To calculate your gross profit margin, follow this formula:

Gross Profit Margin = [(Revenue – Cost of Goods Sold /Revenue] x 100

In here, the cost of goods sold refers strictly to costs related to purchasing menu items. So, for example, if you have a revenue of $500,000, and the cost of goods sold is $150,000, your gross profit margin would be 70%, as follows:

[($500,000 – $150,000)/$500,000] x 100=[$350,000/$500,000] x 100 = 70%

To calculate your net profit margin, apply this formula:

Net Profit Margin = [(Revenue – All Costs)/Revenue] x 100

So, if your revenue stays the same, but the total costs go up to $400,000, you will have a net profit margin of 20%:

[($500,000 – $400,000)/$500,000] x 100=[$100,000/$500,000] x 100=20%

What Is Menu Analysis and How Can It Help You Increase Profitability?

Your menu is crucial for the profitability of your restaurant. To ensure menu profitability, you must first conduct regular menu analysis.

That involves looking at each menu item to establish its popularity and profitability, as well as form a plan that will help you increase the profit margin of your restaurant menu items.

Your goal should be to optimize your restaurant menu, from its content to its design and pricing, to ensure it’s as profitable as it can possibly be.

If you don’t regularly look at your menu and make tweaks, you won’t figure out what items customers aren’t loving anymore or what’s too expensive for them to order.

How to Price Your Menu Items to Turn a Profit

To increase menu profitability, you must first look at menu pricing. What is menu pricing? The process of determining the price of your menu items to ensure a steady profit without overcharging your customers.

In order to calculate the prices you should charge for specific items, you need to establish an ideal food cost percentage (how much of your sales you spend on food), which should typically be between 25 to 35%.

Then, calculate the raw food cost of each menu item. Let’s take a pepperoni pizza, for example. You would need to add up the total cost of the dough, sauce, pepperoni slices, seasoning, and any other ingredients you may use.

To price your pepperoni pizza, follow this equation:

Menu Item Price = Raw Food Cost of the Item/Ideal Food Cost Percentage x 100

In this case, if the raw food cost of the item is $5 and your ideal food cost percentage is 27%, your pepperoni pizza should cost $18.51, because:

5/27x100 = 18.51

This pricing scheme ensures menu profitability based on your ideal food cost percentage. However, that doesn’t mean you have to use this exact price. You can round up or down and adjust the price according to other factors as well.

7 Menu Profitability Tips to Implement ASAP

1. Keep your menu small

Small menus are more profitable because they lower food costs, help customers decide faster, make your staff’s job easier, and help reduce food waste.

You don’t need to provide an endless list of options. In fact, that might be counterproductive as it will take longer for customers to browse the menu and decide what they want to eat.

Stick to a one-page menu that includes seasonal dishes with fresh ingredients and the option to customize the dishes with extras, choices, and add-ons.

Customers will be thrilled with the quality of the locally sourced ingredients and the variation they’ll get each season.

You can start creating your menu right now and make unlimited changes to it as you go following the steps in this video:

The menu can be used for both online ordering on your website and social media and dine-in ordering via a QR code.

2. Choose profitable menu items

To make the most of your menu, you need to be aware of the most profitable restaurant menu items in terms of food costs, pricing, food waste, and seasonality.

Here are some examples:

• Appetizers: They are profitable because they don’t cost a lot to make, and they can be shared by larger groups. They can also be added as extras to full meals, which gives you a chance to cross-sell.
• Sides: The same as appetizers, most sides are inexpensive to make and can be added to any order.
• Add-ons: with high-profit margins, add-ons can help you turn a $7 dish into a $10 dish.

You can easily customize your menu with add-ons in minutes using our online menu maker. Here’s how:

3. Make your menu appealing to look at

No matter how delicious your food is, if you don’t know how to “package” it in a way that appeals to your target audience, you won’t increase menu profitability.

From mouthwatering images to creative menu writing that appeals to the senses, you need to ensure your menu looks good.

Invest in a professional photoshoot to make your dishes shine and craft descriptions using adjectives that emphasize the dish’s flavor, appearance, and cooking method.

4. Offer limited-time specials

Another excellent benefit of having a small base menu is that you can play around and experiment with limited-time menu items, be they daily, weekly, or even monthly specials.

Their limited availability is what will motivate customers to try them before they disappear. Plus, the novelty will ensure clients don’t get sick of your regular menu items and get a bit of diversity now and then.

5. Provide useful menu item information like allergens and nutritional values

Another way to keep customers happy with your menu is to complement the item’s description and ingredients with information about its nutritional values and potential allergens.

Today’s informed customer wants to be able to check at a glance the number of calories or fat that they’re putting into their body, as well as ensure they won’t order something that will trigger an allergy.

6. Train your staff to upsell and cross-sell

Offering customers a premium menu item with a higher profit margin (upselling) or suggesting an additional item that would complement their meal (cross-selling) will improve your profitability and customer service.

When done subtly and without pressuring the customer, upselling and cross-selling are an art that can turn a $20 check into a $30 check in seconds.

You can also increase the average check value if you use an online menu creator that allows you to suggest appetizers, sides, extra toppings, and more when customers add a meal to the cart.

7. Make your menu accessible online and offline

Finally, to make your menu available to a larger audience, don’t limit yourself to dine-in only. Add a Menu & Order button to your restaurant website to enable online ordering and allow customers to order your delicious food at home.

Follow this step-by-step tutorial to learn how to add an Order button to your website for free:

Closing Thoughts

For the long-term success of your restaurant, make menu profitability one of your main goals. From menu pricing to design and content, think of the best ways to make your menu appealing to your key demographic.