KEY IDEA – Because they had run other types of successful family businesses, the Nelsons knew that growing their restaurant would require learning how to measure menu profitability. Otherwise, they would be flying blind without knowing which of their offerings were making the most money (and which weren’t). They start their annual menu profit analysis by using unit sales data collected by their POS. Within each menu category (appetizers, entrees, etc.), they rank each menu item by its unit sales.

KEY IDEA – Rarely ordered items are removed from the menu to make it easier for more popular items to stand out. Next, items with below average popularity are slated for improvement. (What could be adjusted with each underperformer to make it more appealing?)

KEY IDEA – Next, they assess profit contribution by item by comparing its menu price with updated ingredient costs. This helps them identify where menu prices require adjustment to account for ingredient cost inflation. For example, one year they learned that their salads had grown significantly underpriced, especially given their labor intensity and that they had been selling side orders of dressing a few cents below cost.

KEY IDEA – Finally, identifying which items offer above average popularity and profitability helped them know where to most profitably focus their marketing efforts. For example, menu analysis revealed that the Nelsons gourmet specialty pizzas were both especially profitable and highly popular.

Armed with this information, they learned to devote more space in their printed menus to focus on these items. They also trained their servers to always suggest them first to arriving guests. As a result, their menu mix has tilted even further in favor of these popular, higher profit items!

By systematically improving less popular items, maintaining profitable menu pricing, and promoting their most profitable and popular items, Mike and Vicki have kept their business healthy and growing!