Podcast Summary: Restaurant Strategy Episode - "The Power of Menu Engineering"

Podcast Information:

• Title: RESTAURANT STRATEGY
• Host/Author: Chip Klose
• Description: The Restaurant Strategy podcast is dedicated to helping independent restaurant owners increase the profitability of their restaurants. Hosted by industry expert Chip Klose, the focus is split between operations and marketing, releasing two episodes every week.
• Episode: The Power of Menu Engineering
• Release Date: April 28, 2025

Introduction to Menu Engineering

In the episode titled "The Power of Menu Engineering," Chip Klose delves deep into the strategic art of designing and optimizing restaurant menus to enhance profitability and guide customer choices. Klose emphasizes that a menu should transcend being merely a list of offerings—it should be a powerful sales tool that orchestrates a desired dining experience.

Chip Klose [00:00]: "Menu Engineering is how do you use design and layout and fonts to guide the diner to order the things that you want them to order."

Understanding Menu Engineering

Menu engineering, a concept with roots stretching back 40-50 years, involves the strategic arrangement of menu items to influence customer behavior and maximize profits. Klose introduces the foundational framework of menu engineering, setting the stage for a data-driven approach to menu optimization.

Gathering Necessary Data

Profitability Analysis

To make informed decisions, restaurant owners must first understand the profitability of each menu item. This involves analyzing recipe cards to determine the real-time plate costs and gross profit margins.

Chip Klose [04:30]: "You need to understand the profitability of your menu and you need to understand the popularity of your menu."

Popularity Assessment

Determining the popularity of menu items is achieved through product mix reports (PMIX), which can be generated via POS systems or specialized programs like Aero. These reports reveal the sales volume of each item over selected periods, enabling restaurants to identify their best and least-performing dishes.

Chip Klose [07:15]: "If you run a product mix report every single month, you should see what was the most popular item you sold and how many of those you sold."

Menu Matrix and Its Application

Klose introduces the Menu Matrix, a pivotal tool that plots menu items based on their profitability (Y-axis) and popularity (X-axis). This visual representation categorizes items into four quadrants:

1. Stars: High profitability and high popularity.
2. Plow Horses: High popularity but low profitability.
3. Puzzles: High profitability but low popularity.
4. Dogs: Low profitability and low popularity.

By plotting items on this matrix, restaurant owners can make decisive actions—such as promoting stars, reworking plow horses, reconsidering puzzles, and eliminating dogs.

Chip Klose [12:45]: "When you plot everything on this matrix, you're going to determine what stays, what goes and what you can do with them."

The Menu as a Sales Tool

Beyond data analysis, Klose stresses the importance of viewing the menu as an experiential guide for diners. Effective menu engineering ensures that signature and profitable items are highlighted, enhancing both customer satisfaction and restaurant revenue.

Chip Klose [19:00]: "Your menu is a sales tool. Your menu, side by side with your servers, your bartenders, are tools to help guide the diner through, to make sure they have the best possible experience."

Digital Menu Engineering

In today's digital age, Klose expands the conversation to include online ordering platforms, third-party delivery apps, and kiosks. He highlights several strategies to optimize digital menus:

• Incorporate High-Quality Images: "Pictures are worth a thousand words. If you do not have pictures on your online menu, you lose."
• Enable Upsell Opportunities: Utilizing features like "people also ordered" to increase average order value.
• Highlight Featured Items: Positioning popular and signature dishes prominently on digital platforms to drive sales.

Chip Klose [27:30]: "Make sure everything is Pictures. Make sure you're enabling all those pop ups and those recommendations, absolutely important."

Menu Design Principles

Klose outlines ten essential insights for effective menu design, drawing from his book Restaurant Marketing Mindset. Below are key takeaways:

1. Compression and Focus:

   • Embrace a smaller, high-quality menu over a vast, diluted one.
   • Chip Klose [35:20]: "Less is more. Embrace the white space on the page."

2. Menu Layout - The Z-Pattern:

   • Design menus following the natural eye movement: upper left, upper right, center, and then lower left.
   • Chip Klose [30:10]: "The eye usually moves in a Z pattern. Upper left, upper right corner are the most powerful... bottom right corner."

3. Use of White Space and Callouts:

   • Utilize white space to prevent clutter and employ callouts (boxes, different fonts) to highlight key items.
   • Chip Klose [32:50]: "Call outs are a really important way to draw the diner's attention to where you want to draw it."

4. Price Anchoring:

   • Include premium items in each category to anchor prices, making other items appear more reasonably priced.
   • Chip Klose [38:15]: "Simply by having it on the menu, it will get ordered... it will anchor the price and make all the other items seem much more reasonable."

5. Starting with the Drink Menu:

   • Present the drink menu first to focus customer attention on beverages before meals.
   • Chip Klose [41:30]: "If the first thing you want someone to focus on is a drink, then make sure you just get them focused on drinks."

6. Signature Items Strategy:

   • Consider removing best-selling items from the printed menu and promoting them verbally to increase exclusivity and sales.
   • Chip Klose [44:45]: "One additional dessert not listed here. It's our signature apple tart... people who just wanted a little something, instead of ordering one dessert, they got that dessert, which was for two."

7. Upselling Opportunities:

   • Design the menu to naturally suggest add-ons or complementary items.
   • Chip Klose [46:10]: "Offering some way... to do it will be crucial."

8. Pricing Formatting:

   • Avoid decimal points and cents to reduce the psychological emphasis on money.
   • Chip Klose [48:30]: "Remove the dollar sign... get rid of the decimal point and the cents... just have the dollars."

Implementing Menu Engineering Strategies

Klose advises restaurant owners to regularly perform menu engineering exercises, ideally monthly, to stay updated on item performance and adjust accordingly. He reiterates the importance of integrating both physical and digital menu strategies to maximize revenue and enhance customer experience.

Chip Klose [50:50]: "When it comes to menu engineering, there are all kinds of things you can do. Sometimes it's featuring things... think about all of these things."

Conclusion and Final Tips

In wrapping up, Chip Klose encourages listeners to internalize the discussed strategies and revisit the episode for deeper understanding. He underscores the transformative potential of effective menu engineering in driving restaurant profitability and sustainability.

Chip Klose [54:20]: "I encourage you to go back and listen to this episode again because I think there's a lot of information here... a lot to apply to your menu."

Additionally, Klose requests listeners to support the podcast by leaving a five-star rating and review on Apple Podcasts, emphasizing its significance in growing the restaurant strategy community.

Chip Klose [58:10]: "If you get any sort of value from this show, please take two minutes. Leave us a five-star rating and review on Apple Podcasts... it helps us grow this community in profound ways."

Key Takeaways:

• Data-Driven Decisions: Regularly analyze profitability and popularity of menu items using product mix reports and recipe cards.
• Strategic Menu Layout: Utilize the menu matrix to categorize items and inform placement and promotion strategies.
• Leverage Digital Platforms: Optimize online menus with high-quality images and upsell features to enhance digital ordering experiences.
• Design Principles: Focus on compression, strategic positioning, use of white space, callouts, price anchoring, and thoughtful pricing formats.
• Continuous Optimization: Treat the menu as a dynamic tool, continuously refining it based on data insights to maintain profitability and customer satisfaction.

By implementing these menu engineering strategies, independent restaurant owners can significantly enhance their profitability, streamline operations, and deliver a compelling dining experience that keeps customers coming back.