It’s a common misconception that you should automatically price your menu lower than your competition. What you should have is a good view of the competitive landscape before establishing goals for your menu. This includes knowing what makes your restaurant and your menu different from your competition, know what customers are willing to pay for that difference, and pricing your menu accordingly.
Once you have a solid understanding of your competitive position, you can move on to setting goals for your menu.
Ultimately, menu goal setting is driven by two key outcomes: increasing your profitability and improving operational efficiency.
As reported by the National Restaurant Association 2016 Restaurant Operations Report, average margins range from 6.1 percent (full-service restaurants) to 6.6 percent (limited-service restaurants). With so little room for error given these narrow margins, it is essential to fully evaluate and vet profitability goals before making any changes to your menu.
All too often, restaurant owners will move forward with just one menu goal, missing additional opportunities to further their profitability by working toward multiple goals. Or, they don’t consider the unintended consequences, and actually end up increasing their costs. Either scenario should be avoided.
It’s also important to avoid increasing your menu prices “just because.” As the 2016 CPI Forecast notes, from 2015 to 2016 dining out has increased disproportionately to grocery. At the same time, restaurants are attempting to recover lost income in key areas like operating expenses and labor. While increasing menu prices to compensate seems logical, it’s not prudent. Customers require a clear “reason” to justify spending more on your menu, so they’ll balk at price increases that aren’t accompanied by perceptible changes to what you offer them. In other words, if your prices go up, your menu should change to reflect the increase in value. This can come to life through improving item descriptions, highlighting unique items, calling out fresh and local ingredients, or noting special preparation techniques.
No matter what goals you strive for, due to today’s complex foodservice market and limited margins, a single change likely won’t be enough to significantly improve your profitability or operational efficiency. It is far more likely that you’ll need to deploy of slew of strategies, customized to your competitive stance, and reevaluate them once or twice a year. This is where a semi-annual or annual menu analysis can prove helpful.
As your menu goals are achieved, take time with your team to reflect and celebrate before setting new ones. You’ve earned it, after all.
Reach out to our Customer Development and Business Solution Specialists for help determining what goals are right for your menu, and get a customized plan to meet them.