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By Robb Engen, Boomer & Echo
Special to the Financial Independence Hub
When I worked in the hospitality industry our hotel group placed a large emphasis on the profitability of its restaurants and catering departments. Considerable effort was made to drive overall food costs down while at the same time creating a sales culture that pushed the highest margin items in order to boost revenue.
One of the most effective ways to do this was through a process called menu engineering. Before hitting it big by turning around struggling nightclubs in the reality show Bar Rescue, Jon Taffer was a highly sought-after speaker and consultant in the hospitality industry. At the top of Taffer’s legendary revenue growth plan for restaurants and bars is the concept of menu engineering. Here’s how it works:
Restaurant owners divide their menu items into four main categories:
- Stars – Stars are extremely popular and have a high contribution margin. Ideally Stars should be your flagship or signature menu items.
- Plow horses – Plow horses are high in popularity but low in contribution margin. Plow horse menu items sell well, but don’t significantly increase profit.
- Puzzles – Puzzles are generally low in popularity and high in contribution margin. Puzzle dishes are difficult to sell but have a high profit margin.
- Dogs – Dogs are low in popularity and low in contribution margin. They are difficult to sell and produce little profit when they do sell.
