How to Streamline Your Restaurant Menu (and Make It More Profitable)
September 14, 2021
With margins tighter than ever, restaurants nationwide are shrinking their menus. Here's what you need to know.
Over the past year, millions of diners have either sat in a restaurant or placed an online order from its website, only to notice something different. Several menu items – maybe even one of their favorite dishes – have been removed.
Menu analysis, engineering and alterations have always been part of restaurant management. New items occasionally make their way onto a menu in place of a rarely-ordered dish that’s too complicated and costly to make. These days, however, removing a dish on the menu doesn’t necessarily mean it will be replaced.
Instead, menu sizes have quickly and steadily shrunk at both chain and independent restaurants nationwide. For example, IHOP reduced its 12-page menu to a two-page menu, while KFC discontinued once-beloved items like popcorn chicken and potato wedges.
So, what exactly caused this trend, why will it leave a lasting impact on the restaurant business and how can restaurants benefit from streamlined menus?
Why Restaurants Cut Back on Their Menu Offerings
In minor or major ways, restaurants are always tweaking their menus. Creating an optimized menu is an ongoing process that involves the periodic addition, alteration and removal of menu items. But the recent mass reduction of these items is unlike anything restaurants and their patrons have seen.
The cause of this trend was – indeed – the COVID-19 pandemic. Like all businesses, restaurants had to drastically rethink their operating models due to the immediate (and ongoing) influence of the global health crisis. One of the key decisions was to cut back on menu offerings, and while these removals occasionally bothered guests, there were several business-critical reasons they had to happen.
1. Staffing Shortages
The initial impact of COVID on staffing meant a smaller and less stable workforce in restaurants. With dining rooms closed, servers and front-of-house employees were not needed in their usual roles. Restaurants equipped to pivot to online ordering carried on, but the industry as a whole still saw lower-than-usual sales throughout 2020 and into early 2021.
As the country started to return to pre-pandemic life in the summer of 2021, an influx of diner demand was met with a prolonged shortage of restaurant employees. Restaurants couldn’t hire quickly enough to meet the demand of their guests, due in large part to former employees moving on from the restaurant industry or receiving extended unemployment benefits.
As a result, employees who did show up to work had to be as efficient as possible, leading many restaurateurs to reduce their menu offerings to ensure a more smoothly run back-of-house. Fewer dishes means fewer variables, fewer mistakes and a more repeatable process — all necessities when dealing with a smaller staff.
John Dillon, the chief brand officer of Denny’s, echoed these sentiments, noting the chain’s smaller menu is “easier to execute for [Denny’s] team members.”
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2. Supply Chain Disruptions
From farm to table (and the many steps between them), the supply chain for restaurants saw an enormous disruption during the onset of the pandemic, drastically impacting item availability, necessity and cost. As restaurants scaled back their output, food providers found themselves carrying excess supply they could not sell to their clients, severely hindering their own operations. According to a study published by the Agriculture and Applied Economics Association, “at one point during the pandemic, beef and pork packers were both operating at about 60% of the previous year's processing volume.”
Suppliers adjusted accordingly, but as time went on, demand from restaurants started to pick back up – leaving suppliers without the resources they needed to deliver. Restaurants were thus forced to choose between going without certain ingredients or paying a premium to stock up on them. Suppliers and packagers also faced instability from COVID outbreaks in their factories, disrupting the supply chain and raising prices even further.
A few examples include:
Oyster farmers’ inability to keep up with demand.
Pork prices increasing 8% from the average cost.
Chicken breast and round steak prices increasing by 7% and 5%, respectively.
In short, the financial instability many restaurants faced – in conjunction with supply shortages and price increases – essentially forced these businesses to cut back on their menu offerings. Continuing to offer certain dishes would mean increased menu prices, lower profit margins, an unpredictable menu and higher variance costs for unused inventory.
3. Shifting Diner Preferences
Diner preferences gradually but assuredly changed because of the pandemic, making it an optimal time for restaurants to rethink their menus and offer more timely, takeout-friendly options.
Notably, diners flocked towards comfort foods to keep their spirits high. Salads consumed at white-collar desks disappeared in favor of pizza, burgers and french fries – and nearly 70% of diners say they’ll continue to enjoy the same kind and amount of those foods that led to the notorious Quarantine 15.
Restaurants have recognized these shifting preferences and adjusted their menus accordingly. Burger chain Red Robin nixed 55 items from its menu – including healthier options like the Shrimp & Cod Duo and its Classic Wedge Salad – in order to run the kitchen more efficiently, better manage inventory and serve the majority of guests what they want.
The Benefits of a Streamlined Menu
Even as diners have started to return to packed bars and dining rooms, full-sized menus haven’t reappeared at the same rate. In fact, due to the clear benefits and new buying behaviors that started with the pandemic, more than 60% of restaurateurs plan to keep smaller menus, according to the National Restaurant Association’s 2021 State of the Restaurant Industry Report.
Some of those benefits include:
1. Higher-Margin Menu Items
The foods diners are ordering more often at restaurants are great for the bottom line. Comfort foods like pasta and pizza are considered high-margin items due to the low cost of ingredients and customers’ willingness to pay for them. These items contribute a bigger percentage of their selling price to a restaurant’s net profit and overall profit margin.
2. Fewer Inventory Woes
A bigger menu means more ingredients, and thus more risk of inventory variance. Ingredients expiring before they get used is a real problem in kitchens – particularly when the number of guest orders fluctuates. Plus, optimizing food storage in the back of the house is an ongoing, complicated challenge. Fewer menu items equates to fewer ingredients, which makes storage simpler.
Not to mention, supply chains and food costs are still stabilizing after the COVID-driven disruption. Keeping certain items off the menu – at least for the time being – helps control costs and solidify current menu offerings.
3. More Efficient Staff
One of the greatest benefits of a streamlined menu is that it results in streamlined operations. Case in point: after removing its all-day breakfast menu, McDonald’s saw a reported 15-second reduction in drive-thru times. With a smaller menu, cooks can also spend less time training and (re)learning how to prep every item and instead focus on making fewer dishes better. As restaurants continue to struggle with staffing, it’s the most logical way to stay operational.
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The Bigger Picture: A Brief History of Menu Engineering
The trends of the past year have reinforced the necessity of one key part of restaurant management: menu engineering.
Menu engineering refers to the never-ending cycle of creating, pricing, designing, analyzing and improving a restaurant menu. The process ensures the right items are present, reviews the popularity and profitability of dishes and opens the door for certain foods to be added to or removed in the future. Professional menu engineer Gregg Rapp notes that menu engineering can increase profits by 10-15%.
Restaurateurs should formally analyze their menus at least once a year, but due to the drastic pivoting needed during the pandemic, menu engineering has become a more frequent and imperative exercise. Today, menu engineering efforts are focused on maintaining or shrinking the size of a menu, with just 2% of restaurateurs saying they plan on expanding their menus.
But even before the pandemic, restaurants were open to cutting menu items en masse to reap the aforementioned benefits. In 2017, Chili’s reduced its menu by 40%, and soon after reported its best traffic growth in a decade. That same year, Chipotle bade farewell to chorizo.
Restaurants remove menu items for more than just efficiency. Sometimes, the margins are too low to justify including them. Some items are best left as seasonal or limited-time offerings, and some items don’t fit with a brand’s intended image (see Sweetgreen nixing bacon in 2016).
The point is – regardless of the state of the world – a menu’s performance, profitability and contribution to operational efficiency should always be in the back of the mind of business-savvy restaurateurs. That way, when the paradigm shifts, they’ll be ready to pivot and keep their restaurant thriving.
Actionable Tips for Restaurants for Streamlining a Menu
1. Monitor Costs
The first point is to always be menu engineering and reporting on menu performance. Doing so at an item-specific level allows for incremental menu changes that won’t catch as many customers off guard as a total menu overhaul.
Keeping a close eye not only on overall sales numbers but profit margins, inventory variance and food costs is the best way to quantify the health of a restaurant during times of uncertainty. Having a robust restaurant analytics platform makes it possible to quickly access these metrics, act on them and make informed decisions about which menu items should be altered or removed.
2. Focus on Carry-Out Dishes
Some diners are still uncomfortable dining in a restaurant, while others have gotten accustomed to off-premises dining in the comfort of their own homes. More than 80% of diners claim they will still order takeout and delivery after the pandemic, with 53% of adults saying takeout and delivery is “essential to the way they live.”
For restaurants, this means menu adjustments should favor off-premise dining options. This could mean doubling down on comfort food or even making packaged, family-size meal bundles exclusively for takeout.
One final note to remember: When growing an off-premise dining program, it’s crucial to have the right tools in place such as ample takeout containers and reliable online ordering software to keep the business running smoothly.
3. Listen to Customers
While the benefits of a streamlined menu are clear, it’s easy to get carried away with the exercise. Some restaurants have actually had to reverse course on menu removals in order to appease disappointed customers. For example, McDonald’s issued a mea culpa by bringing back its (in)famously sunsetted all-day breakfast menu, Taco Bell added potatoes back to its menu and Subway reintroduced roast beef and rotisserie chicken following complaints about their removal from both customers and franchisees.
At the end of the day, diners still want options, and there are risks to reducing those options too much. As with any change in a business, restaurants should source both quantitative and qualitative feedback and consider reversing decisions if they have a negative impact.
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