Long Beach Fish Grill Menu Board
Source: Jessica Dinglasan
Jessica Dinglasan, owner of Long Beach Fish Grill in Long Beach, California, never used to write “market price” on his menu.
But now the halibut she buys costs more than $30 a pound, almost double what it was a year ago, and the 13-gallon container of canola oil she buys for fries and crispy fish went from $19 to $42.
“I have to do the market price,” she said.
As food and labor costs rise, restaurants are making strategic changes to menus to avoid reprinting new ones every week. But price hikes can’t help much, especially since weekly changes in the cost of ingredients would mean frequent reprints. This is where menu engineering comes in.
Analyzing sales data and food costs can help restaurateurs decide which menu items to emphasize, which prices to raise, and which offerings to eliminate altogether to optimize their bottom line. A smart menu design can highlight foods or drinks that will keep customers coming back or help with kitchen operations.
A slightly larger font or an eye-catching box, sketch, or photo can quickly translate to dollars.
“To me, menu engineering is the layout of the menu that makes the ordering process the most profitable for the restaurant,” said Michele Benesch, president of menu design company Menu Men.
Sean Willard, menu engineering specialist at Menu Engineers, estimates that diners spend less than 90 seconds after sitting down to browse the menu. This puts pressure on restaurants to present menus to customers that help them quickly order the meal they will enjoy the most.
The restaurant industry has been grappling with higher commodity costs for months now, as demand for restaurant meals recedes but their supply chains lag. Russia’s war with Ukraine has exacerbated the problem, sending gas prices skyrocketing and causing global shortages of wheat, corn and soybeans.
“Inflation isn’t going down. I thought so, but now there’s this war,” Dinglasan told CNBC.
Food prices have climbed 7.9% over the past year, according to the Bureau of Labor Statistics consumer price index. But not all menu items have felt the inflationary effects to the same degree.
“Chicken has gone up, but not as much as fish or beef,” Benesch said.
This puts seafood restaurants and steakhouses in a bind. Ruth’s Hospitality Group, for example, forecasts that its food costs, excluding beef, will rise 16% in its fiscal first quarter. Add beef costs to that equation, and the owner of Ruth’s Chris expects the price of his ingredients to jump 24% from the year-ago period.
In steakhouses, faced with higher prices, cost-conscious diners may opt for a smaller cut of the filet mignon. Benesch therefore helps these restaurants to complete their menus so that customers are tempted to order more sides or appetizers.
“Maybe with the wedge or a Caesar salad or the potatoes au gratin… The padding of this result makes the difference,” she said.
Matt Piccinin, co-founder of the 16-store Shuckin’ Shack Oyster Bar chain, with restaurants along the east coast from Maryland to Florida, said it now lists all of its seafood offerings at market price, as does Long Beach Fish Grill. Seafood makes up about half of the chain’s menu.
Some of Shuckin’ Shacks’ menu items are loss leaders, like its crab dumplings, according to Piccinin. The price of crab has skyrocketed and the chain does not want to pass all the costs on to customers. Instead, he hopes the popular appetizer will keep customers coming back and buying other, more profitable menu items.
In constant evolution
Willard said almost all of his customers have reduced their menus in recent months to practice better inventory control.
When prices are high, it doesn’t make as much sense to buy an expensive ingredient that’s only used for a dish or as a garnish. Willard said a customer stopped buying pickles as a garnish because prices had gone up.
A leaner menu also helps in the kitchen, which may operate with fewer cooks due to higher labor costs or a shortage of workers.
Olive Garden’s parent company, Darden Restaurants, is a restaurant business that cut dishes early in the pandemic, and it’s sticking to the strategy.
“In terms of the menu, we’ve made it clear that we really like the menu reduction and what it does to give our customers the high-value dishes they want and make it easier for our teams to produce,” Darden said. COO. and new CEO Rick Cardenas told analysts in late March. “And we keep improving. If we add new elements, we take another one out.”
Larger restaurant chains can better manage inflation with strategic price increases and hedging with future contracts that allow them to buy their ingredients up to a year in advance.
Bank of America Securities analyst Sara Senatore wrote in a note to clients last week that food inflation is the macroeconomic factor most closely tied to same-store sales growth in the industry.
“Food prices go up immediately in grocery stores and behind, small price increases in restaurants are cheaper in comparison,” Senatore said. “As a result, we believe that businesses that set prices in line with inflation should be able to effectively pass on cost increases, while those with lower prices can gain traffic share.”
However, that doesn’t mean that publicly traded restaurant chains don’t think about what’s on their menus either. Chipotle Mexican Grill restaurant chef Scott Boatwright said in a February interview that the chain was trying to think strategically about limited-time menu items.
“We are thinking about future limited time offers and the impact on margins, keeping an eye on the supply chain, specific to products that we know will see significant inflation and moving those LTOs so that they’re at least in balance with the margin or even the accretive margin,” says Boatwright.
And as menus are constantly evolving, certain pandemic shifts in consumer behavior provide restaurants with greater flexibility and a cushion on their bottom line.
Many restaurants have moved from physical menus to digital QR codes that direct diners to online versions – no need to wipe or throw away physical menus each time after use. As many establishments return to traditional print menus, Benesch said she encourages customers to save QR codes for daily specials or a loyalty program.
“I think QR codes are here to stay. They’re great marketing tools, and they’re great for highlighting a small segment of someone’s menu,” Benesch said.
Benesch said she also encourages restaurants to think of off-menu ways to attract customers, such as pushing a dessert cart into the dining room so every customer sees their treats.