Casual dining chain Chili’s cut its menu by 75 items in Fall 2017—just one of many operators across the industry landscape to shrink menu size in recent years. It is critically important to understand the factors underlying this trend and to evaluate your own menu size as a way to sustain sales and profitability.
The primary driver for a smaller menu is cost control. Continued downward pressure on sales combined with increasing labor and other costs has operators seeking new opportunities to shave expenses. The menu is the logical first place to look for savings. The key is to understand which and how many menu items to cut and in order to maintain a healthy bottom line.
Core menu and market size
Operators should maintain a core menu consisting of those items that capture the essence of their brand and define their position in the marketplace. The core menu is distinct from the total offering, which can also include daily specials, Limited Time Offers (LTOs) and more.
The core menu needs to be carefully preserved and protected. That doesn’t mean you can’t cut or otherwise modify it—it’s just that change must be driven by your brand and not by the latest food trends, emerging cuisines and “hot” dishes spotlighted in industry and consumer media. Changes to your core menu require deep evaluation and consideration.
The size of your market can provide a useful benchmark for the size of your core menu. Larger markets like New York, Chicago and Los Angeles require clear brand differentiation to stand out in a sea of competition. The population of potential guests within a close physical radius is so large that operators can find success with a very narrow and specific offering—say, a core menu of 20-45 items.
Operators in smaller markets face fewer competitors, but they also have fewer potential guests within range—even though that range is often considerably wider, given how far someone in a rural market may have to drive to get to a restaurant. It makes sense for these operators to offer a broader menu that will appeal to a broader cross-section of the smaller population. While there is no specific formula, a core menu of 30-65 items might be appropriate.
Whatever the size of your market, the important considerations remain the radius from which your potential customers can come and the competitors within that radius. Remember that the competition for food dollars now includes such non-traditional foodservice providers as grocery stores, delivery services and meal-kit companies.
Offering enough items to build sufficient sales while maximizing cost control is a delicate balance. With your core menu set, you can better maintain that balance by using LTOs and specials to accommodate contracting or strengthening market conditions.
Menu ingredients and labor
The way you execute your core menu can make a huge impact on costs. Keep these three guidelines in mind:
1. Focus your labor on those items that that can create a clear market differentiation.
2. Emphasize cost reduction for items that are market requirements but not brand differentiators. Consider value-added products that reduce labor, including produce and lesser cuts of protein.
3. Value-added products are essential for items that don’t fit into the first two categories. This may include dressings, sauces and other products that require manual effort.
The evaluation process
Menu analysis identifies the items that are driving your sales and profitability, so it’s a necessary first step in determining your core menu size. Menu analysis also lays the proper groundwork for an effective menu reduction strategy. Accounting for seasonality is critical, so it’s best to conduct menu analysis on a quarterly basis.
The radio dial and the light switch
Keep in mind that measured, planned reductions over time are more effective than rapid changes in menu size. Think of it as making small adjustments via a radio dial rather than turning a light switch on and off. Eliminating menu items all at once might make customers think something is amiss. Aim for reductions of no more than 5 percent of your menu offering each quarter to meet your business goals without alarming your guests.
Right-sizing your core menu to your specific market is a great way to manage costs, strengthen your brand and execute at a high level that meets today’s guest expectations.
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