How Menu Optimization Helps The Hospitality Industry Beat Recessions
Menu optimization has played a significant role in helping the hospitality industry, including restaurants, hotels, bars, and cafes, weather financial storms and recessions. By strategically designing menu layouts and offerings, businesses can maximize profits and adapt to changing market conditions. This report will discuss the impact of menu optimization, new menu technologies, and delivery services on the hospitality industry.
Menu Optimization in the Hospitality Industry
Menu optimization has played a significant role in helping the hospitality industry, including restaurants, hotels, bars, and cafes, weather financial storms and recessions. By strategically designing menu layouts and offerings, businesses can maximize profits and adapt to changing market conditions. Let's look at the impact of menu optimization, new menu technologies, and delivery services on the hospitality industry, with three examples to illustrate the point.
Menu Engineering and Psychology
The foodservice industry is divided into several segments, including full service, quick service, eating and drinking, and retail host. Each segment has its own target customers and appeals to a specific market, but they all use menus! The expectation might be greasy-fingered paper menus at bars, pubs, and lounges that serve alcoholic beverages and food, which is a perception to overcome. Full service restaurants offering a sit-down dining experience with table service are expected to have more impressive menus, don't you think? Each segment has its own target customers and appeals to specific desires.
Menu engineering is the process of designing a menu to encourage customers to spend more without considering the price. However, identifying and eliminating underperforming menu items can be a challenging task. The variables that must be considered when conducting menu optimization include pricing, menu design, item placement, and customer preferences. Considering these variables is applying menu psychology, which is the study of how a restaurant, hotel, bar, or cafe's menu organization affects customer spending. Studies have shown that customers are likely to order one of the first items that draw their attention.
By strategically placing high-profit items in these areas, restaurants can increase their profits. Ongoing menu engineering has the potential to increase restaurant profits by 10-15%. When adding in the fact that powerful color representations of food on menus can increase sales by 30%, it’s a powerful reason to consider upgrading your physical and digital menu.
Delivery Services and Custom Menus
The advent of user-friendly apps and tech-enabled driver networks has revolutionized food delivery services. Restaurants can now build custom menus for each consumer using data generated through delivery platforms, increasing opportunistic sales and total revenue. This has become a permanent fixture in the dining landscape, with customers expecting speed, quality, and variety in their food delivery experiences.
Examples of Menu Optimization in Action
Recession-Ready Restaurants: During economic downturns, restaurants can review and optimize their menus by analyzing which items are the most profitable and which ones are underperforming in terms of sales volume or profitability. Besides having to stretch, mix, and get creative with ingredients to reduce costs and increase profits, by removing underperforming items and focusing on high-profit dishes, restaurants can better weather financial storms. Based on the evaluation, it may be necessary to make changes to the menu items. For example, if an item is not selling well due to pricing, it may be necessary to reduce the price or bundle it with other menu items to increase its value. Alternatively, if an item is not selling well due to poor quality, it may be necessary to remove it from the menu altogether or replace it with a higher quality alternative.
Technology-Driven Menu Reduction: Restaurants have been using technology to better understand historical sales volume by day and time, leading to menu reductions of about 10% to 20% per restaurant. By analyzing point-of-sale data, operators can determine which items sell well and which low-selling items can be removed from the menu, optimizing profits during challenging economic times.
Adapting to Delivery and Takeout Trends: With takeout and delivery becoming core parts of the restaurant business model, menu planning must consider how each item handles transit time. Restaurants can optimize their menus by focusing on items that hold up well during transport and packaging, ensuring customer satisfaction and maximizing profits.
New Menu Technologies and Delivery Services
New technologies have played a crucial role in the evolution of menu optimization and delivery services. Several restaurants have won the omnichannel game by combining data collected during menu relaunches with email lists for personalization, loyalty, and rewards programs. For example, artificial intelligence (AI) and machine learning (ML) have been used to create personalized menus and recommendations for customers, enhancing their dining experience and increasing sales. Voice-activated food ordering, such as through digital assistants like Siri and Alexa, has also become popular, attracting younger and tech-savvy consumers seeking convenience. With the progress of Augmented Reality (recently bolstered by Apple's launch of the VisionPro and abundant smartphones that scan QR codes without needing an app), the hospitality industry is now discovering the benefits of 3D menus to drive happier customer experiences and higher profits.
In conclusion, menu optimization has been a vital tool for the hospitality industry to navigate financial challenges and recessions. By leveraging menu engineering, psychology, and new technologies, businesses can maximize profits, adapt to changing market conditions, and enhance customer experiences. The integration of delivery services and custom menus has further expanded the industry's ability to thrive in an ever-evolving landscape.