How should a small restaurant decide which menu items to cut, and what numbers should it look at?

To decide which items to cut, you need to look at the intersection of profitability and popularity. A common way to visualize this is a Menu Engineering Matrix, which plots items into four categories.

Here are the specific numbers you should pull from your Point of Sale (POS) system and inventory records:

1. The Essential Data Points

Before making a decision, gather these numbers for each menu item over a set period (e.g., the last three months):

• Contribution Margin (CM): The selling price minus the cost of ingredients (COGS). This tells you how much actual cash an item puts in your pocket.
• Menu Mix (MM): The number of units sold of that item divided by the total number of items sold. This tells you how popular an item is relative to others.
• Labor/Prep Time: Estimate the man-hours required to prep and cook the dish. An item might look profitable on paper, but if it takes a chef 20 minutes of active prep time, it’s costing you more than it seems.

2. The Four Categories (The Matrix)

Once you have the data, categorize your items:

• Stars (High Profit, High Popularity): Keep these. Protect their quality and ensure they are featured prominently on the menu.
• Plowhorses (Low Profit, High Popularity): These keep the lights on but don't drive margin. Try to increase the price slightly or reduce the portion size/ingredient costs without compromising the dish.
• Puzzles (High Profit, Low Popularity): These are your "hidden gems." They have great margins but don't sell. Rename them, improve the description, or have your staff recommend them specifically. If that doesn't work after a few weeks, consider cutting them.
• Dogs (Low Profit, Low Popularity): These are your first targets for removal. They tie up capital in inventory, take up space in your pantry, and offer no financial benefit to the restaurant.

3. Qualitative Factors (The "Human" Side)

Don't rely on spreadsheets alone. Before cutting a "Dog," ask:

• The "Crossover" Effect: Does this item share ingredients with three other popular dishes? If you cut it, do you lose the need for a specific produce item that is essential elsewhere?
• The Purpose: Does this item serve a specific need? For example, a low-profit kid’s meal or a vegan option may be essential to attract groups, even if it doesn't make money on its own.
• The "Loss Leader" Status: Is it the reason your regulars come in? Even if it isn't a "Star," losing a signature item can hurt your brand identity.

Recommendation for Your Next Step:

Start by creating a spreadsheet listing every item, its cost, its price, and how many you sold last month. If you are struggling to categorize them, pick your bottom 10% of items by "Contribution Margin" and see if they are also in the bottom 10% for "Popularity." If an item is in both, cut it immediately to simplify your operations and reduce food waste.

Would you like help setting up a simple calculation formula for your spreadsheet, or are you looking for advice on how to communicate menu changes to your staff and customers?