If there were a proven way to build a more profitable foodservice menu, every convenience store would already be doing it, right?
Yet few c-store operators deliberately engineer their menus to increase profitability per customer, according to industry experts. The challenge is our inherent bias—our reluctance to risk or drop popular, albeit maybe unprofitable menu items, which can result in a more profitable foodservice program. But it’s also breaking with the traditional way of thinking of a menu only as food items, and instead establishing a process for determining which items need to be removed or changed and how to maximize what’s already there.
It’s not a matter of lacking the tools, because even small operators likely have access to the basic data needed to re-engineer menus, says c-store industry consultant Deborah Holand.
“The menu should be made up of items that an average person would eat several times a week,” Holand says. “So focusing on two hot dogs with a fountain drink as a promotion won’t attract a lot of people because it has no nutritional value. Offering a sandwich with a side salad or chips and tea or other healthy beverage discount compared to a fountain drink all of a sudden gives this combo meaning.”
The Combo Mambo
Holand points out that many c-stores start formally pursuing menu engineering only because they’ve seen the power of daily specials or meal combos in driving incremental sales.
“If operators want to build the highest profit dollars out the door, they have to think about category management—engineering even their base food components so they complement each other and can build check averages,” she says.
It starts simply with listing all prepared food items individually and then categorizing them broadly into appetizers, entrees, sides and desserts. By breaking them down further into profiles that provide a sense of choice and value, c-stores can capture more convenience customers.
Even a basic sandwich program can be re-engineered to fit different customer profiles, she says.
“Am I trying to grab more women or health-minded millennials? Then maybe I add a wrap or a wheat bread option, up the vegetables, or trade up to a higher-quality ham or nonprocessed cheese,” she says. “But then it’s crucial that I know my specs.”
Proper menu engineering—from packaged/commissary up through the most complex made-to-order c-store foodservice programs—starts with accurate costing, says Mark Kelnhofer, president and CEO of Westerville, Ohio-based restaurant management firm Return on Ingredients.
“The first component of proper menu engineering is cost,” he says, “so if that’s not accurately stated, the whole process is going to be rough, and all of a sudden you’ll find you’re not experiencing the profit you thought you had.”
More often than not, operators tend to understate costs, typically only factoring in purchase price on items that are going to be processed further—whether stemmed, trimmed, chopped or blanched—and incur additional costs, Kelnhofer says. Just picking the leaves off whole fresh basil results in a 60% loss.
“As you continue to use ingredients, the more processes they go through, the more you have to account for. It might seem insignificant, but it adds up quickly,” he says.
The key is to approach costing as a product manufacturer would: basing ingredient cost on the usable amount of each ingredient; determining time, labor and overhead to produce a menu item; and approaching recipe writing more like a science than an art.
“Recipe documentation is huge,” Kelnhofer says. “Ultimately, you’re creating standards on the ingredients being used, quantity, labor, prep times, methods, tools and equipment used. So believe it or not, a recipe is a very complex document.”
To ensure accurate costing and product consistency across York, Pa.-based Rutter’s Farm Stores’ made-to-order foodservice program, foodservice director Ryan Krebs works with quality-assurance supervisors to develop specs for each recipe that get sent to individual stores and become part of employees’ training process that they’re required to sign off on.
“It becomes part of the coded recipe guide so employees can refer back to it,” Krebs says. “That’s down to things like pre-weighing fries, because one person’s handful is not another person’s handful.”
Creating Value
Rutter’s sells a lot of combo meals through its touch-screen kiosk ordering system, leveraging a “saving 59 cents” option with wrap or sandwich combos.
Another grabber is the “value menu.” Instead of listing food items randomly, Rutter’s aggregates a full listing of lessthan-$ 1.99 items under the value package—typifying the importance of categorizing or creating buckets.
“People hitting the value button almost always add more to their basket,” Krebs says. “The combo meal is also huge for us because people are spending more, but in their minds they’re saving money.”
The kiosk home screen also alerts customers to new items or draws attention to lagging ones. “If we see an item dragging in
sales and everything else is increasing, we put it on the front screen and sales increase,” he says. “It forces customers to check it out because it’s screaming at them when they walk up.”
Because Rutter’s menu is comparatively large—spanning categories such as breakfast, sandwiches, wraps, burgers, nachos, tacos, quesadillas, salads, sides, low-carb, kids’ meals and desserts—ingredients are often cross-utilized to maximize profits while keeping labor and SKUs at a minimum.
“Many c-stores weren’t built to handle the volumes we do now. It’s about determining: How many SKUs can I carry in 2,000 or 3,000 square feet of space?” says Krebs. “The foods and cooking times don’t change; I’m just spreading options and giving the customer more to choose from, which satisfies them and brings more margin back to us. So when thinking in terms of adding diversity, I try as best I can to dig into what we already have and see how I can manipulate that.”
A protein, for example, can be incorporated into a taco, salad, wrap, quesadilla, burrito and sandwich, as well as served in a basket with side and drink. Elsewhere, Rutter’s recently upped its tiered side-order sizes from two to three (regular, large and family), which Krebs says entices customers to trade up to get the most bang for their buck.
Cross-utilization makes foodservice programs more streamlined and—ultimately—more successful, Kelnhofer says.
“You’ve got to execute well when you put something on the menu,” he says. “If you have 169 items, the chance of that happening is pretty low. You have to become more disciplined and reduce inventory levels for purchased products, so you don’t have as many works in progress and can make product in a quality, consistent manner.”
Measuring Performance
Much like underestimating costs, operators tend to measure the performance of menu items based on incomplete data, Kelnhofer says. In keeping with the overarching goal of continuously driving profitability, any new item should meet or exceed the unit contribution margin of what’s being removed.
“You want to know how much cash that product is driving for you every time you sell it and in total,” he says. “A lot of times, operators think if they’ve sold a lot, the item must be successful. Then they look at cost percents and see it has a low food cost, so they keep it on. The problem is, they’re not looking at the full picture of how much money or profitability they’re making on that item.”
Looking at chainwide incremental sales tells Krebs a lot about whether he should keep items on his menu, even those with misleadingly high volumes.
“If you remove an item, there’s always a risk,” he says. “You’re going to have customers who say that was their favorite item ever. But I have to look at my 49 (of 62 total) locations and ask: Was this really successful across the chain? If it’s not incrementally driving sales, overall that’s not an item I should keep on. You can’t be aggressive and add things if you don’t remove things.”
As such, menu engineering shouldn’t be a one-time exercise, Kelnhofer says.
“As soon as one menu is done, guess what you’re doing the following week? Engineering the next menu because of seasonality, promotions or other things,” Kelnhofer says. “It has to become an integral part of the business that involves not only the chef and foodservice director, but the accountant, director of purchasing, marketing leader and CEO.”
Continued: Five Steps to Make a Better Menu
Five Steps to Make a Better Menu
A. “Cluster your ‘star’ items—as in, most profitable and popular—front and center on menu boards,” says Chris Quirk, a chef and instructor who also oversees the QSR dining outlet at Kendall College in Chicago.
B. Because sandwiches typically make up 80% to 90% of entrée offerings for c-stores, offering a range of profiles is a simple way to boost profitability for this workhorse section, but knowing product specs is key, says c-store consultant Deborah Holand.
C. “Adding a service aspect can be great for profitability,” says Quirk. “If you have an attendant customizing hot dogs, you could charge $5 for a fully customized dog instead of running a ‘two for $2.99’ hot dog special. The customer is paying a lot more, but they also see the attendant making their dog to order and giving them a smile, which will make them say, ‘I like that. I’ll come back!’ Experience is a big differentiator.”
D. Tiered sizes offer huge potential in terms of perceived value, says Quirk: “In reality, part of that, especially given today’s packaging engineering, is that upsizing doesn’t necessarily give you much larger quantity, but the perceived value is huge. And more bang for your buck is a serious Americanism.”
E. “If you bundle and discount even a small amount, certainly the margins are great, and you’re also bringing your contribution to the bottom line per-sale up by selling three items instead of one,” says Quirk. “Again, more perception of value than actual value.”
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