Menu engineering is the practice of categorising each item by popularity and profitability, then designing the menu to promote high-profit items. Done correctly, it increases average transaction value by 10-20% without changing prices.
The Four Categories of Menu Engineering
Menu engineering, developed by Michael Kasavana and Donald Smith, categorises every menu item into one of four groups based on two dimensions: popularity (how often it is ordered) and profitability (the contribution margin it generates).
Stars: high popularity, high profitability. These are your best items - customers love them and they make you money. Your freddo espresso that sells 80 units per day at 2.80 euros with a COGS of 0.60 euros is almost certainly a Star. Stars should be prominently featured on the menu and never removed.
Plowhorses: high popularity, low profitability. These sell well but have thin margins. A freshly squeezed orange juice that sells 30 per day but costs 1.20 euros in fruit to produce and sells for 2.50 euros (1.30 euros contribution margin vs. 2.20 for the freddo) is a Plowhorse. Strategy: raise the price slightly if the market allows, or find ways to reduce the cost without reducing quality.
Puzzles: low popularity, high profitability. Items that are rarely ordered but have excellent margins when they are. A premium specialty coffee at 4.50 euros with a COGS of 0.80 euros is a Puzzle. Strategy: move it to a more visible menu position, train staff to recommend it, and consider whether it needs a new description or name.
Dogs: low popularity, low profitability. Items that do not sell and do not make money when they do. The strategy is straightforward: remove them from the menu. They clutter the menu, complicate inventory, and contribute almost nothing to revenue or profit. Most cafes have 3-5 Dogs that should be removed.
Running the Analysis for Your Cafe
Gather your sales data: most POS systems can produce a report of units sold per item over the past month. If you do not have POS software, count manually from your order records for one representative week. You need: units sold per item per month, and COGS per item (from your recipe costing).
Calculate contribution margin for each item: selling price minus COGS. Then rank all items by units sold (to determine popularity) and by contribution margin (to determine profitability). The midpoint of each ranking divides your menu into the four categories.
Example analysis for a 15-item cafe menu: if your average contribution margin across all items is 2.00 euros and your average units sold per item is 25 per day, any item above 25 units sold and above 2.00 euros contribution margin is a Star. Below 25 units and above 2.00 euros is a Puzzle. Above 25 units and below 2.00 euros is a Plowhorse. Below both thresholds is a Dog.
Menu Design That Guides Customer Choice
Once you know your Stars and Puzzles, position them where customers look first. Eye-tracking research on menu reading shows customers look top-right first, then top-left, then the centre. Place your most profitable items in these positions. Do not list items strictly by price (cheapest to most expensive) because this trains customers to order from the bottom of the price list.
Visual hierarchy: use boxes, borders, or shading to highlight 2-3 items you want customers to notice. A simple box around your signature Puzzle (the one you want to sell more of) can increase its order frequency by 20-30% without any other change.
Anchoring: include one premium item priced 30-40% higher than your next-most-expensive item. This makes the next-most-expensive item feel like reasonable value by comparison, and it increases orders of the mid-price items. A 5.50 euro specialty pour-over on a menu where everything else is under 3.50 makes the 3.20 freddo feel cheap and increases freddo orders.
Remove currency symbols: menus that show prices without the euro sign (2.80 instead of 2.80€) have been shown in multiple studies to increase spending by reducing price-consciousness. This is a simple design change with no cost.
Seasonal Menu Updates
Review your menu engineering analysis every season (four times per year). Summer changes: frappé becomes a Star that was a Puzzle in winter. Hot chocolate drops from Plowhorse to Dog. Your summer seasonal items (cold brew, iced tea, fruit coolers) need to be added, analysed after 2 weeks, and positioned appropriately. Winter changes: the reverse. A static annual menu misses seasonal shifts in what customers want and what is profitable to make.
Manage your cafe with Greek Cafe Manager
Daily cash register, IKA payroll, stock tracking, recipe costing, and monthly P&L in one place. Built for Greek cafes.
Open the App →