Maximizing restaurant profitability: A complementarity approach

Amid industry challenges including sustained inflation, and rising costs of goods and labor, restaurant operators need to manage menu item pricing and availability in a manner that both provides value to the consumer, and supports sustained revenue and profit growth This research addresses the issue of menu item complementarity, proposing a 2-step approach to identify and evaluate entrée complements. Step 1 calculates the total contribution margin of entrée items, incorporating complementary items' expected contribution margin. The calculation advances menu engineering charts to incorporate broader purchase patterns. Step 2 applies market basket analysis (MBA) to identify unique entrée-complement combinations. Using data from 9712 transactions from an independent hotel restaurant located in the United States, the study demonstrates how this approach can inform bundling and upselling strategies, ultimately enhancing menu profitability and customer value.