The math is getting harder for restaurant operators, with rising food costs, labor shortages and price-sensitive consumers all contributing margin pressure. In fact, 42% of operators reported their restaurant was not profitable, according to the National Restaurant Association’s 2026 State of the Restaurant Industry report.
While it might be tempting to raise prices, that’s no longer a successful strategy as restaurant pricing has already risen more than 30% since COVID,* explains Henry Escobar, Product Manager for Craftable, a software platform that replaces disconnected spreadsheets and manual processes with AI-native, real-time visibility into food costs, vendor spend and operational margins. “The industry is approaching a tipping point where operators can no longer rely solely on increases to protect margins without pricing themselves out of consideration and impacting guest traffic,” he says.
So where can operators turn? The answer starts with the menu.
Your Menu as a Dynamic Operational Tool
The role of menus is changing from just a branding tool to becoming one of a restaurant’s key financial levers. By being more intentional about menu design and engineering, operators can use placement, visuals, digital merchandising and simplified offerings to influence guest behavior while improving efficiency. In fact, the National Restaurant Association’s 2026 “What’s Hot” report named “clear menu labeling, icons and cues” as one of its top trends.
Many operators are also discovering that overly complicated menus create cost and execution challenges that directly impact profitability, while streamlined menus can reduce complexity in both the kitchen and supply chain. “Excessive SKU counts can increase waste, complicate inventory management, slow kitchen execution and make performance data harder to interpret,” Escobar cautions, citing TAO Group as a customer that has seen measurable results from reducing SKUs up to 20% annually.
And today it’s easier than ever to make changes on the fly. “Digital menus allow restaurants to shorten iteration cycles, moving from an annual revision to ongoing optimization as a way to improve kitchen efficiency,” Escobar says.
At the same time, operators still need to preserve the creativity and guest experience that define their brand. That’s an area where AI is becoming especially valuable, by bringing greater context to menu decisions through surfacing patterns that would be difficult to spot manually.
Escobar points out that effective menu optimization is not purely about maximizing margins. For example, a signature item may not be the highest-margin dish on the menu, yet could be central to the brand identity or guest experience. “TAO Group’s famous soup dumplings drive enormous guest demand and brand recognition, even if they aren’t the single most profitable item,” he says.
Access to deeper insights helps restaurants make decisions that support the bottom line, without stripping away what makes a restaurant unique.
Earlier Visibility Into Margin Risk
Ingredient volatility is also reshaping menu strategies. From beef to tomatoes to coffee, many categories that restaurants rely on have experienced shocking price surges, forcing operators to rethink their offerings. Additionally, many menu items may gradually become less profitable over time, with a dish that once delivered healthy margins no longer making financial sense when costs have ticked up.
Historically, many restaurants only recognized those problems after returns had already declined. Now, AI-driven menu engineering flags issues so restaurants can respond more quickly.
The foundation is connected data, with POS, inventory, purchasing, receiving and recipe costing systems coming together so restaurants can analyze profitability at a much more granular level. Rather than evaluating the menu as a whole, operators can compare specific categories such as appetizers, desserts, cocktails or non-alcoholic beverages, as well as results by daypart or location.
In some cases, the data reveals concentration risks that might otherwise go unnoticed. Bartaco, for example, discovered that its top five menu items accounted for roughly 60% of total revenue. While that highlighted the strength of its core offerings, it also exposed potential vulnerability if a major ingredient cost increased sharply or guest demand shifted unexpectedly.
The goal is to move beyond reactive reporting toward earlier visibility into changing menu economics so restaurants can adjust.
Waste Reduction as a Margin Strategy
AI can also address another major profitability challenge: With food costs typically representing between 28% and 40% of a restaurant’s total expenses, waste reduction is one of the fastest opportunities to recover margin.
Across the industry, restaurants waste an estimated 22 to 33 billion pounds of food annually, which shows up in a variety of areas, from over-prep or oversized portions to spoilage, misordering and even theft.* Yet, the National Restaurant Association’s 2026 State of the Restaurant report found that only 37% of operators said they had increased food waste tracking.
Once again, AI can be the secret weapon in helping uncover patterns that show operators where waste is occurring and which adjustments may have the greatest financial impact without sacrificing quality or guest experience.
AI’s Role in Connecting the Data You Already Have
Despite growing interest in AI across the restaurant industry, menu optimization remains an underutilized area. The National Restaurant Association report found that while more than one-quarter of restaurants now use AI-related tools in some capacity, only 7% currently use AI specifically for menu optimization.
Those who are actively using AI-assisted menu engineering are already seeing measurable results, with 58% reporting improved profitability from those efforts.*
“The next evolution of menu engineering will move beyond static reporting toward more proactive and interactive guidance, including automated insights, conversational cost analysis tools, and faster recipe and inventory integration,” Escobar says. “Rather than relying solely on instinct or periodic reporting, AI allows restaurants to analyze data continuously to connect food costs, inventory movement, guest behavior, purchasing trends and menu performance in ways that support faster, better-informed decisions.”
To find out more about the AI edge your restaurant can deploy today, visit Craftable.
*Data sourced from Craftable production database and Pendo product analytics, May 2026.
