Menu Analysis & Engineering HRT383

References Mill, Robert Christie (1998) Restaurant Management: Customers, operations, and employees / Menu Scoring & Menu Engineering, pp 114-116. Upper Saddle River, N.J. : Prentice Hall. Drysdale, John A. & Jennifer Adams Aldrich (2002). Profitable menu planning / Chapter 5: Menu Analysis, pp. 101-115. 3rd ed. Upper Saddle River, N.J. : Prentice Hall, TX911.3.M45 D79 2002  CD-ROM TX911.3.M45 D79 2002  11/22/2018 HRT383

Objectives By the completion of this presentation you should be able to: Analyze a menu for profitability Apply menu engineering to menu analysis 11/22/2018 HRT383

Important Terms Menu engineering Plowhorses Puzzles Stars Dogs 11/22/2018 HRT383

Introduction This presentation explains how to evaluate a menu When measuring a menu to see if it is successful 2 criteria must be met to declare it a winner: Must be profitable in terms of individual item profitability Most profitable item must be selling the best. For evaluating menus, several systems are available. Two of the most widely used methods will be presented here. 11/22/2018 HRT383

Stars, Plowhorses, Puzzles, & Dogs Method, called menu engineering, developed by Donald Smith Ph.D., Westin Hotels Distinguished Professor at Washington State University This method rates the menu by measuring each entrée as to its profitability (gross profit) and its sales. It then combines these measurements and places each menu item into one of four classifications. Puzzle Plow Horse Star Dog 11/22/2018 HRT383

Selling Price – Food Cost = Contributing Margin Determine the contributing margin (CM) of each item CM same as item’s Gross Profit Use total food cost (include garnish, accompaniments served with entrée such as salad, potatoes, rolls, butter etc.). Selling Price – Food Cost = Contributing Margin One point to understand before delving into menu engineering is the theory of contributing margins. 11/22/2018 HRT383

Contribution Margin Dollars vs. Food Cost Percentage Lamb Salmon Coffee Selling Price $24.00 $22.00 $2.00 Cost $10.78 $5.97 $0.19 Food Cost % 44.92% 27.14% 9.5% Cont. Margin $ $13.22 $16.03 $1.81 Note: Relationship between food cost % and contribution margin in $ is not consistent. An item that has a high contribution margin in $ does not necessarily have a low food cost %. Too often, management is led to believe that low food cost % are the primary objective. Not so, you can’t take % to the bank, you take money. 11/22/2018 HRT383

Contribution Margin Dollars vs. Food Cost Percentage Lamb Salmon Coffee Selling Price $24.00 $22.00 $2.00 Cost $10.78 $5.97 $0.19 Food Cost % 44.92% 27.14% 9.5% Cont. Margin $ $13.22 $16.03 $1.81 Which one will/should your server sell ? Note: Relationship between food cost % and contribution margin in $ is not consistent. An item that has a high contribution margin in $ does not necessarily have a low food cost %. Too often, management is led to believe that low food cost % are the primary objective. Not so, you can’t take % to the bank, you take money. 11/22/2018 HRT383

Contribution Margin Dollars vs. Food Cost Percentage Lamb Salmon Coffee Selling Price $24.00 $22.00 $2.00 Cost $10.78 $5.97 $0.19 Food Cost % 44.92% 27.14% 9.5% Cont. Margin $ $13.22 $16.03 $1.81 Which one will/should your server sell ? Note: Relationship between food cost % and contribution margin in $ is not consistent. An item that has a high contribution margin in $ does not necessarily have a low food cost %. Too often, management is led to believe that low food cost % are the primary objective. Not so, you can’t take % to the bank, you take money. 11/22/2018 HRT383

Data Trap Spring ‘06 See Dinner Hand Out 11/22/2018 HRT383

Menu Engineering (1) (2) (3) (4) (5) (6) (10) Menu Item Number Sold Soup/Salad Number Sold Item Sales Price Food Cost Percentage Total Sales (2) X (3) Total Food Cost (4) X (5) Crab Cake 38 $10.00 12.9% $380 $49.02 Tapas 19 8.00 18.9% 152 28.69 Shrimp 30 10.00 32.9% 300 98.70 G Cheese 37 36.0% 296 106.56 Ravioli 34 7.00 30.6% 238 76.76 158 $1,366 $355.73 (10) C/M $8.71 6.49 6.71 5.12 4.86 (7) Food Cost Percentage: (6) / (5) = (8) Total Contribution to Margin: (5) – (6) = (9) Average Contribution Margin/ Customer: (8) / (2) = (10) Contribution Margin per menu Item: (5) – (6) (2) 25.8% $1010.27 $6.39 11/22/2018 HRT383

Popularity (11) Average Popularity 80% of the average item sales per appetizer: 100 / 5 X 80% = 16% (12) Popularity of each menu item: Number of portions sold divided by total number of meals sold Crab Cake : 38 / 158 = 24.05% Ceviche : 19 / 158 = 12.03% J Shrimp: 30 / 158 = 18.99% G Cheese : 37 / 158 = 23.42% Ravioli: 34 / 158 = 21.52% 11/22/2018 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star Dog Puzzle Popularity 16% In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star Dog Puzzle Popularity 16% *Crab Cake $8.71/24.05% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star * Tapas Dog Puzzle *Crab Cake $8.71/24.05% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star * Tapas Dog Puzzle *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star * Tapas Dog Puzzle *G Cheese $5.12/23.42% Star *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse *Ravioli $4.86/21.52% Star *G Cheese $5.12/23.42% *Ravioli $4.86/21.52% Star *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

The Four Key Menu Categories Plowhorses are items that are relatively popular but have a high contribution margin. Items in this category can have their menu prices increased or the portion size cut in a attempt to increase CM. If market is price resistant Stars have both high popularity and high CM Puzzles have relatively low popularity and high margins; lower price. Dogs are both low in popularity and CM; eliminate Plowhorses If the market does not resist the price increase, this action will move a plowhorse into the star category. If market is price resistant, the item can be buried in a inconspicuous place on the menu in the knowledge that people will find these relative bargains anyway. Stars It may be possible to increase menu price and/or cut portion size to increase profits while maintaining volume Puzzles They need to be promoted more to stimulate sales. Dogs Prime candidates to be dropped from the menu. In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 11/22/2018 HRT383

HRT383 Dinner Appetizers 100% Plowhorse *Ravioli $4.86/21.52% Star Reduce portion *G Cheese $5.12/23.42% *Ravioli $4.86/21.52% Star *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse $ *Ravioli $4.86/21.52% Star Reduce portion *G Cheese $5.12/23.42% $ *Ravioli $4.86/21.52% Star *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

HRT383 Dinner Appetizers 100% Plowhorse $ *Ravioli $4.86/21.52% Star Reduce portion *G Cheese $5.12/23.42% $ *Ravioli $4.86/21.52% Star *Crab Cake $8.71/24.05% *Shrimp $6.71/18.99% * Tapas $6.49/12.03% Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16% 11/22/2018 0 Contribution Margin $6.39 HRT383

Data Trap Winter ‘06 See Dinner Hand Out for Main Courses & Desserts 11/22/2018 HRT383

Exercise Please work with your fellow students and come up with suggestions/decisions. 11/22/2018 HRT383

HRT383 Dinner Main Courses 100% Plowhorse Star Dog Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 13.33% 11/22/2018 0 Contribution Margin $14.14 HRT383

HRT383 Dinner Main Courses 100% Plowhorse Star *Sirloin $13.75/40.62% *Salmon $16.03/14.14% *Pork $10.85/12.08% *Lamb $13.22/11.31% Dog *Chix $14.48/11.05% *Risotto $14.91/10.80% Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 13.33% 11/22/2018 0 Contribution Margin $14.14 HRT383

The Four Key Menu Categories Plowhorses are items that are relatively popular but have a high contribution margin. Items in this category can have their menu prices increased or the portion size cut in a attempt to increase CM. If market is price resistant Stars have both high popularity and high CM Puzzles have relatively low popularity and high margins; lower price. Dogs are both low in popularity and CM; eliminate Plowhorses If the market does not resist the price increase, this action will move a plowhorse into the star category. If market is price resistant, the item can be buried in a inconspicuous place on the menu in the knowledge that people will find these relative bargains anyway. Stars It may be possible to increase menu price and/or cut portion size to increase profits while maintaining volume Puzzles They need to be promoted more to stimulate sales. Dogs Prime candidates to be dropped from the menu. In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 11/22/2018 HRT383

HRT383 Dinner Desserts 100% Plowhorse Star Dog Puzzle Popularity 16.0% In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16.0% 11/22/2018 0 Contribution Margin $4.73 HRT383

HRT383 Dinner Desserts 100% Plowhorse $ up *Cheese Cake $3.59/19.05% Star * Apple Crisp $4.92/38.12% 4.51/18.03% *Cookie * Tiramisu $4.64/16.33% Dog $ Down* Choc $6.45/11.90% Puzzle Popularity In the example; CHICKEN would be dropped from the menu, while the FILET would be promoted more heavily. The prices on the BEEF and the TURKEY might be raised a little and featured more visibly on the menu. 16.0% 11/22/2018 0 Contribution Margin $4.34 HRT383

Conclusion Menu analysis is important If demographic studies, internal capacities, cost cards, and markups have been executed correctly, the score should be a good one Analysis should be done using either the Smith or the Hurst methods to ascertain the profitability of the menu If the analysis shows a poor menu, make improvements Good menu: first step has been taken toward running a profitable operation. It’s just that simple 11/22/2018 HRT383

Where to Get More Information Mill, Robert Christie (1998) Restaurant Management: Customers, operations, and employees / Menu Scoring & Menu Engineering, pp 114-116. Upper Saddle River, N.J. : Prentice Hall. Drysdale, John A. & Jennifer Adams Aldrich (2002). Profitable menu planning / Chapter 5: Menu Analysis, pp. 101-115. 3rd ed. Upper Saddle River, N.J. : Prentice Hall, TX911.3.M45 D79 2002  CD-ROM TX911.3.M45 D79 2002  Most Menu & F&B Management Books 11/22/2018 HRT383