Menu Analysis & Engineering HRT383 By Dr. Ben Dewald

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  5/16/2019 HRT 382

Objectives By the completion of this presentation you should be able to: Analyze a menu for profitability Apply menu engineering to menu analysis Apply menu scoring methods to menu analysis. 5/16/2019 HRT 382

Important Terms Menu engineering Menu scoring Placement Pricing Plowhorses Puzzles Stars Dogs Menu scoring Placement Pricing 5/16/2019 HRT 382

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. 5/16/2019 HRT 382

Stars, Plowhorses, Puzzles, & Dogs 1st 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 5/16/2019 HRT 382

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. 5/16/2019 HRT 382

Contribution Margin Dollars vs. Food Cost Percentage Steak Dinner Fish Sandwich Coffee Selling Price $15.00 $4.00 $0.75 Cost $7.50 $1.00 $0.15 Food Cost % 50% 25% 20% Cont. Margin $ $3.00 $0.60 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. 5/16/2019 HRT 382

Menu Engineering (1) (2) (3) (4) (5) (6) (10) Menu Item Number Sold Item Sales Price Food Cost Percentage Total Sales (2) X (3) Total Food Cost (4) X (5) Chicken 65 $9.95 35 $646.75 $226.36 Beef 75 11.95 38 896.25 340.58 Turkey 90 10.25 31 922.50 285.98 Filet 55 12.95 45 712.25 320.51 285 $3,177.75 $1,173.43 (10) C/M $6.47 7.41 7.07 7.12 (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) 39.93% $2,004.32 $7.03 5/16/2019 HRT 382

Menu Engineering (11) Average Popularity 80% of the average item sales per entrée: 100 / 4 X 80% = 20% (12) Popularity of each menu item: Number of portions sold divided by total number of meals sold Chicken: 65 / 285 = 22.8% Beef: 75 / 285 = 26.3% Turkey: 90 / 285 = 31.6% Filet: 55 / 285 = 19.3% 5/16/2019 HRT 382

Menu Engineering Analysis 100% Plowhorse *Chicken (6.47/22.8%) Star *Turkey (7.07/31.6%) *Beef (7.4126.3%) Dog *Filet (7.12/19.3%) Puzzle Popularity 20% 5/16/2019 0 Contribution Margin 7.03 8 HRT 382

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. Dogs are both low in popularity and CM 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. 5/16/2019 HRT 382

Menu Engineering Analysis 100% Plowhorse *Chicken (6.47/22.8%) Star *Turkey (7.07/31.6%) *Beef (7.4126.3%) Dog *Filet (7.12/19.3%) 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. 20% 5/16/2019 0 Contribution Margin 7.03 8 HRT 382

Menu Scoring Method developed by Michael Hurst, Professor of Restaurant Management at Florida International University, a restaurant owner and past president of the NRA. Devised to ascertain whether menu changes (additions, deletions, and price adjustments) actually improved the profitability of the menu by comparisons of a menu score. One advantage: quick to complete because it does not track every menu item. 5/16/2019 HRT 382

Menu Scoring Combines profitability and popularity of menu items to arrive a a consensus score The higher the score, the better the menu An existing menu can be scored, then compared with a proposed menu, after sales for the new menu have been estimated. 5/16/2019 HRT 382

Menu Scoring (1) (2) (3) (4) (5) (6) Menu Item Number Sold Item Sales Price Food Cost Percentage Total Sales (2) X (3) Total Food Cost (4) X (5) Chicken 65 $9.95 35 $646.75 $226.36 Beef 75 11.95 38 896.25 340.58 Turkey 90 10.25 31 922.50 285.98 Filet 55 12.95 45 712.25 320.51 Total 285 $3,177.75 $1,173.43 Meal Check Average: 5 / 2 = Gross Profit: 5 – 6 = Gross Profit %: 8 / 5 = Gross Profit Average Meal: 7 x 9 = Total Meals Served: Popularity of Meals Analyzed: 2 / 11 = Menu Score: 10 x 12 = $11.15 $2,004.32 63% $7.02 450 4.42 5/16/2019 HRT 382

The Higher the Score the More Profitable the Menu This method takes into account not only # of items sold, but also their contributing profit 5/16/2019 HRT 382

Placement Two Schools of thought Menu Sequence Focal Points Menu should follow progression of meal Focal Points Use focal points on the menu to push certain menu items 5/16/2019 HRT 382

Focal Points Focal Point Single Sheet Menu Twofold Menu 5/16/2019 HRT 382

Focal Points 2 3 4 5 Focal Point Threefold Menu 5/16/2019 HRT 382

Specials Larger Bolder type than the rest of menu Longer description Concept of Closure people’s eyes are drawn to what ever is enclosed by a box Color, illustration, and/or pictures, bullets can be used to draw attention to signature items. 5/16/2019 HRT 382

Branding Fast food Coke / Pepsi TGIF Jack Daniels 5/16/2019 HRT 382

Menu Pricing Odd-Cents pricing Price rounding. Placement Majority of prices end in either a “5” or a “9” Price rounding. Within certain price bands, price increases have little negative impact on customers Placement 5/16/2019 HRT 382

Price Placement BAKED CHICKEN Tender pieces of chicken breast $8.99 LEMON SOLE Fresh filets sautéed with lemon caper sauce $11.99 LAMB STEAK Center cut of lamb served on a bed of rice $12.99 SWORDFISH STEAK Charcoal grilled served with beurre blanc $14.99 Baked Chicken……….$8.99 Lemon Sole………….$11.99 Lamb Steak………….$12.99 Swordfish Steak…..…$14.99 5/16/2019 HRT 382

Price Placement BAKED CHICKEN Tender pieces of chicken breast Eight dollars and ninety nine cents LEMON SOLE Fresh filets sautéed with lemon caper sauce Eleven dollars and ninety nine cents LAMB STEAK Center cut of lamb served on a bed of rice Twelve dollars and ninety nine cents SWORDFISH STEAK Charcoal grilled served with beurre blanc Fourteen dollars and ninety nine cents 5/16/2019 HRT 382

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 5/16/2019 HRT 382

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 5/16/2019 HRT 382