Menu Analysis & Engineering

Menu Analysis & Engineering
HRT383

References Mill, Robert Christie (1998) Restaurant Management: Customers, operations, and employees / Menu Scoring & Menu Engineering, pp Upper Saddle River, N.J. : Prentice Hall. Drysdale, John A. & Jennifer Adams Aldrich (2002). Profitable menu planning / Chapter 5: Menu Analysis, pp rd ed. Upper Saddle River, N.J. : Prentice Hall, TX911.3.M45 D CD-ROM TX911.3.M45 D 2/23/2019 HRT383

Objectives By the completion of this presentation you should be able to: Analyze a menu for profitability Apply menu engineering to menu analysis 2/23/2019 HRT383

Important Terms Menu engineering Plowhorses Puzzles Stars Dogs
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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. 2/23/2019 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 2/23/2019 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. 2/23/2019 HRT383

Contribution Margin Dollars vs. Food Cost Percentage
Steak Salmon Coffee Selling Price $33.00 $23.00 $2.00 Cost $20.96 $7.12 $0.19 Food Cost % 63.52% 30.69% 9.5% Cont. Margin $ $12.04 $15.88 $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. 2/23/2019 HRT383

Contribution Margin Dollars vs. Food Cost Percentage
Steak Salmon Coffee Selling Price $33.00 $23.00 $2.00 Cost $20.96 $7.12 $0.19 Food Cost % 63.52% 30.69% 9.5% Cont. Margin $ $12.04 $15.88 $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. 2/23/2019 HRT383

Example 2/23/2019 HRT383

Appetizers Crab Cake Ravioli Duck En Croute Cheese 2/23/2019 HRT383
Menu Plate Contribu tion Quantity Net Total MENU ITEM Price Cost % Margin Sold Income Crab Cake 10.00 2.46 24.60% 7.54 54 540.00 132.84 Ravioli 7.00 1.95 27.86% 5.05 38 266.00 74.10 Duck 8.00 2.25 28.13% 5.75 22 176.00 49.50 En Croute 2.99 29.90% 7.01 27 270.00 80.73 Cheese 1.72 21.50% 6.28 15 120.00 25.80 SUBTOTAL APPETIZERS 43.00 11.37 26.44% 117 362.97 2/23/2019 HRT383

Popularity Average Popularity
80% of the average item sales per appetizer: 100 / 5 X 80% = 16% Popularity of each menu item: Number of portions sold divided by total number of meals sold Crab Cake : 54 / 117 = 34.62% 2/23/2019 HRT383

Popularity Crab Cake Ravioli Duck En Croute Cheese 2/23/2019 HRT383
Menu Plate Contribution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Crab Cake 10.00 2.46 24.60% 7.54 54 540.00 132.84 34.62% Ravioli 7.00 1.95 27.86% 5.05 38 266.00 74.10 24.36% Duck 8.00 2.25 28.13% 5.75 22 176.00 49.50 14.10% En Croute 2.99 29.90% 7.01 27 270.00 80.73 17.31% Cheese 1.72 21.50% 6.28 15 120.00 25.80 9.62% SUBTOTAL APPETIZERS 43.00 11.37 26.44% $6.47 156 362.97 16% 2/23/2019 HRT383

HRT383 Dinner Appetizers 100% Plowhorse Star Dog Puzzle Popularity 16%
*Crab Cake $7.75/34.62% 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% 2/23/2019 Contribution Margin $6.47 HRT383

*Crab Cake $7.75/34.62% Dog Puzzle Popularity *Ravioli $5.05/24.36% * En Croute $7.01/17.31% 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% * Duck $5.75/14.10% *Cheese $6.28/9.62% 2/23/2019 Contribution Margin $6.47 HRT383

Menu Engineering 2/23/2019 HRT383 Menu Plate Contri- bution Quantity
Menu Plate Contri- bution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Engineering Crab Cake 10.00 2.46 24.60% 7.54 54 540.00 132.84 34.62% STAR Ravioli 7.00 1.95 27.86% 5.05 38 266.00 74.10 24.36% Plow Horse Duck 8.00 2.25 28.13% 5.75 22 176.00 49.50 14.10% DOG En Croute 2.99 29.90% 7.01 27 270.00 80.73 17.31% Cheese 1.72 21.50% 6.28 15 120.00 25.80 9.62% SUBTOTAL APPETIZERS 43.00 11.37 26.44% $6.47 156 362.97 16% 2/23/2019 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. 2/23/2019 HRT383

*Crab Cake $7.75/34.62% Dog Puzzle Increase $ $8 - ? Cut Portion ? Popularity *Ravioli $5.05/24.36% * En Croute $7.01/17.31% 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% * Duck $5.75/14.10% ELIMINATE ? *Cheese $6.28/9.62% ELIMINATE ? 2/23/2019 Contribution Margin $6.47 HRT383

Data Trap Winter ‘08 See Dinner Hand Out for Main Courses 2/23/2019
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Main Courses 2/23/2019 HRT383 Menu Plate Food Cost Contri- bution
Menu Plate Food Cost Contri- bution Quantity Net Total Popu- larity MENU ITEM Price % Margin Sold Income Engineering Rib-Eye 42.00 26.59 63.31% 15.41 220 $9,240 $5,849.80 19.28% Lamb 38.00 18.70 49.21% 19.30 117 $4,446 $2,187.90 10.25% Chicken 26.00 12.91 49.65% 13.09 108 $2,808 $1,394.28 9.47% Duck 32.00 58.44% 13.30 72 $2,304 $1,346.40 6.31% Swordfish 35.00 12.16 34.74% 22.84 160 $5,600 $1,945.60 14.02% Pork 30.00 13.28 44.27% 16.72 109 $3,270 $1,447.52 9.55% Short Rib 12.64 42.13% 17.36 110 $3,300 $1,390.40 9.64% Scampi 13.59 42.47% 18.41 161 $5,152 $2,187.99 14.11% Ravioli 24.00 11.70 48.75% 12.30 84 $2,016 $982.80 7.36% SUBTOTAL MAIN DISHES 48.11% 16.53 1,141 $38,136 $18,733 2/23/2019 HRT383

Popularity Average Popularity
80% of the average item sales per appetizer: 100 / 9 X 80% = 8.88% Popularity of each menu item: Number of portions sold divided by total number of meals sold Rib Eye : 199 / 960 = 20.73% 2/23/2019 HRT383

Main Courses 2/23/2019 HRT383 Menu Plate Food Cost Contribution
Menu Plate Food Cost Contribution Quantity Net Total Popu- larity MENU ITEM Price % Margin Sold Income Engineering Rib Eye $42.00 $26.59 63.31% $15.41 199 $8,358 $5,291.41 20.73% Lamb $38.00 $18.70 49.21% $19.30 96 $3,648 $1,795.20 10.00% Chicken $26.00 $12.91 49.65% $13.09 87 $2,262 $1,123.17 9.06% Duck $32.00 58.44% $13.30 61 $1,952 $1,140.70 6.35% Swordfish $35.00 $12.16 34.74% $22.84 134 $4,690 $1,629.44 13.96% Pork $30.00 $13.28 44.27% $16.72 81 $2,430 $1,075.68 8.44% Short Rib $12.64 42.13% $17.36 100 $3,000 $1,264.00 10.42% Scampi $13.59 42.47% $18.41 138 $4,416 $1,875.42 14.38% Ravioli $24.00 $11.70 48.75% $12.30 64 $1,536 $748.80 6.67% SUBTOTAL MAIN DISHES 48.11% $17.03 960 $32,292 $15,943.82 8.88% 2/23/2019 HRT383

Exercise Please work with your fellow students and come up with suggestions/decisions. 2/23/2019 HRT383

HRT383 Dinner M/C 100% Plowhorse Star Dog Puzzle Popularity 8.88%
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. 8.88% 2/23/2019 Contribution Margin $16.53 HRT383

Menu Plate Food Cost Contri- bution Quantity Net Total Popu- larity MENU ITEM Price % Margin Sold Income Engineering Rib-Eye 42.00 26.59 63.31% 15.41 220 $9,240 $5,849.80 19.28% Lamb 38.00 18.70 49.21% 19.30 117 $4,446 $2,187.90 10.25% Chicken 26.00 12.91 49.65% 13.09 108 $2,808 $1,394.28 9.47% Duck 32.00 58.44% 13.30 72 $2,304 $1,346.40 6.31% Swordfish 35.00 12.16 34.74% 22.84 160 $5,600 $1,945.60 14.02% Pork 30.00 13.28 44.27% 16.72 109 $3,270 $1,447.52 9.55% Short Rib 12.64 42.13% 17.36 110 $3,300 $1,390.40 9.64% Scampi 13.59 42.47% 18.41 161 $5,152 $2,187.99 14.11% Ravioli 24.00 11.70 48.75% 12.30 84 $2,016 $982.80 7.36% SUBTOTAL MAIN DISHES 48.11% 16.53 1,141 $38,136 $18,733 8.88% 2/23/2019 HRT383

Menu Plate Food Cost Contri- bution Quantity Net Total Popu- larity MENU ITEM Price % Margin Sold Income Engineering Rib-Eye 42.00 26.59 63.31% 15.41 220 $9,240 $5,849.80 19.28% Plow Horse Lamb 38.00 18.70 49.21% 19.30 117 $4,446 $2,187.90 10.25% STAR Chicken 26.00 12.91 49.65% 13.09 108 $2,808 $1,394.28 9.47% Plow Horse Duck 32.00 58.44% 13.30 72 $2,304 $1,346.40 6.31% DOG Swordfish 35.00 12.16 34.74% 22.84 160 $5,600 $1,945.60 14.02% STAR Pork 30.00 13.28 44.27% 16.72 109 $3,270 $1,447.52 9.55% Short Rib 12.64 42.13% 17.36 110 $3,300 $1,390.40 9.64% Scampi 13.59 42.47% 18.41 161 $5,152 $2,187.99 14.11% Ravioli 24.00 11.70 48.75% 12.30 84 $2,016 $982.80 7.36% DOG SUBTOTAL MAIN DISHES 48.11% 16.53 1,141 $38,136 $18,733 8.88% 2/23/2019 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. 2/23/2019 HRT383

Menu Plate Food Cost Contri- bution Quantity Net Total Popu- larity MENU ITEM Price % Margin Sold Income Engineering Rib-Eye 42.00 26.59 63.31% 15.41 220 $9,240 $5,849.80 19.28% Plow Horse $ up? Lamb 38.00 18.70 49.21% 19.30 117 $4,446 $2,187.90 10.25% STAR Chicken 26.00 12.91 49.65% 13.09 108 $2,808 $1,394.28 9.47% Duck 32.00 58.44% 13.30 72 $2,304 $1,346.40 6.31% DOG Eliminate? Swordfish 35.00 12.16 34.74% 22.84 160 $5,600 $1,945.60 14.02% STAR Pork 30.00 13.28 44.27% 16.72 109 $3,270 $1,447.52 9.55% Short Rib 12.64 42.13% 17.36 110 $3,300 $1,390.40 9.64% Scampi 13.59 42.47% 18.41 161 $5,152 $2,187.99 14.11% Ravioli 24.00 11.70 48.75% 12.30 84 $2,016 $982.80 7.36% DOG Eliminate? SUBTOTAL MAIN DISHES 48.11% 16.53 1,141 $38,136 $18,733 8.88% 2/23/2019 HRT383

Up Selling Your Favorite 2/23/2019 HRT383

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 2/23/2019 HRT383

Focal Points Focal Point Single Sheet Menu Twofold Menu 2/23/2019
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Focal Points 2 3 4 5 Focal Point Threefold Menu 2/23/2019 HRT383

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. 2/23/2019 HRT383

Branding Fast food Coke / Pepsi TGIF Jack Daniels 2/23/2019 HRT383

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 2/23/2019 HRT383

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 2/23/2019 HRT383

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 2/23/2019 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 2/23/2019 HRT383

Where to Get More Information
Mill, Robert Christie (1998) Restaurant Management: Customers, operations, and employees / Menu Scoring & Menu Engineering, pp Upper Saddle River, N.J. : Prentice Hall. Drysdale, John A. & Jennifer Adams Aldrich (2002). Profitable menu planning / Chapter 5: Menu Analysis, pp rd ed. Upper Saddle River, N.J. : Prentice Hall, TX911.3.M45 D CD-ROM TX911.3.M45 D Most Menu & F&B Management Books 2/23/2019 HRT383

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