Menu Engineering
A relatively new method of menu analysis & food
pricing is called menu engineering. This sophisticated and fairly complex approach considers
both the profitability and popularity of competing menu items. The emphasis is
on gross margin rather than food cost percentage.
Menu
engineering requires the manager to know each menu item's food cost, selling price, and quantity sold over a
specific period of time. The menu item's gross margin (selling price minus food
cost) is characterized as either high or low in relation to the average
gross margin for all competing menu items sold.
For
example, if a menu item has a gross margin of RS. 30/- when the average gross margin for the menu is RS. 35/-,
then the menu item is classified as having a low gross margin. If the menu item
has a gross margin of RS. 45/-, then it is classified as high for
profitability purposes.
Each
menu item is further classified by popularity (high or low) based on the item's menu mix percentage, that is, the menu
item count for each menu item as a
percentage of the total menu items sold. Where "n" equals the number of
competing menu items, the dividing point for determining high low popularity is
calculated as follows:
70%
x 1 / n
Therefore,
if there are 10 competing items on a menu, the dividing point is 7%, determined
as follows:
70%
x 1/10 = .07 or 7%
Profitability Popularity Classification
High High Stars
High Low Puzzles
Low High Plow Horses
Low Low Dogs
Stars: Menu
items high in both popularity and contribution margin. Stars are
the most popular items on your menu. They may be your signature items.
Plow Horses:
Menu items high in popularity but low in contribution margin. Plow horses are
but low in contribution margin. Plow horses are demand generators. They may be
the lead items on your menu or your signature
items. They are often significant to the restaurant's popularity with price
conscious buyers.
Puzzles: Menu items low in popularity
but high in contribution margin. In other words, Puzzles yield a
high profit per item sold. But they are hard to sell.
Dogs: Menu items low in
popularity and low in contribution margin. These
are your losers. They are unpopular, and they generate little profit.
How to
use the categories
Once you have grouped your menu into the four key
categories, you are ready to make decisions. Each category must be analyzed and evaluated
separately.
Stars: You must maintain rigid
specifications for quality, quantity, and presentation of all Star items.
Locate them in a highly visible position on the menu. Test them
occasionally for price in-elasticity. Are guests willing to pay more for these items, and
still buy them in significant quantity? The Super Stars of your menu — highest priced Stars — may be less price sensitive than any other items on the menu. If so, these items may be
able to carry a larger portion of any increase in
cost of goods and labor.
Plow
Horses: These
items are often an important reason for a restaurant's popularity. Increase
their prices carefully. If Plow Horses are highly price sensitive,
attempt to pass only the cost of goods increase on to the menu price. Also, consider reducing the
item's standard portion without making the difference
noticeable. Merchandise the Plow Horse by packaging it with side items to
increase its contribution margin. Another option is to use the item to create
a "better value alternative."
Puzzles: Take
them of the menu. Particularly if a Puzzle is low in popularity, requires costly or additional inventory, has poor shelf
life, requires skilled or labor intensive preparation, and is of
inconsistent quality. Another option is to re-position the Puzzle and feature
it in a more popular location on the menu. You can try adding value to the item
through Table D'Hote Packaging. Rename it. A Puzzle's popularity can be
affected by what it its called, especially if the name can be made to sound
familiar. Decrease the Puzzle's price. The item may have a contribution margin
that is too high and is facing price resistance. Care must be taken, however,
not to lower the contribution margin to a point where the Puzzle draws menu
share from a Star.
Dogs: Eliminate all Dog items if
possible. Foodservice operators are often intimidated by influential guests to
carry a Dog on the item. The way to solve this problem is to carry the item in
inventory (assuming it has a shelf life) but not on the menu. The special guest
is offered the opportunity to have the item made to order upon request. Charge
extra for this service. Raise the Dog's price to Puzzle status. Some item in
the Dog category may have market potential. These tend to be the more popular
Dogs, and may be converted to Puzzles.
Menu
margin concept-
Supposed
analyze menu in 2 ways
a) Profitability
b) Popularity
Purpose
–
To determine:
ü Food cost of each and every
item
ü Selling prize
ü Number of each item sold for
a specific period of time.
Menu
margin concept-
A
|
B
NAME OF DISH
|
C
SALES PRICE
|
D
FOOD COST
|
E
MARGIN
C-D
|
F
GROSS /AVG MARGIN
|
G
PROFIT
OVER/UNDER
|
1
|
MURG TANDOORI
|
320
|
150
|
170
|
100
|
OVER
|
2
|
MURG MALAI TIKKA
|
250
|
100
|
150
|
100
|
OVER
|
3
|
MURG RESHNI TIKKA
|
300
|
100
|
200
|
100
|
OVER
|
4
|
MURG MAKHANI
|
285
|
130
|
155
|
100
|
OVER
|
5
|
MURG HARIYALI
|
275
|
100
|
175
|
100
|
OVER
|
6
|
MURG DO PIYAZA
|
250
|
125
|
125
|
100
|
OVER
|
7
|
CHICKEN SATAY
|
225
|
100
|
125
|
100
|
OVER
|
8
|
CHICKEN
BURGER
|
155
|
80
|
75
|
100
|
UNDER
|
9
|
CHICKEN
SANDWICH
|
150
|
45
|
105
|
100
|
UNDER
|
10
|
CHICKEN
SASHLIK
|
175
|
75/85
|
100/85
|
100
|
UNDER
|
SBU=STRATEGIC BUSINESS UNIT
GROSS MARGIN=SELLING PRICE-FOOD COST
POPULARITY
SL. NO.
|
NAMES OF DISHES
|
NAME OF ITEMS SOLD
|
AVERAGE OF ITEM SOLD
|
POPULARITY OVER/UNDER
|
1
|
TANDOORI
MURG
|
15
|
46
|
UNDER
|
2
|
MURG
MALAI TIKKA
|
50
|
46
|
OVER
|
3
|
MURG
RESHMI TIKKA
|
40
|
46
|
UNDER
|
4
|
MURG
MAKHANI
|
75
|
46
|
OVER
|
5
|
MURG
HARIYALI
|
60
|
46
|
OVER
|
6
|
MURG
DO PIYAZA
|
50
|
46
|
OVER
|
7
|
CHICKEN
SATAY
|
25
|
46
|
UNDER
|
8
|
CHICKEN
BURGER
|
60
|
46
|
OVER
|
9
|
CHICKEN
SANDWICH
|
65
|
46
|
OVER
|
10
|
CHICKEN
SASHLIK
|
25
|
46
|
UNDER
|
PLOW HORSE/CASHCOW
(OVER/UNDER)
|
STAR
(OVER/OVER)
|
DOGS
(UNDER/UNDER)
|
PUZZLES
(UNDER/OVER)
|
POPULARITY
|
PROFITABILITY
|
CATEGORY
|
OVER
|
OVER
|
STAR
|
UNDER
|
UNDER
|
DOGS
|
OVER
|
UNDER
|
CASH
COWS/PLOW HORSES
|
UNDER
|
OVER
|
PUZZLES
|
ü STAR- SIGNATURE ITEMS
ü PUZZLES - NEW PRODUCT LAUNCH
ü CASH COW - POPULARITY MAY PERSIST
PROFIT MAY DECREASE
ü DOGS - NO PROFIT AND POPULARITY
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