Menu Analysis & Engineering HRT383 Lunch Winter 09

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  4/16/2017 HRT383

Objectives By the completion of this presentation you should be able to: Analyze a menu for profitability Apply menu engineering to menu analysis Price menu items Locate menu items on a menu. 4/16/2017 HRT383

Important Terms Menu engineering Menu Plowhorses Puzzles Stars Dogs Placement Pricing 4/16/2017 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. 4/16/2017 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 4/16/2017 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. 4/16/2017 HRT383

Contribution Margin Dollars vs. Food Cost Percentage Sirloin Pasta Coffee Selling Price $22.00 $18.00 $2.00 Cost $10.36 $4.54 $0.19 Food Cost % 47.09% 25.22% 9.5% Cont. Margin $ $11.64 $13.46 $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. 4/16/2017 HRT383

Contribution Margin Dollars vs. Food Cost Percentage Sirloin Pasta Coffee Selling Price $22.00 $18.00 $2.00 Cost $10.36 $4.54 $0.19 Food Cost % 47.09% 25.22% 9.5% Cont. Margin $ $11.64 $13.46 $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. 4/16/2017 HRT383

Data Trap Winter ‘09 See Lunch Hand Out 4/16/2017 HRT383

Desserts RKR Apple Crisp 5.00 1.35 27.00% 3.65 62 310.00 83.70 47.69%   Menu Plate F/C  Contri- bution Quan- tity Net Total Popu- larity MENU ITEM Price Cost % Margin Sold Income Engineering RKR Apple Crisp 5.00 1.35 27.00% 3.65 62 310.00 83.70 47.69% Sampler 0.94 18.80% 4.06 27 135.00 25.38 20.77% Cheesecake 1.50 30.00% 3.50 40.50 Mngr Special 1.12 22.40% 3.88 14 70.00 15.68 10.77% TOTAL DESSERTS 25.42% 3.73 130 650.00 165.26 4/16/2017 HRT383

Popularity Average Popularity 80% of the average item sales per Dessert: 100 / 4 X 80% = 20% 4/16/2017 HRT383

Desserts 20% RKR Apple Crisp 5.00 1.35 27.00% 3.65 62 310.00 83.70   Menu Plate F/C  Contri- bution Quan- tity Net Total Popu- larity MENU ITEM Price Cost % Margin Sold Income Engineering RKR Apple Crisp 5.00 1.35 27.00% 3.65 62 310.00 83.70 47.69% Sampler 0.94 18.80% 4.06 27 135.00 25.38 20.77% Cheesecake 1.50 30.00% 3.50 40.50 Mngr Special 1.12 22.40% 3.88 14 70.00 15.68 10.77% TOTAL DESSERTS 25.42% 3.73 130 650.00 165.26 20% 4/16/2017 HRT383

HRT383 Lunch Desserts 100% Plowhorse Star Dog Puzzle Popularity 20% 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% 4/16/2017 0 Contribution Margin $3.73 HRT383

HRT383 Lunch Desserts 100% Plowhorse * Apple Crisp $3.65/47.69% * Cheesecake $3.50/20.77% Star * Sampler $4.06/20.77% Dog * Mngr Special $3.88/10.77% 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% 4/16/2017 0 Contribution Margin $3.73 HRT383

Desserts Star Puzzle 20% 3.73 Plow Horse RKR Apple Crisp 5.00 1.35   Menu Plate F/C  Contri- bution Quan- tity Net Total Popu- larity MENU ITEM Price Cost % Margin Sold Income Engineering RKR Apple Crisp 5.00 1.35 27.00% 3.65 62 310.00 83.70 47.69% Plow Horse Sampler 0.94 18.80% 4.06 27 135.00 25.38 20.77% Star Cheesecake 1.50 30.00% 3.50 40.50 Mngr Special 1.12 22.40% 3.88 14 70.00 15.68 10.77% Puzzle TOTAL DESSERTS 25.42% 3.73 130 650.00 165.26 20% 4/16/2017 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. 4/16/2017 HRT383

HRT383 Lunch Desserts Increase $ Cut Portion ? 100% Plowhorse * Apple Crisp $3.65/47.69% * Cheesecake $3.50/20.77% Star * Sampler $4.06/20.77% Dog * Mngr Special $3.88/10.77% Puzzle Popularity Increase $ Cut Portion ? 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% 4/16/2017 0 Contribution Margin $3.73 HRT383

Lunch Main Courses 6.71 Horsehill Salad w/ Chix 10.00 3.45 34.50% 6.55   Menu Plate Contribution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Engineering Horsehill Salad w/ Chix 10.00 3.45 34.50% 6.55 9 90.00 31.05 2.05% 4.79% Horsehill Salad 8.00 2.85 35.63% 5.15 12 96.00 34.20 2.74% SouthWestern Salad 3.09 30.90% 6.91 42 420.00 129.78 9.59% Cobb Salad 2.05 20.50% 7.95 34 340.00 69.70 7.76% Caesar Salad 0.67 8.38% 7.33 7 56.00 4.69 1.60% Caesar Salad with Chicken 1.46 14.60% 8.54 13.14 Caesar Salad with Shrimp 3.89 38.90% 6.11 5 50.00 19.45 1.14% Cheese Quesadilla 3.25 40.63% 4.75 15 120.00 48.75 3.42% 9.36% Quesadilla with Chicken 18 180.00 62.10 4.11% Quesadilla with Shrimp 3.95 39.50% 6.05 8 80.00 31.60 1.83% Reuben Sandwich 1.95 24.38% 21 168.00 40.95 Burger 9.00 2.59 28.78% 6.41 24 216.00 62.16 5.48% 15.98% Burger - Cheese 3.05 30.50% 6.95 22 220.00 67.10 5.02% Burger - Bacon 2.25 22.50% 7.75 20.25 Burger - Cheese & Bacon 11.00 3.39 30.82% 7.61 165.00 50.85 Turkado 2.81 35.13% 5.19 49 392.00 137.69 11.19% Lasagna 3.17 31.70% 6.83 240.00 76.08 Fish n Chips 3.32 33.20% 6.68 51 510.00 169.32 11.64% Meatloaf 2.19 21.90% 7.81 36 360.00 78.84 8.22% Duck Enchiladas 2.89 26.27% 8.11 242.00 63.58 Chili Entrée 6.00 1.50 25.00% 4.50 6 36.00 1.37% SUBTOTAL MAIN DISHES 29.33% 6.71 438 4161.00 1220.28

Popularity Average Popularity 80% of the average item sales per Main Dishes: 100 / 13 X 80% = 6.15% 4/16/2017 HRT383

Lunch Main Courses 6.71 6.15% Horsehill Salad w/ Chix 10.00 3.45   Menu Plate Contribution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Engineering Horsehill Salad w/ Chix 10.00 3.45 34.50% 6.55 9 90.00 31.05 2.05% 4.79% Horsehill Salad 8.00 2.85 35.63% 5.15 12 96.00 34.20 2.74% SouthWestern Salad 3.09 30.90% 6.91 42 420.00 129.78 9.59% Cobb Salad 2.05 20.50% 7.95 34 340.00 69.70 7.76% Caesar Salad 0.67 8.38% 7.33 7 56.00 4.69 1.60% Caesar Salad with Chicken 1.46 14.60% 8.54 13.14 Caesar Salad with Shrimp 3.89 38.90% 6.11 5 50.00 19.45 1.14% Cheese Quesadilla 3.25 40.63% 4.75 15 120.00 48.75 3.42% 9.36% Quesadilla with Chicken 18 180.00 62.10 4.11% Quesadilla with Shrimp 3.95 39.50% 6.05 8 80.00 31.60 1.83% Reuben Sandwich 1.95 24.38% 21 168.00 40.95 Burger 9.00 2.59 28.78% 6.41 24 216.00 62.16 5.48% 15.98% Burger - Cheese 3.05 30.50% 6.95 22 220.00 67.10 5.02% Burger - Bacon 2.25 22.50% 7.75 20.25 Burger - Cheese & Bacon 11.00 3.39 30.82% 7.61 165.00 50.85 Turkado 2.81 35.13% 5.19 49 392.00 137.69 11.19% Lasagna 3.17 31.70% 6.83 240.00 76.08 Fish n Chips 3.32 33.20% 6.68 51 510.00 169.32 11.64% Meatloaf 2.19 21.90% 7.81 36 360.00 78.84 8.22% Duck Enchiladas 2.89 26.27% 8.11 242.00 63.58 Chili Entrée 6.00 1.50 25.00% 4.50 6 36.00 1.37% SUBTOTAL MAIN DISHES 29.33% 6.71 438 4161.00 1220.28 6.15%

Exercise Please work with your fellow students and come up with suggestions/decisions. 4/16/2017 HRT383

HRT383 Lunch 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. 6.15% 4/16/2017 0 Contribution Margin $6.71 HRT383

Lunch Main Courses 6.71 6.15% Horsehill Salad w/ Chix 10.00 3.45   Menu Plate Contribution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Engineering Horsehill Salad w/ Chix 10.00 3.45 34.50% 6.55 9 90.00 31.05 2.05% 4.79% Horsehill Salad 8.00 2.85 35.63% 5.15 12 96.00 34.20 2.74% SouthWestern Salad 3.09 30.90% 6.91 42 420.00 129.78 9.59% Cobb Salad 2.05 20.50% 7.95 34 340.00 69.70 7.76% Caesar Salad 0.67 8.38% 7.33 7 56.00 4.69 1.60% Caesar Salad with Chicken 1.46 14.60% 8.54 13.14 Caesar Salad with Shrimp 3.89 38.90% 6.11 5 50.00 19.45 1.14% Cheese Quesadilla 3.25 40.63% 4.75 15 120.00 48.75 3.42% 9.36% Quesadilla with Chicken 18 180.00 62.10 4.11% Quesadilla with Shrimp 3.95 39.50% 6.05 8 80.00 31.60 1.83% Reuben Sandwich 1.95 24.38% 21 168.00 40.95 Burger 9.00 2.59 28.78% 6.41 24 216.00 62.16 5.48% 15.98% Burger - Cheese 3.05 30.50% 6.95 22 220.00 67.10 5.02% Burger - Bacon 2.25 22.50% 7.75 20.25 Burger - Cheese & Bacon 11.00 3.39 30.82% 7.61 165.00 50.85 Turkado 2.81 35.13% 5.19 49 392.00 137.69 11.19% Lasagna 3.17 31.70% 6.83 240.00 76.08 Fish n Chips 3.32 33.20% 6.68 51 510.00 169.32 11.64% Meatloaf 2.19 21.90% 7.81 36 360.00 78.84 8.22% Duck Enchiladas 2.89 26.27% 8.11 242.00 63.58 Chili Entrée 6.00 1.50 25.00% 4.50 6 36.00 1.37% SUBTOTAL MAIN DISHES 29.33% 6.71 438 4161.00 1220.28 6.15%

Lunch Main Courses 6.71 6.15% DOG STAR STAR PUZZLE PLOW HORSE PUZZLE   Menu Plate Contribution Quantity Net Total Popularity MENU ITEM Price Cost % Margin Sold Income Engineering Horsehill Salad w/ Chix 10.00 3.45 34.50% 6.55 9 90.00 31.05 2.05% 4.79% Horsehill Salad 8.00 2.85 35.63% 5.15 12 96.00 34.20 2.74% DOG  SouthWestern Salad 3.09 30.90% 6.91 42 420.00 129.78 9.59% STAR  Cobb Salad 2.05 20.50% 7.95 34 340.00 69.70 7.76%  STAR Caesar Salad 0.67 8.38% 7.33 7 56.00 4.69 1.60% Caesar Salad with Chicken 1.46 14.60% 8.54 13.14  PUZZLE Caesar Salad with Shrimp 3.89 38.90% 6.11 5 50.00 19.45 1.14% Cheese Quesadilla 3.25 40.63% 4.75 15 120.00 48.75 3.42% 9.36% Quesadilla with Chicken 18 180.00 62.10 4.11%  PLOW Quesadilla with Shrimp 3.95 39.50% 6.05 8 80.00 31.60 1.83%  HORSE Reuben Sandwich 1.95 24.38% 21 168.00 40.95 Burger 9.00 2.59 28.78% 6.41 24 216.00 62.16 5.48% 15.98% Burger - Cheese 3.05 30.50% 6.95 22 220.00 67.10 5.02% Burger - Bacon 2.25 22.50% 7.75 20.25 Burger - Cheese & Bacon 11.00 3.39 30.82% 7.61 165.00 50.85 Turkado 2.81 35.13% 5.19 49 392.00 137.69 11.19% PLOW HORSE  Lasagna 3.17 31.70% 6.83 240.00 76.08  PUZZLE  Fish n Chips 3.32 33.20% 6.68 51 510.00 169.32 11.64% Meatloaf 2.19 21.90% 7.81 36 360.00 78.84 8.22% Duck Enchiladas 2.89 26.27% 8.11 242.00 63.58 Chili Entrée 6.00 1.50 25.00% 4.50 6 36.00 1.37% SUBTOTAL MAIN DISHES 29.33% 6.71 438 4161.00 1220.28 6.15%

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. 4/16/2017 HRT383

Horsehill Salad w/ Chix MENU ITEM Menu Engineering Recommendation Horsehill Salad w/ Chix DOG Eliminate? SouthWestern Salad STAR Cobb Salad Caesar Salad PUZZLE Lower $? Quesadilla (Chix & Schrimp) PLOW HORSE Increase Menu $ or Reduce Portion? Reuben Sandwich Burger (Cheese & Bacon) Turkado Reduce Portion Lasagna Fish & Chips Meatloaf Duck Enchiladas Chili Entree Main Courses 4/16/2017 HRT383

Up Selling Manager’s Special 4/16/2017 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 4/16/2017 HRT383

Focal Points Focal Point Single Sheet Menu Twofold Menu 4/16/2017 HRT383

Focal Points 2 3 4 5 Focal Point Threefold Menu 4/16/2017 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. 4/16/2017 HRT383

Branding Fast food Coke / Pepsi TGIF Jack Daniels 4/16/2017 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 4/16/2017 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 4/16/2017 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 4/16/2017 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 4/16/2017 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 4/16/2017 HRT383