Menu Analysis & Engineering HRT383 Dinner Fall 08

7/12/2015 HRT3832 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 TX911.3.M45 D  CD-ROM TX911.3.M45 D TX911.3.M45 D

7/12/2015 HRT3833 Objectives By the completion of this presentation you should be able to: Analyze a menu for profitability Apply menu engineering to menu analysis

7/12/2015 HRT3834 Important Terms  Menu engineering Plowhorses Puzzles Stars Dogs

7/12/2015 HRT3835 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: 1.Must be profitable in terms of individual item profitability 2.Most profitable item must be selling the best.

7/12/2015 HRT3836 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. Plow Horse Do g Puzzle Star

7/12/2015 HRT3837 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

7/12/2015 HRT3838 Contribution Margin Dollars vs. Food Cost Percentage SteakSalmonCoffee 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

7/12/2015 HRT3839 Contribution Margin Dollars vs. Food Cost Percentage Which one will/should your server sell ? SteakSalmonCoffee 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

7/12/2015 HRT38310 Contribution Margin Dollars vs. Food Cost Percentage Which one will/should your server sell ? SteakSalmonCoffee 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

7/12/2015 HRT38311 Example

7/12/2015 HRT38312 Appetizers MenuPlate Contribu tionQuantityNetTotal MENU ITEMPriceCost%MarginSoldIncomeCost Crab Cake % Ravioli % Duck % En Croute % Cheese % SUBTOTAL APPETIZERS %

7/12/2015 HRT38313 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%

7/12/2015 HRT38314 Popularity MenuPlate Contribu tionQuantityNetTotalPopularity MENU ITEMPriceCost%MarginSoldIncomeCost Crab Cake % % Ravioli % % Duck % % En Croute % % Cheese % % SUBTOTAL APPETIZERS %$ %

7/12/2015 HRT38315 HRT383 Dinner Appetizers Plowhorse Star *Crab Cake $7.75/34.62% DogPuzzle 100% 16% Popularity 0 Contribution Margin $6.47

7/12/2015 HRT38316 HRT383 Dinner Appetizers Plowhorse Star *Crab Cake $7.75/34.62% DogPuzzle 100% 16% Popularity 0 Contribution Margin $6.47 *Ravioli $5.05/24.36% * Duck $5.75/14.10% * En Croute $7.01/17.31% *Cheese $6.28/9.62%

7/12/2015 HRT38317 Menu Engineering MenuPlate Contri- butionQuantityNetTotal Popular ityMenu MENU ITEMPriceCost%MarginSoldIncomeCost Engineering Crab Cake % %STAR Ravioli % %Plow Horse Duck % %DOG En Croute % %STAR Cheese % %DOG SUBTOTAL APPETIZERS %$ %

7/12/2015 HRT38318 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

7/12/2015 HRT38319 HRT383 Dinner Appetizers Plowhorse Star *Crab Cake $7.75/34.62% DogPuzzle 100% 16% Popularity 0 Contribution Margin $6.47 *Ravioli $5.05/24.36% * Duck $5.75/14.10% * En Croute $7.01/17.31% *Cheese $6.28/9.62% Increase $ $8 - ? Cut Portion ? ELIMINATE ?

7/12/2015 HRT38320 Data Trap Fall ‘08  See Dinner Hand Out for Main Courses

7/12/2015 HRT38321 Main Courses MENU ITEM Menu Price Plate Cost Food Cost % Contribu tion Margin Quantity Sold Net IncomeTotal Cost Popularit y Menu Engineerin g Loin Steak % $2,655$1, % Lamb % $2,048$1, % Chicken % $1,092$ % Halibut % $1,995$1, % Pork % $2,190$1, % Ravioli %6.6732$768$ % Rabbit % $616$ % Paella % $1,050$ % Duck % $1,696$ % SUBTOTAL MAIN DISHES 53.05% $14,110$7,329

7/12/2015 HRT38322 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 :59 / 4.97 = 13.5%

7/12/2015 HRT38323 Main Courses MENU ITEM Menu Price Plate Cost Food Cost % Contribu tion Margin Quantity Sold Net IncomeTotal Cost Popularit y Menu Engineerin g Loin Steak % $2,655$1, % Lamb % $2,048$1, % Chicken % $1,092$ % Halibut % $1,995$1, % Pork % $2,190$1, % Ravioli %6.6732$768$ % Rabbit % $616$ % Paella % $1,050$ % Duck % $1,696$ % SUBTOTAL MAIN DISHES 53.05% $14,110$7, %

7/12/2015 HRT38324 Exercise  Please work with your fellow students and come up with suggestions/decisions.

7/12/2015 HRT38325 HRT383 Dinner M/C Plowhorse Star Dog Puzzle 100% 8.88% Popularity 0 Contribution Margin $14.88

7/12/2015 HRT38326 Main Courses MENU ITEM Menu Price Plate Cost Food Cost % Contribu tion Margin Quantity Sold Net IncomeTotal Cost Popularit y Menu Engineerin g Loin Steak % $2,655$1, % Lamb % $2,048$1, % Chicken % $1,092$ % Halibut % $1,995$1, % Pork % $2,190$1, % Ravioli %6.6732$768$ % Rabbit % $616$ % Paella % $1,050$ % Duck % $1,696$ % SUBTOTAL MAIN DISHES 53.05% $14,110$7, %

7/12/2015 HRT38327 Main Courses MENU ITEM Menu Price Plate Cost Food Cost % Contribu tion Margin Quantity Sold Net IncomeTotal Cost Popular ity Menu Engineering Loin Steak % $2,655$1, % STAR Lamb % $2,048$1, %STAR Chicken % $1,092$ % PLOW HORSE Halibut % $1,995$1, % STAR Pork % $2,190$1, %STAR Ravioli %6.6732$768$ %DOG Rabbit % $616$ % DOG Paella % $1,050$ % PUZZLE Duck % $1,696$ % PLOW HORSE SUBTOTAL MAIN DISHES 53.05% $14,110$7, %

7/12/2015 HRT38328 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

7/12/2015 HRT38329 Main Courses MENU ITEM Menu Price Plate Cost Food Cost % Contribu tion Margin Quantity Sold Net IncomeTotal Cost Popular ity Menu Engineering Loin Steak % $2,655$1, % STAR Lamb % $2,048$1, %STAR Chicken Increase $ % $1,092$ % PLOW HORSE Halibut % $1,995$1, % STAR Pork % $2,190$1, %STAR Ravioli Eliminate %6.6732$768$ %DOG Rabbit Eliminate % $616$ % DOG Paella Lower $ % $1,050$ % PUZZLE Duck Increase $ Reduce size % $1,696$ % PLOW HORSE SUBTOTAL MAIN DISHES 53.05% $14,110$7, %

7/12/2015 HRT38330 Up Selling  Your Favorite

7/12/2015 HRT38331 Placement  Two Schools of thought 1.Menu Sequence Menu should follow progression of meal 2.Focal Points Use focal points on the menu to push certain menu items

7/12/2015 HRT38332 Focal Points Focal Point Single Sheet MenuTwofold Menu

7/12/2015 HRT38333 Focal Points Focal Point Threefold Menu

7/12/2015 HRT38334 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.

7/12/2015 HRT38335 Branding  Fast food  Coke / Pepsi  TGIF  Jack Daniels

7/12/2015 HRT38336 Menu Pricing  Odd-Cents pricing 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

7/12/2015 HRT38337 Price Placement Baked Chicken……….$8.99 Lemon Sole………….$11.99 Lamb Steak………….$12.99 Swordfish Steak…..…$14.99 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

7/12/2015 HRT38338 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

7/12/2015 HRT38339 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

7/12/2015 HRT38340 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 TX911.3.M45 D  CD-ROM TX911.3.M45 D TX911.3.M45 D  Most Menu & F&B Management Books