Latest innovation in Menu Re-Engineering Josh Boutwood

A. Marketing approach to evaluate menu pricing, design and content decisions

B. Classifies menu on base selling price and margin pesos, not just percentages

C. A cost multiplier pricing formula inadvertently restrictive to profitability

D. Reliable model does not replace sound profession judgment

What is Menu Engineering

Why Use Menu Engineering?

A. Operators have certain degree of control over labor and food cost but now there is an advanced tool to control contribution margin

B. Changing economic, social and competitive climate

C. Growth of price/value driver of spending behaviour

D. Rising food and paper costs

E. Need for pricing strategy models to support profitability

F. Real time approach to decision-making

“Stars, Workhorses, Cash Cows & Dogs”

…

This method rates the menu by measuring each entree as to its profitability (gross profit) and its sales. It then combines these measurements and places

each menu item into one of four classifications.

How to Define your Menu Items

Menu Item Unit SalesLow

Low

High

High

Men

u It

em G

ross

Mar

gin

“STARS” A. Most popular and profitable

B. Locate in highly visible position on menu

C. Maintain rigid quality, portion and presentation

D. Test for price elasticity

“Work Horses” A. Higher than average in popularity and lower than average in gross

profit

B. Leader menu items, bring people in the door

C. Test for price sensitivity; price in stages: such as Php 310 to Php 340 to Php 395

D. Relocate workhorses to low profile on menu

E. Package with lower cost menu item

“Cash Cows” A. High contribution but low in popularity

B. Take off the menu if labor intensive

C. Reposition in higher profile part of menu

D. Rename the item

E. Decrease the price

F. Merchandise the item

G. Limit the number on the menu

“Dogs” A. Menu “losers”, unpopular and low contribution B. Eliminate the item from the menu C. Raise item’s price to achieve at least a cash cow D. Make it a special but do not list on the menu

Contributing Margin

✤ Determine the contributing margin (CM) of each item

A. CM is the same as the items Gross Profit

B. Use total food cost

SELLING PRICE - FOOD COST= CONTRIBUTING MARGIN

Contribution Margin Pesos vs. Food Cost Percentage

Ribeye Battered Fish Coffee

Selling Price Php 995 Php 295 Php 80

Cost Php 497.50 Php 70 Php 12

Food Cost % 50% 23% 15%

Cont. Margin Php Php 497.5 Php 225 Php 68

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 FC(4)x(5) CM

Chicken 65 Php 395 30% Php 25,675 Php7800

Php275

Beef 75 Php 795 36% Php 59,625 Php21,750

Php 505

Fish 90 Php 425 28% Php38,250

Php 10,800 Php 305

Tenderloin 55 Php 995 66% Php54,725

Php36,575 Php 330

285 178,275 79,925

(7) Food Cost Percentages (6) / (5) = 44%(8) Total Contribution to Margin (5) - (6) = 98,350(9) Average Contribution Margin/Customer (8) / (2) = 345.08

Menu Engineering

(10) Average Popularity 80% of the items sales per entree: 100 / 4 x 80% = 20%

(11) Popularity of each Item: Number of portions sold divided by total number of meals sold

✤ Chicken 65 / 285 = 22% (Workhorse)✤ Beef 75 / 285 = 26% (Star)✤ Fish 90 / 285 = 31% (Star)✤ Tenderloin 55 / 285 = 19% (Dog)

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

FOCAL POINTSingle sheet Menu

FOCAL POINT (Two Fold menu)

2 4

Focal Point 3 Fold menu

3 5

Specials

✤ Larger Bolder type than the rest of menu

✤ Longer descriptions

✤ Concept of Closure Peoples eyes are drawn to what ever is enclosed by a box

✤ Colour, Illustrations, and/or pictures, bullets can be used to draw attention to signature items.

“END”

–Thank You