MENU ENGINEERING

Menu Engineering is a management tool to evaluate an existing menu to evolve a better product mix to meet the needs of the target market through effective pricing strategy based on popularity and profitability of individual menu items. Profit and profitability are the focal points of menu engineering, and it aims at arriving at an ideal blend of the two. Profit here may be defined as the selling price in excess of the costs, and profitability as the ratio of profits to the selling price, expressed as a percentage. REQUIREMENTS OF GOOD MENU ENGINEERING Standard Recipes Knowledge of Cost Fluctuations Knowledge of Seasonality Popularity Analysis Market Mix

BASIS OF ANALYSIS 1. Meal Time-wise Breakfast Lunch Dinner 2. Menu Category-wise Starters Soups Main course Vegetables Breads Dessert

DEFINITIONS Average Contribution Margin per Guest = Total Contribution Margin / Total Guest Count Average Contribution Margin per Item = Total contribution Margin / Demand Factor Demand Factor Total of item counts for a particular category Total Number of Items Ordered per Guest = Average Contribution Margin per Guest / Average Contribution Margi per Item Menu Mix Percentage The menu mix percent for each item is calculated by dividing the number of units sold divided by the total number units sold for all items. Item Contribution Margin Defined as the sales price minus the variable cost per unit. POPULARITY CONTRIBUTION ANALYSIS The Boston Model categorizes all items on the menu into four, based on the popularity and the contribution margin. This categorization is under: 1. Stars 2. Plow-horses 3. Puzzles 4. Dogs

PLOW-HORSES High P Low CM

STARS High P High CM

DOGS Low P Low CM

PUZZLES Low P High CM

Contribution Margin
CHARACTERISTICS OF EACH CATEGORY 1. Stars These are the most ideal items on the menu.

Maximum attention on quality control and strict standardization Examine handling costs and cost of leftovers

Eg. Murg Makhni, Tandoori Pomfret 2. Plow-horses

These are usually essential items on the menu. They give the body to the menu and keep the restaurant ticking. Certain items from this list can be pushed into the star category through higher pricing A healthy amount of items must be kept in this category and one should ensure the volume of sale of these items Identify and up-sell stars that come with these items

Examine scope for cost reduction, presentation, portion size and shelf life without lowering the perceived value of the product

Eg. Chicken Tikka, Paneer Makni 3. Puzzles

Explore possibilities of pushing the items into the star category, by pushing up sales at the same selling price, or as a strategy reduce prices to ensure higher sales, and push it into the plow-horse category The change in category should be done without the puzzle eating into any other items share, in turn pushing it into the dog/puzzle category

Check labor and indirect costs Eg. Mutton Roganjosh, Bharvan Aloo 4. Dogs

Push to any other category Eliminate from the menu By exception, maintain the loss leaders

Eg. Machi Amritsari, Dal Tadka SALES MIX Sales mix is a term used to describe the relative quantity sold of any menu item compared to the other items in the same category. The relative quantities are normally percentages of total units sold, and always total 100%. For example, the sales mix of item A are: Sale of item A / Sale of all menu items

POPULARITY INDEX Popularity index is defined as the ratio of portion sales for a given menu item to total portion sales for all menu items. The popularity index is calculated by dividing portion sales for a given item by the total sales for all menu items. This index may be calculated for any time period, even for a single meal. These ratios are of far greater use in determining an items popularity than are the raw figures that simply indicate the volume of sale. Popularity index can also be used in determining whether to continue offering a certain item on the menu. If an item consistently represents only 2% of the total sales whenever it appears, serious consideration should be given to removing it from the menu, and substituting it with a more popular item.