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Menu Engineering

In: Business and Management

Submitted By ladybugs80
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Pages 5
Menu Engineering

Menu engineering is a menu analysis food pricing method that is used to determine which menu item requires re-pricing, featuring, eliminating, repositioning or re-costing (Schmidgall, 1997; Bell 2002). This approach incorporates both the profitability and the popularity of menu items with an emphasis on contribution margins (CM). The CM is established by subtracting the food costs from the menu item’s revenue.

Menu engineering requires each menu’s item food cost, selling price, and quantity sold over a specific time period. The gross profit margin of each menu item is compared to an average gross profit margin of all menu items and then classified as high or low. Each menu item is also classified as high or low by its popularity. A menu mix percentage for the item is established by dividing the total count of the item in the total count of all menu items. The dividing point for establishing low or high popularity is calculated by multiplying 70% by 1/n, where n equals the number of competing menu items.

The profitability and popularity classifications of each menu item results in four categories. A menu item with higher than average popularity and profitability is referred to as a Star, while an item with higher than average profitability and lower than average popularity is called a Puzzle. Menu items with lower than average profitability and higher than average popularity are called Plow Horses. Finally, menu items with lower than average profitability and popularity, are considered Dogs (Schmidgall, 1997).

After menu items are classified according to profitability and popularity, each menu item’s share of the total menu profit needs to be determined. This is accomplished by a two-step Profit Factor (PF) calculation (Bell, 2002). First, the average CM is determined

by dividing the total menu CM by the number of menu items. The total...

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