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Menu Engineering

Menu engineering is a management tool used to evaluate an existing menu and develop a better product mix to meet market needs through effective pricing based on item popularity and profitability. It aims to find the ideal balance of profit and profitability. Key factors in menu engineering include standard recipes, understanding cost fluctuations and seasonality, popularity and market analysis. Items are categorized based on their popularity and contribution margin as stars, plow-horses, puzzles or dogs to determine how to optimize the menu.

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Bonophool Banerjee
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57 views

Menu Engineering

Menu engineering is a management tool used to evaluate an existing menu and develop a better product mix to meet market needs through effective pricing based on item popularity and profitability. It aims to find the ideal balance of profit and profitability. Key factors in menu engineering include standard recipes, understanding cost fluctuations and seasonality, popularity and market analysis. Items are categorized based on their popularity and contribution margin as stars, plow-horses, puzzles or dogs to determine how to optimize the menu.

Uploaded by

Bonophool Banerjee
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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WMI/06/2000

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

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WMI/06/2000

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

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WMI/06/2000

PLOW-HORSES STARS

High P High P
Low CM High CM

DOGS PUZZLES

Low P Low P
Low CM 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

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WMI/06/2000

 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
item’s 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

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WMI/06/2000

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 item’s 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.

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