Perhaps the oldest misconception in food service management is that food cost is directly related to profitability. In other words, it is assumed that the lower an operation’s food cost percentage (food cost divided by food revenue), the more profitable the restaurant. Unfortunately, this is not always the case. Alternatively, the menu engineering model (ME) requires management to focus on the dollar amount a menu item contributes to profitability as opposed to simply monitoring its food cost calculation. Despite the fact that it has been more than four decades since the concept of menu engineering was introduced to the food service industry, a recent Google Chrome search revealed 2.96 billion, not million, results demonstrating the longevity and relevancy of the approach.
Menu engineering is used to enhance profitability and customer satisfaction. Menu engineering examines the impact of menu item descriptions and placement on profitability and popularity. While the goal of menu engineering is to increase customer visits and spending per visit, industry practitioners point to the involvement of marketing, psychology, and graphic design as important components. It the resulting outcome of pricing, design, placement, and content that differentiates competing menu items against overall menu performance. Instead of concentrating on: “What is a satisfactory food cost percentage?” menu engineering is concerned with, “Is the restaurant receiving a reasonable contribution to profit given its menu mix?”
ME analysis goes beyond traditional restaurant metrics by assisting operators in obtaining a reasonable level of profitability through increased customer demand and/or average contribution margins. While most foodservice analytical applications primarily focus on controlling percentages, menu engineering deals with enhanced decision-making strategies related to customer preferences, promotions, and pricing. A menu engineering analysis centers on three basic data elements: a) customer demand (number of covers sold), b) menu mix (sales preference scoring), and c) contribution margin (gross profit tabulation). ME provides both an item and overall comprehensive investigation of competing menu items, by meal period, while establishing a dynamic standard against which future menu changes can be measured.
Read the full white paper on your member dashboard
Share this
