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MENU ENGINEERING
The concept of menu engineering was developed by Michigan State University's Dr. Michael Kasavana and Donald Smith in the early 1980s, and has been used widely in the restaurant industry since that time. Based on Boston Consulting Group's (BCG) matrix conceptualization model, Kasavana and Smith extended and specialized the BCG concept for the foodservice industry. Menu Engineering examines the sales history for each dish on the menu, and examines that dishs selling price and cost price. It then relates their profit margins and their menu mix percentages to see which items are proving popular and thus profitable. Menu engineering is the analysis of your menu which looks at the sales price, sales history and the cost of each item of the menu. From the collected data engineering refers to the calculation of the profit or contribution margin of each item in relation to all the other items on the menu for a period of time. Menu engineering provides the manager with information about a menu items profitability, as well as popularity, so that proactive planning, recipe design and customer pricing decisions can be made. Menu engineering is not a substitute for proper purchasing, food rotation, standard recipes or any of the other basic kitchen controls that can negatively impact your costs. Rather it is a method of evaluating every item on your menu relative to its present contribution to bottom line, thereby allowing managers to recognize the items they want to sell! Menu engineering is an integral part of hospitality management in todays robust and competitive market. Each of the items once calculated will be classed into one of four categories: 1. Stars or Winners (popular and profitable) 2. Plow Horses or Workhorses or Runners (popular but not as profitable) 3. Puzzles or Challenges or Sleepers (not popular but highly profitable) 4. Dogs or Losers (neither popular nor profitable) The advantage of this approach is that it provides a simple way of graphically indicating the relative cash contribution position & popularity of individual items on a matrix as shown below: High %age of total sales/Popularity Plow horse or workhorse or Runners Stars or Winners

Dogs or Losers Low Low

Puzzle or Challenge High

Contribution margin/Gross Profit contribution

2 The concept of contribution margin is the basis of menu engineering. Contribution margin is based on the money you take to the bank. Contribution margin = Selling Price Food Cost Contribution margin is same as Gross Profit Average Popularity = 100 No. of Items Popularity% or Menu mix% = No. of items sold Total numbers sold Average Gross Profit = Total Gross Profit Total numbers sold After getting the data, categorize each menu item according to popularity & profitability. Gross Profit Category High High Low Low Menu Mix(Popularity) Category High Low High Low Item Category STAR PUZZLE/CHALLENGE PLOWHORSE DOG 100% (%)

Benefits
Menu Engineering is not a one time calculation it is done on a regular basis like monthly or quarterly. It will allow you to maximise cost reduction in food and beverage costs and enhance your profitability of your menu. Engineering does not stop there as it allows you to position items on your menu to gain the maximum exposure to your customers to gain maximum profit. Engineering allows you to focus on the profit or contribution of each item rather that the usual practice of the individual cost percentage. Some of the benefits of menu engineering include: 1. Increased average gross profit per customer 2. Item analysis for decision making on what item to keep or get rid of 3. Cost control analysis to decrease your F & B costs 4. Sales promotion analysis allows you to promote higher profit items 5. Staff sales analysis and linked incentive programs 6. Menu pricing analysis 7. New menu evaluation 8. Menu layout analysis for increased profitability 9. Trend analysis for food styles on your menu.

Action Plan based on results

Stars (High Profit & high Popularity): Dont touch this item i.e. maintain the status quo for stars (no changes) or may be increase the price little bit. Plow horse(Low Profit & high Popularity): Plow horses are items that sell well, but don't make enough money. These items should typically be retained on the menu, but to make them more profitable it might be necessary to raise their price or reduce their cost by changing the portion sizes. Our job is to re-engineer the menu item to reduce its cost while not sacrificing what makes it popular. So we can reduce portion size as well to reduce cost. This can involve substituting a single relatively expensive ingredient for a one that is less costly (e.g. Assiago cheese in a Caesar salad for Reggiano Parmesan). It may involve substituting one cut of meat for a less expensive one knowing that the preparation is what makes the item popular. It might be as simple as using a less expensive garnish. How about increasing the items selling price? Chefs imagination and talent takes over here. Puzzles/Challenges(High Profit & Low Popularity): These items are profitable but relatively unpopular. Our challenge is to make them more popular. There are many ways to accomplish this including changing the preparation (Veal Marsala may be more popular than Veal Putanesca, but still just as profitable). Re-naming or re-plating the item to make it sound and/or appear more appealing is another alternative. Puzzles have good margins but aren't very popular, so they need to be repositioned on the menu to gain higher visibility, their name needs to be changed to make them more appealing, or they need to be replaced if these things don't work. Dogs/Losers(Low Profit & Low Popularity): Eliminate this item or increase the price to make it a puzzle or reduce the price to make it a plow horse or rename the dish, change some of the ingredients or concentrate on more profitable dishes by eliminating it. Conclusion: Menu engineering has been used by the food service industry for many years now. It is important to note that, like other management approaches, it is not something that can simply be purchased. Success depends on the right mix of products and services, and of course the necessary expertise. In the end, a well-implemented approach for menu engineering can be a significant way to improve food and beverage profitability. The problem really isn't getting the math done, or even getting the data gathered. The point of sale system generates sale mix information routinely. Recipe costing is a bit more difficult, however, as with any other management system, expertise separates success and failure.