21 Dec Menu Engineering
The method of menu exploration & food pricing is known as “menu engineering”. This sophisticated and intricate approach reflects both the profitability and popularity of the menu items. The emphasis is on gross margin rather than food cost percentage.
Menu engineering requires the owner/manager to know each menu item’s food cost, selling price, and quantity sold over a specific period of time. The menu item’s gross margin (sell price minus food cost) is referred to as either high or low in relation to the average gross margin for all competing menu items sold.
For example, if a menu item has a gross margin of 55% when the average gross margin for the menu is 72%, then that menu item is classified as having a low gross margin. If the menu item has a gross margin of 81%, then it is classified as having a high gross margin.
We then further classify the menu item by popularity (high or low) and based on the item’s menu mix percentage, that is, the menu item count for each menu item as a percentage of the total menu items sold.
Menu items high in both popularity and contribution margin. Stars are the most popular items on your menu.
Menu items high in popularity but low in contribution margin. They may be the lead items on your menu or your signature items. They are often significant to the restaurant’s popularity with price conscious buyers.
Menu items low in popularity but high in contribution margin. In other words, Puzzles yield a high profit per item sold. But they are hard to sell.
Menu items low in popularity and low in contribution margin. These are your losers. They are unpopular, and they generate little profit.
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