Evaluating the Menu

The menu is often the most important tool influencing the success or failure of a

food and beverage operation. But how should menus be evaluated to determine

whether the mo popular approach to menu evaluation sold? The process of menu

engineering $"$s menu item? There are two mion.

quently, and a praluated in terms of both their popularity and profitabilitin. Menu

items can be evalues engineering process uses information readily

Basically, the manager to classify menu items into four types available to

Stars$-$itores $-$items that are not profitable but are popular

Plowles$-$items that are profitable but are not popular

Puzzl$-$items that are neither profitable nor popular

Dog classify each menu item, managers require a practical way to define and

measure the profitability and popularity of each menu item. This can be accom$-$

plished by using information about precosted food costs and frequency of menu

item sales.

The basis of a menu item's profitability is not the level of its food cost, but

its contribution margin. Some managers assume one food item's lower food cost

percentage makes that item more profitable to sell than an item with a higher food

cost percentage, meaning the operation earns more from the sale of lower food

cost items. While this theory sounds good, it can be easily disproved. Consider the

following example:

In this example, chicken has the lower food cost percentage $(33$ percent compared

to $43$ percent for steak$).$ According to the theory, the sale of chicken should help

the operation more than the sale of steak. However, as shown by the contribution

margin $($menu item selling price minus food cost$),$ only $$5\mathrm{.}02$ is left from the sale

of chicken to pay for all other costs and to make a contribution to the property's

profit requirements. In the case of steak, $$7\mathrm{.}98$ remains for this purpose. The higher

cost item may cost more, but it produces a larger contribution margin.

Information about frequency of sales for each menu item can be gathered by

tallying the number of each item sold during some specified time period, such

as two weeks. This information can be abstracted manually from guest checks

or$,$ more frequently, by analysis of unit sales information from the POS system.

Popular items have a relatively high menu mix percentage. Accordingly, "star"

year

service $($Yea

operations

seasonal locat

re much

revenue and

While using

lyze monthly

sider why the trend

March, August,

year. The manager

in January, Febr

how much of the

increase in selling

Exhibit $3$ Budget

Operating Budget

Determining Annual Revenue Differences. To calculate the annual percentageof

revenue differences, perform the same type of calculation using totals at the bo:

tom of the columns. To calculate the current year increase over the previous year:

To calculate the percentage revenue increase in the second year over the first ear: