Menu Engineering Case Study Activity

Remington$$s is a popular table service restaurant in a suburban town. The restaurant has seating for $150$ people in its main dining room and another $25$ on the patio. The restaurant has been open for over four years now and has gained the recognition of serving the best steaks and prime rib in town. During the first three years the owners made minimal menu price increases. However, the owners reluctantly raised all menu item prices $10\%$ last year due to increasing cost of goods, labor costs, and other raising expenses.$$

Currently, the restaurant$$s bookkeeper has been urging the owners to make another $10\%$ menu price increase. The bookkeeper believes this is necessary for the operation to maintain an adequate contribution margin. A review of purveyor invoices proves food costs have increased over $5\%$ in the last $3$ months alone.$$

On the other hand, the chef argues what the restaurant really needs is to expand and diversify its menu. The chef feels Remington$$s menu is too beef oriented. The restaurant should consider moving away from its dependency on high cost products $($such as beef$)$ and toward lower cost ingredients $($such as poultry and pasta items$).$ Even though the restaurant has set a target food cost percent of $38\%$ for its entrees, the chef is concerned that some of the restaurant$$s featured menu items are priced at too high of a food cost.$$

In addition, the following facts help describe the current situation:

The restaurant operates at capacity $3$ evenings a week: Friday $5-10$; Saturday $5-12$; and Sunday $4-8.$ Other nights are less than full capacity.$$

Although guest counts had tended to fluctuate unpredictably, this year$$s counts stabilized at an average of $3,000$ guests per week.$$

Most competitor restaurants in town complain of declining sales. Each has increased menu prices three times to Remington$$s one time. Some have added pasta and Mexican food items to take advantage of their inherent lower food cost.

Although there are several indirect competitors within a $3-$mile radius of Remington$$s$,$ there is only one direct competitor, Ebony$$s Steakhouse, which is a chain restaurant. Ebony$$s$,$ which opened last year with strong sales, appears to be facing a sales decline this year. Ebony$$s prices average nearly $$2\mathrm{.}00$ per item higher than Remington$$s$.$

Remington$$s$,$ in an effort to increase sales and guest frequency, has introduced a nightly special priced in the $$6-$$$8$ range.

The task at hand: $$The owners need your help. They are busy running the daily operations of the restaurant and do not have the time to thoroughly evaluate the current menu situation. They have a menu engineering worksheet for their entr$$e items but would like you review it $($see the spreadsheet below$).$

In addition, they would like answers to the following questions based on your analysis of the menu engineering spreadsheet. Provide in$-$depth and detailed answers.

Which menu items, if any, would you increase in price?

Are there any items you would remove from the menu?

Should Remington$$s lower the price of any menu item$($s$)?$

Which menu items should remain at their current prices?

What is the minimum price Remington$$s should establish for its nightly special?

Would you recommend broadening and diversifying this menu? Why or why not?