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Menu Engineering

Menu engineering is a field that strategically constructs menus to influence customer purchasing decisions. It draws from psychology, accounting, marketing, and design. Menu engineers calculate item costs and profits to determine which items are "stars", and then use visual cues and placement to encourage ordering of profitable items and discourage unprofitable ones. Key tactics include placing popular, high-margin items in menu "sweet spots" at the top and bottom of pages where they are most visible. The goal is to maximize restaurant profits by subtly steering customers towards the most lucrative dish options.

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438 views4 pages

Menu Engineering

Menu engineering is a field that strategically constructs menus to influence customer purchasing decisions. It draws from psychology, accounting, marketing, and design. Menu engineers calculate item costs and profits to determine which items are "stars", and then use visual cues and placement to encourage ordering of profitable items and discourage unprofitable ones. Key tactics include placing popular, high-margin items in menu "sweet spots" at the top and bottom of pages where they are most visible. The goal is to maximize restaurant profits by subtly steering customers towards the most lucrative dish options.

Uploaded by

sebijoseph97
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Menu engineering

Is an interdisciplinary field of study devoted to the deliberate and strategic construction of menus? It is also commonly referred to as Menu Psychology. In general, the term menu engineering is used within the hospitality industry, but can be applied to any industry that displays a list of product or service offerings for consumer choice. Typically the goal with menu engineering is to maximize a firm's profitability by subconsciously encouraging customers to buy what you want them to buy, and discouraging purchase of items you don't want them to buy. Fields of study which contribute most to menu engineering include:

Psychology (perception, attention, emotion/effect) Managerial Accounting (contribution margin and unit cost analysis) Marketing & Strategy (pricing, promotion) Graphic Design (layout, typography)

Psychology of menu engineering


Perception & Attention - Visual perception is inextricably linked to how customers read a menu. Most menus are presented visually , and the majority of menu engineering recommendations focus on how to increase attention by strategically arranging menu categories within the pages of the menu, and item placement within a menu category. This strategic placement of categories and items is referred to as the theory of sweet spot The reasoning being Sweet Spots stems from the classical effect in psychology known as the Serial position effect. The thought is, customers are most likely to remember the first and last things they see on a menu - hence, sweet spots on a menu should be where the customers look first and last. To date, there is no empirical evidence on the efficacy of the sweet spots on menus. Customer perception of items offered on a menu can also be affected by subtle textual manipulations. For example, descriptive labeling of item names may produce positive effects, leading to higher customer satisfaction, and higher perceived product value.Similarly, the presence of dollar signs or other potential monetary cues may cause guests to spend less.

Managerial accounting
The primary goal of menu engineering is to encourage purchase of targeted items, presumably the most profitable items, and to discourage purchase of the least profitable items. To that end, firms must first calculate the cost of each item listed on the menu. This costing exercise should extend to all items listed on the menu, and should reflect all costs incurred to produce and serve. Optimally item costs should include: food cost (including wasted product and product loss),

incremental labor condiments and packaging. Only incremental costs and efforts should be included in the item cost. After an item's cost and price have been determined (see pricing in the Marketing section), evaluation of an item's profitability is based on the item's Contribution Margin. The contribution margin is calculated as the menu price minus the cost. Menu engineering then focuses on maximizing the contribution margin of each guest's order. Recipe costing should be updated (at least the ingredient cost portion) whenever the menu is reprinted or whenever items are reengineered. Some simplified calculations of contribution margin include only food costs.

Marketing (price & promotion)


By using guest demand (also called the menu mix) and gross profit margins, the relative performance of each menu item is determined, and assigned one of the following terms (based on the BCG Matrix): Stars Stars are extremely popular and have a high contribution margin. Ideally Stars should be your flagship or signature menu items. Plow Horse or Cash Cows Plow Horses are high in popularity but low in contribution margin. Plow horse menu items sell well, but dont significantly increase revenue. Puzzles Puzzles are generally low in popularity and high in contribution margin. Puzzle dishes are difficult to sell but have a high profit margin. Dogs Dogs are low in popularity and low in contribution margin. They are difficult to sell and produce little profit when they do sell. In general, items within a relevant comparable set (for example, entrees, or chicken entrees) should be priced to have similar contribution margins - this way, the restaurant would make the same amount of money, no matter what item the guest chooses to orde
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 dollars, thereby allowing managers to recognize the items they want to sell!

Contribution Margins While the concept of food cost percentage (an items ingredient cost divided by its menu price) is the most commonly used criteria for assessing effective cost controls, the concept of contribution margin (an items menu price less its food cost) is the basis of menu

engineering. A simple question should make the distinction clear. If you could sell one more item before your restaurant closed today, would it be a sirloin steak for $20 that costs you $8 or a plate of pasta primavera for $10 that costs you $2. While the food cost percentage of the pasta is 20% versus 40% for the steak, the steak will contribute $12 to gross revenue as opposed to $8 for the pasta. Ill take the $12 thank you very much. Contribution margin then is based on the dollars you take to the bank.

Accounting for the Popularity of Menu Items

1. While a menu item's contribution margin tells us how many dollars each individual

2.

sale of the item contributes to the cash register, you need to know how popular the item is to determine the total dollars it contributes to the restaurants revenue. A popular item with a high contribution margin is a star while an unpopular item with a low contribution margin would fairly be called a dog. Menu engineering therefore takes each menu items contribution margin and its popularity into account to determine into which of four categories it falls: star, workhorse, challenge or dog. Well get back to these categories shortly. Column A. A list of your competing menu items (a separate evaluation should be performed for each menu category e.g. appetizers, entrees, and desserts)

2. Column B. A periodic (weekly or monthly) total of the number of each item sold
(use your POS report)

3. Column D. The ingredient cost of each menu item (not just the center of the plate
cost but the entire cost of the item)

4. Column E. A list of the menu selling price for each item being evaluated
You can perform the evaluation yourself by manually calculating the numbers in the following: Columns C, F, G, H, L, N, I, J, M, K, O, and Q. (Note that the spreadsheet above automatically calculates these numbers) The inputs in Columns P, R and S are calculated as follows: Column P: Profit Category is LOW if the menu item profit is less than the menus Average item profit ($4.16 in this example). Conversely, enter HIGH in the cell if the menu items profit is greater than average for the menu. Column R: Popularity Category is LOW if the menu item's menu-mix percentage (e.g. the total number of the item sold divided by the total number of items) is less than 80% of the average. Conversely this means that we are considering an item to be popular, and placing the word HIGH in the column, if it sells at least 80% of an average items popularity. In the example below, the average menu popularity equals 8.3% (100% divided by 12 items = 8.3%). Therefore we consider an item popular (HIGH) if it sells 80% of 8.3% or 6.7%. Column S: The Menu Item Class is determined by the results of Columns P and R. If an item is both profitable and popular then its a STAR. It its profitable but relatively unpopular then enter the word CHALLENGE. If the item is relatively unprofitable but

popular then enter the word WORKHORSE. Finally, a DOG is an unprofitable and unpopular menu item.

Menu engineering, also referred to as menu psychology, is an occupation that is entirely focused upon the building and structuring of menus. Menu engineers are generally hired on a contract basis to work on an existing restaurant's menu. Through various tactics including psychology, graphic design, marketing, and managerial accounting, these experts are able to craft a menu that encourages the sale of some items, while discouraging the sale of others. The psychology behind menu engineering has to do with visual perception. A menu engineer places items that an owner wishes to sell more of within certain sections of a menu called "sweet spots." These menu items are often the first and last things that a customer views when looking at a menu. Thus, any item that a restaurant wants to sell more of will be placed towards the top and bottom of each page. Managerial accounting also plays a large part in menu engineering. In order to increase a restaurant's profitability, a menu expert will calculate the costs associated with each item on a menu. In order to do this, food costs, labor costs, and packaging costs must be calculated. Once all items have been tabulated, those items that are more expensive are placed near the top or bottom of a menu.

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