The Menu

Balagurunathan Venkatesan
DHMCT, B Sc, CFBE, FIH
Corporate Manager – Food and Beverage
GRT Hotels and Resorts Pvt Ltd
 Objectives
By the completion of this presentation you should
be able to:
– Analyze a menu for profitability
– Apply menu engineering to menu analysis
 Introduction

How to evaluate a menu?

When measuring a menu to see if it is
successful 2 criteria must be met to
declare it a winner:
1.Must be profitable in terms of individual item
profitability
2.Most profitable item must be selling the best.
"Designing a menu is like playing
chess
against the customer,"
“ Customers spend less
than
two minutes
perusing a Menu ”
 "A flashy menu that doesn't
generate sales is like a race car
without an engine...
Nice to look at, but it won't pay
the bills."
 Your menu
must also project the proper
image
 
to your guests and help them
choose those meals
YOU want to sell...
Those high profit, fast & easy to
prepare items.
 Soul of the Restaurant
• Menu is one of the important aspects for
the success of any foodservice
establishment. Perhaps it is arguably the
soul of the restaurant.
 Menus are Statements
• Menu infers several interpretations for both the
buyers and sellers. "menus are statements" of
the food and- beverage items provided by a
foodservice establishment, primarily based on
consumer needs and/or demands and designed
to achieve organizational objectives" note that
menu can be interpreted as a list of product
range that a restaurant offers and the same time
it can be a piece of literature or display used to
communicate the product range to the customer.
 Menus are for Research
• However, a recent study argues that
"menus are more than the conventional
function of a communications and selling
tool but also a research and
experimentation device that can be
studied to increase restaurant profit"
 Define Menu Engineering

Menu engineering. In the hospitality

industry, a process that analyzes the
entire menu (as opposed to individual
menu items) as a measure of
profitability.
 Menu Engineering

Menu Engineering is
nothing but to know
“ Is Your Menu Working For You
or Against You? ”
 The MENU
• The menu is the foundation for the control
process in a food and beverage
operations.
• As the foundation , the menu planning
control point begins the control process.
 Control Cycle
Food Cost Accounts

Serving Menu planning

Holding Purchasing

Cooking Receiving

Preparing Storing
Issuing
 The Menu’s Influence
• The process of planning a menu never
ends; the final menu is never achieved.
• The menu image may be elegant,
business like, fun, ethnic, or trendy,
depending on the market need.
• The menu has an impact on every aspects
of a food beverage manager’s and chef’s
job.
 The Menu’s Influence
• Product Control Procedures
• Cost Control Procedures
• Productions Requirement
• Nutritional Content of Meals
• Equipments Needs
• Sanitation Management
• Layout and Space Requirement
• Staffing Needs
• Service Requirements
• Sales Income Control Procedures.
 Product Control Procedures
• The Menu Controls
the Final product
presentation.
• Even the menu
Controls the how the
product is served.
 Cost Control Procedures
• Food Cost
• Labour Cost
• Material Cost
• Miscellaneous Cost
 Productions Requirement
• Ingredients
• Tools
• Energy
• Skilled Staff
 Nutritional Content of Meals
• Protein
• Carbohydrate
• Fat
• Vitamins
 Equipments Needs
• List of Equipments
prepared as per the
items in the menu.
• If you have Grilled
Sandwich in the
menu, there should
be a sandwich griller.
 Sanitation Management
• Water Connections
• Provisions of Drain
• Hot Water
• Cold Water
• Chambers
Layout and Space Requirement
• Keeping in mind
minimum movements.
• Availability of Space
• Compact Equipments.
• Heating equipments
and Chilled
equipments.
 Staffing Needs
• Selections of staff
• Knowledge of Staff
• Training of Staff
• Uniform
 Service Requirements
• Crockery
• Cutlery
• Glassware
• Tableware
• Linen
Sales Income Control Procedures.
• Proper system
implementation .
• Menu Items Coding.
• Feed the menu in the
system.
 Priority Concerns of the Menu
Planner
Guest Availability Basic
Wants and Needs Quality of Items Flavour

Concepts of Value Cost Consistency

Item price Availability Texture/Form/Shape

Object of Property Visit Peak volume Production Nutritional Content

and Operating concern
Socio Economic Factors Sanitation Concern Visual Appeal

Demographic Concern Layout Concerns Aromatic Appeal

Ethnic Factors Equipment Concerns Temperature

Religious Factors
 Marketing Implication of the Menu

• Theme and Atmosphere

• Menu planning Strategies - Ingredients
• Building the Menu – Entrees
• Dining Trends
• Menu Design
• Menu Changes – External Factors , Internal Factors
 Subjective Pricing Methods
• The Reasonable Price Method
• The Highest Price Method
• The Loss Leader Method
• The Intuitive Price Method
Simple Mark up Pricing Method
• Ingredients Mark –Up Method
• Prime Ingredients Mark – Up Method
• Mark up with accompaniment Cost
Contribution Margin Pricing Method
Step # 1
Non –Food Costs + Required Profit = Average Contribution Margin
Number of Expected Guests

Step # 2
Determine the base selling price for a menu item:
This is done by adding the average contribution margin required per
guest to the item’s standard food cost.
 Ratio Pricing Method
Step #1
All Non Food Costs +Required Profit = Ratio
Food Cost

Step #2
Calculate the amount of non-food and profit required for a menu
item
Ratio x standard food cost

Step #3
Determine the base selling price for the menu item
This is done by adding the result of step 2 to the standard food cost
of the menu item.
 Simple Prime Costs Method
• The term prime costs refers : food , beverage and
labour.

• Step #1 Determine the labour cost per guest:

Labour cost per guest = Labour Cost

Number of expected guest
• Step #2 Determine the prime costs per guest:
The labour cost per guest added to the menu items food cost
• Step # 3 Determine the menu item’s base selling price
Base Selling Price = Price Costs per Guest
Desired Prime Costs Percentage
Specific Prime Costs Method
With this specific prime pricing method the
food and beverage manager or chef
develops the menu items so that the base
selling prices for the items cover their fair
share of labour costs
 Important Pricing Considerations

• Concept of value is always important:

Guest pay for more then the product –
Quality of Service, Cleanness of the facility
and atmosphere.
• Supply and demand
• Volume – fewer guest more over heads
• Price charged by the competition
 Stars, Plow horses,
Puzzles, & Dogs
• This method menu engineering, developed by
Donald Smith Ph.D., Westin Hotels
Distinguished Professor at Washington State
University
• This method rates the menu by measuring each
entrée as to its profitability (gross profit) and its
sales. It then combines these measurements
and places each menu item into one of four
classifications.
• Stars, Plow horses, Puzzles, & Dogs
 Contributing Margin
• Determine the contributing margin (CM) of
each item
Selling Price – Food Cost = Contributing Margin

CM same as item’s Gross Profit

– Use total food cost (include garnish,
accompaniments served with entrée such as
salad, potatoes, rolls, butter etc.).
 Menu Engineering Method
• Menu engineering provides the manager with information
about a menu item’s 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 rupees,
thereby allowing managers to recognize the items they
want to sell! 
Whistle
• Cost price Rs 2

• Selling Price Rs 10

• Cost 20%
Teddy Bear

• Cost Price Rs 30

• Selling Price Rs 120

• Cost 25%
Wooden Chess Board

• Cost Price Rs 100

• Selling Price Rs 300

• Cost 33%
F 16 Battery Operated Aero plane

• Cost price Rs 700

• Selling Price Rs 1750

• Cost 40%
Remote Control Car

• Cost price Rs 1000

• Selling Price Rs 2000

• Cost 50%
 Whistle Teddy Chess Aero Remote
Bear Plane Car
1 Rs 2 Rs 30 Rs 100 Rs 700 Rs 1000
2 Rs 10 Rs 120 Rs 300 Rs 1750 Rs 2000
3 20% 25% 33% 40% 50%
 Whistle Teddy Chess Aero Remote
Bear Plane Car
1 Rs 2 Rs 30 Rs 100 Rs 700 Rs 1000
2 Rs 10 Rs 120 Rs 300 Rs 1750 Rs 2000
3 20% 25% 33% 40% 50%
4 100 50 25 15 10
 Whistle Teddy Chess Aero Remote
Bear Plane Car
1 Rs 2 Rs 30 Rs 100 Rs 700 Rs 1000
2 Rs 10 Rs 120 Rs 300 Rs 1750 Rs 2000
3 20% 25% 33% 40% 50%
4 100 50 25 15 10
5 Rs1000 Rs 6000 Rs 7500 Rs 26250 Rs 20000
 Whistle Teddy Chess Aero Remote
Bear Plane Car
1 Rs 2 Rs 30 Rs 100 Rs 700 Rs 1000
2 Rs 10 Rs 120 Rs 300 Rs 1750 Rs 2000
3 20% 25% 33% 40% 50%
4 100 50 25 15 10
5 Rs1000 Rs 6000 Rs 7500 Rs 18750 Rs 20000
6 Rs 200 Rs 1500 Rs 2500 Rs 10500 Rs 10000
 Whistle Teddy Chess Aero Remote
Bear Plane Car
1 Rs 2 Rs 30 Rs 100 Rs 700 Rs 1000
2 Rs 10 Rs 120 Rs 300 Rs 1750 Rs 2000
3 20% 25% 33% 40% 50%
4 100 50 25 20 10
5 Rs1000 Rs 6000 Rs 7500 Rs 26250 Rs 20000
6 Rs 200 Rs 1500 Rs 2500 Rs 10500 Rs 10000

7 Rs 800 Rs 4500 Rs 5000 Rs 15750 Rs 10000

 Step One:
Determine the Gross Item Profit for each item on your menu. It's basic
economics - how much do your recipes cost you? The first step to a
more effective menu is to determine that cost. List every item on your
menu and then determine how much each one of them cost you, your
Recipe Cost. Forget the Food Cost Percentage, we're going to focus
on another formula: Menu Price - Recipe Cost = Gross Item Profit.
Let's look at some examples from our A’ Cafe.

• Item #1: Beef Tenderloin Item #2: Fettuccine Alfredo

• Menu Price: Rs 320 Menu Price: Rs 200
• Recipe Cost: Rs 120 Recipe Cost: Rs 40
• Gross Profit: Rs 200 Gross Profit: Rs 160

• Which item would you rather sell a bunch of?

• But we're not done with you yet - the next step is
determining the Sales Contribution of each item.
 Step Two:
• Determine the Sales Contribution for each item on
your menu.
• Now that you know what each item on your menu costs
to produce, wouldn't you like to know how well it
performs for you? It's time for the menu item popularity
contest. If you already have that data at your fingertips,
great! You're ahead of the game. If not, don't worry,
simply keep track of how many times you sell each of
your menu items for the next month.
• Once you've collected the data and declared a Menu
Miss _____, it's on to Step 3 - putting it all together.
 Step Three:

• Putting the numbers together - the Star Chart. This is

the part that you've all been waiting for - making it all
work for you! To really visualize which items are working
for you, we draw a Star Chart and plot each menu item's
position in relation to the others. 

• The chart is divided into four quadrants: Plow horses,

Stars, Dogs and Puzzles. First we'll plot the average
item, both in number of Units Sold and in the Gross
Profit it generated for you. From that point we'll divide
the chart into four parts.
 Four Category
• In the upper right quadrant are the Stars - the
items that were above average in both units and
profit.
• In the upper left are the Plow horses - these are
some of your most popular items, but they're not
bringing in quite the profit margin that you'd like
them to.
• In the lower left are the Dogs - these items sell
slowly and have a thin profit margin.
• And finally in the lower right are the Puzzles -
these items bring you a good profit margin, but
they just don't sell as well as you might like.
Chart
 Simple Comparison

MENU ITEM FOOD COST MENU SELLING PRICE FOOD COST PERCENTAGE CONTRIBUTION MARGIN

Chicken Rs 60 Rs 180 33% Rs 120

Prawn Rs 120 Rs 280 43% Rs 160

How do you compute menu
item popularity and
contribution margin?
 1. Contribution Margin= Menu
price - food cost.
•

• If a menu item's contribution margin is greater than the average

contribution margin for the entire menu, it receives a rating of "H"
indicating that it has an above average contribution margin.

• Example –

• Sum of CMs = Rs 3000 ,

• # of items on menu = 10,
• Avg. CM= 3000/10 = Rs 300

• If a menu item had a contribution margin of Rs 400 it would receive a "H."

• If a menu item had a contribution margin of Rs 200 it would receive a "L.“

•
 2. Demand = Number of items sold of a
particular menu item/total number of
menu items sold.
• If a menu item's percentage of sales is greater than the average sales
percentage for the entire menu, it receives a rating of "H" indicating that
particular item has a higher sales percentage than the demand mix.

• Example –
• If there are 11 items on the menu,
• Average of each item sold is 45 portions,
• the Menu mix would equal 1/11X45= 4%

• Any menu item with a sales percentage equal to or greater than 4% would
receive a rating of "H."
• Any item with a sales percentage less than 4% would receive a rating of "L."
 Menu Engineering Categories

All items analyzed are categorized into one of the following categories on
the basis of the items profitability and popularity.

Category Profitability Popularity

• Plow horses Low High
• Stars High High
• Puzzles High Low
• Dogs Low Low

Menu Classification System.

All menu items can be classified into four types:
• 1. Stars = HH. (Items which are both profitable and popular)
• 2. Plow Horses = HL (Items which are high in popularity but low in profit)
• 3. Puzzles = LH (Items are low in popularity but high in profit)
• 4. Dogs = LL (Items are both low in popularity and profit)
Menu Item No Sell Price Food CM     Menu Menu Menu
Sold Cost Cost Revenue CM

BBQ Ribs 60 Rs 240 Rs 100 140 6000 14400 8400 L H PL

Fettuccini Alfredo 50 Rs 200 Rs 40 160 2000 10000 8000 L H PL
BBQ Chicken 30 Rs 200 Rs 60 140 1800 6000 4200 L L DOG
Whitefish 70 Rs 280 Rs 80 200 5600 19600 14000 H H STAR
8 oz. Beef Filet 30 Rs 320 Rs 120 200 3600 9600 6000 H L PUZ
Pizza 40 Rs 200 Rs 60 140 2400 8000 7600 L L DOG
12 oz. Prime Rib 60 Rs 280 Rs 80 200 4800 16800 12000 H H STAR
Shrimp Dinner 40 Rs 260 Rs 80 180 3200 10400 7200 H L PUZ
Prime Rib & Shrimp 20 Rs 300 Rs 80 220 1600 6000 4400 H L PUZ
Fish & Chips 70 Rs 200 Rs 80 120 5600 14000 8400 L H PL
Pork Chops 20 Rs 240 Rs 100 140 2000 4800 2800 L L DOG

Averages 45 Rs 240 160

 Data
Now that we have this wealth of data,

What do we do with it?

Well, we're glad you asked! It's time to

separate the stars from the dogs, and pay
attention to the plow horses and the
puzzles.
Menu Engineering
Four Categories

PUZZELS STARS

DOGS PLOW HORSE

 Stars
• Ah, the complete picture! With the Star
Chart we can easily see that the
Whitefish and 12 oz. Prime Rib are our
Stars - they sell well and they bring us the
highest Gross Profit Margin. These are
the items that should be given preferred
placement on the menu.
 Plow Horses
• Next are the Plow horses. These items
are selling well for us, but they're not doing
as well in profit margin. These are good
candidates for cost savings - if we can find
a way to reduce the cost of producing
these items and still maintain sales, they
have an excellent chance of moving
across the line into Star territory.
 Puzzles
• Third are the Puzzles. They don't sell as
well as we'd like, but when they do the
profit margin is above average. These
tend to be our more expensive items, and
too many of them can adversely effect our
menu but they are excellent candidates for
increasing popularity through a
creative design. A great way to do that is
to give them the prime real estate on the
menu and get them popping off the page!
 Dogs
• Finally we have the Dogs. These items don't
produce for us at all, but are sometimes
necessary to have on the menu - perhaps
they're important to a particular market, such as
the children's menu. Perhaps they're your
mother's favorite dish and you'd be disowned for
taking it off the menu. Whatever the case, unless
there is a compelling reason that they should
stay, these are the first items to look at replacing
or eliminating to increase sales and profit
margin.
 Good Menu Item
The Goal of effective menu planning
and evaluation should be to increase
the contribution margin of each item –
not decrease its food cost
percentage.
 Managing Plow horses
1. Increase price carefully
Because this item is unique
2. Test for demand
3. Relocate the item to a low profile on the
menu
4. Shift demand to more desirable items.
5. Combine with lower cost products.
6. Consider portion reduction
 Managing Puzzles
1. Shift demand to this items
To place in visible areas
Renaming them
Using suggestive selling techniques.
Using table Tend cards
2. Consider price degrease
3. Add value to the item
 Managing Stars
• Maintain a rigid specification
• Do not attempt to alter the quality
• Place in highly visible location on the
menu
• Test for selling price inelasticity.
• Use suggestive selling techniques.
 Managing Dog
1. Removal from menu
2. Selling price could be increased
3. Check the labour
4. Leftover use
 Summery of Menu Engineering
• Stars
Stars are extremely popular and have a high contribution margin.
Ideally Stars should be your flagship or signature menu item
• Plow Horse
Plow Horses are high in popularity but low in contribution margin.
Plow horse menu items sell well, but don’t significantly increase
revenue.
• Puzzles
Puzzles are generally low in popularity and higher contributions.
Puzzle dishes are very difficult to sell, but are have a high profit
margin.
• Dogs
Dogs are low in popularity and low in contribution margin. Basically
they are difficult to sell and when you do they are not all that
profitable.
 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
Remember Money
pays the bills not
percentages.
 Placement
• Two Schools of thought
1.Menu Sequence
– Menu should follow progression of meal
2.Focal Points
– Use focal points on the menu to push certain
menu items
 Focal Point
• Single Fold Menu Two fold Menu

Focal Point Focal Point

 Focal Point
2 Menu Card 4

Focal Point

3 5
 Specials
• Larger Bolder type than the rest of menu
• Longer description
• Concept of Closure
– people’s eyes are drawn to what ever is
enclosed by a box
• Color, illustration, and/or pictures, bullets
can be used to draw attention to signature
items.
 Price Placement
Baked BAKED CHICKEN
Chicken……….Rs.270.00 Tender pieces of chicken
Lemon breast
Sole…………...Rs.360.00 Rs.270.00
Lamb LEMON SOLE
Steak………….Rs.420.00 Fresh filets sautéed with
lemon caper sauce
Salmon Steak….. Rs.360.00
……...Rs.910.00 LAMB STEAK
Center cut of lamb served
on a bed of rice
Rs.420.00
SALMON STEAK
Charcoal grilled served with
beurre blanc Rs.910.00
 Price Placement
BAKED CHICKEN
Tender pieces of chicken breast
baked to perfection - 270
LEMON SOLE
Fresh filets sautéed with lemon caper sauce
& rice pilaf – 360
LAMB STEAK
Center cut of lamb served on a bed of rice
pilaf - 420
SALMON STEAK
Charcoal grilled served with beurre
blanc sauce– market price
 BAKED CHICKEN
Tender pieces of chicken breast
Rupees Two Seventy
LEMON SOLE
Fresh filets sautéed with lemon caper sauce
Rupees Three Sixty
LAMB STEAK
Center cut of lamb served on a bed of rice
Rupees Four Twenty
SWORDFISH STEAK
Charcoal grilled served with beurre blanc
Rupees Nine Ten
 Conclusion
• Menu analysis is important
• If demographic studies, internal capacities, cost cards,
and markups have been executed correctly, the score
should be a good one
• Analysis should be done using Menu engineering
methods to ascertain the profitability of the menu
• If the analysis shows a poor menu, make improvements
• Good menu: first step has been taken toward running a
profitable operation.
• It’s just that simple