The term “menu engineering” is not used by all restaurants
operators. However, it is a definite
process that all restaurants, single and multi-unit, should be utilizing. The process of determining which items need
to be removed or modified versus which one should be added to a menu can be a
complex one. Too often mistakes are made
which can hurt the future profitability of the company. In some cases decisions are made off of the
passion and emotion that is involved with the menu item and not necessarily the
numbers that are to assist the decision making process. Even more important, which numbers are
used. Incorrect or incomplete analysis
can hamper the ability to plan for profits.
The accuracy of the recipe costs
is important to driving the profitability of the menu(s). Too many times the recipe costs are not
accurately stated and can adversely affect the whole menu engineering process
and operation. In my interviews with
many restaurant operators, the primary focus on menu engineering is quantities
sold of an item and the cost percent per plate.
Although volume and the cost percent per plate is important, they should
not be the only factors in the decision making process. The view in this article is to look at
engineering the profits of each menu item drive and not necessarily the cost
percent on its own.
The first step of the process
should be an analysis of the current menu specifically by price tier or markets
and the type (lunch, dinner, etc.). The
analysis should be done on all core or printed menu items. In order to determine what core menu items
are to be removed, you will need to determine the gross margin per plate and
extend that out by the volume to determine the contribution margin the item is
delivering. Obviously, you cannot remove
a whole category. However, the menu
items that are driving the lowest contribution margin dollars for each category
should be targeted for replacement.
Once we have determined the menu
items to be removed, the next step is to take the newly designed menu items and
compare the gross margins per plate for each item. The goal to ensure that the gross margin
dollars per plate does not decrease. If
the current menu item is replaced with a new menu item that results in lower
gross margin per plate, you may be reducing the overall chances for improved
profit. If this decision is made, there
will also be a need to increase the volume sold to make up any lost margin
dollars from the change. The goal should
be to replace a current menu item with a new one that will improve the gross
margin per plate. Remember, this view of
menu engineering is not to look at the cost as a percent, but the potential
amount of profit that will be driven from the new menu item.
Using accurate recipe costing as
a base along with analysis of gross margin per plate, the restaurant location
can make methodical decisions that can only assist in the improvement of the
bottom line. The method of looking at
only cost percentages is flawed. You
cannot place percents in your pocket.
Concentrate on the amount of profit you are going to be generating. In a time of a highly competitive
marketplace, operators cannot make mistakes in decisions relating to the
menu. The menu is the pinnacle of what
you represent. All restaurant operators
are in the business to make a profit.
Ultimately, the main goal should be to make a profit that can cultivate
and grow the business. Proper recipe
costing and menu engineering decisions can propel you there.
Mark Kelnhofer is the President and CEO of Return On
Ingredients LLC and has over 20 years in management accounting experience including
over ten years in fine dining restaurant industry. He can be reached at (614) 558-2239 and
Mark@ReturnOnIngredients.com.
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