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Effective Menu Engineering For Your Food & Beverage Menus

The presentation focuses on effective menu engineering for food and beverage businesses, emphasizing the importance of accurate recipe costing, portion control, and overhead management to optimize profitability. It outlines methods for analyzing menu items through cost-volume-profit analysis and advocates for pricing strategies based on gross margin rather than just cost percentages. Key concepts include recognizing loss leaders, optimizing menu placement for better sales, and continuous efficiency improvements in menu item offerings.

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Effective Menu Engineering For Your Food & Beverage Menus SlideShare Presentation Westerville, OH n June 27, 2013 © 2013 Return On Ingredients LLC n P.O. Box 2387 n Westerville, Ohio 43086-2387 n 614.423.4410 n Fax 614.340.7946 Request to have this presentation conducted live for your association, group or event at info@ReturnOnIngredients.com
Mark Kelnhofer • BA in Accounting and Business Administration in 1993 • Masters in Business Administration (MBA) in 2005 • Ohio Dominican University, Columbus, Ohio • Manufacturing Cost (1993 – 2013) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants • Bravo/Brio Restaurant Group (2002 – 2010) • Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co., Hospitality USA • Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting • Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
Bravo/Brio Restaurant Group Return On Ingredients LLC l P.O. Box 2387 l Westerville, Ohio 43086-2387 l 614.423.4410 l Fax 614.340.7946 Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC 4.2% = $ millions in savings
Brio Tuscan Grille – Easton Town Center Columbus, Ohio
Bravo! Cucina Italiana Virginia Beach, VA
Bon Vie – Easton Town Center Columbus, Ohio
Mark Kelnhofer • BA in Accounting and Business Administration in 1993 • Masters in Business Administration (MBA) in 2005 • Ohio Dominican University, Columbus, Ohio • Manufacturing Cost (1993 – 2013) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants • Bravo/Brio Restaurant Group (2002 – 2010) • Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co., Hospitality USA • Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting • Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
Other Food Manufactures… • Restaurants • Casinos • Hotel & Lodging • Sports Arenas • Hospitals • Colleges and Universities • Catering and Banquet Centers • Theme Parks • Horse Race Tracks • ….and others!
Amtrak Fox Business News 08/02/2012
ROI Methodology Recipe costing is the base for many other aspects of the operations.
The Reality Is… • Some restaurant operators do not have any written or documented recipes. • Some have recipes that are written are only for execution, not costing. • The few that have costing in many cases do not take a manufacturing approach. • Menu pricing in some cases is not based on proper analysis and data.
What is in your control?  Knowing your costs
What is in your control?  Knowing your costs  Establishing your selling price
The Review of Accurate Recipe Costs
Weights & Measures • Portion control through the use of utensils (Tbsp, tsp, dishers, spoodles, etc.) • Accuracy of weights and measures is paramount. 1 cup, Basil Leaves 1 cup, Granulated Sugar 0.2 ounce 6.8 ounces Density: 2.5% Density: 85.0%
Batch Recipes & Yields • Batch recipes should account for the proper yield (what the result is) including known waste and the process (labor) • When the purchased product has changed form in any way, a batch recipe should be created to account for the cost. “Hands on the process”. • If you don’t account for the process and yields, your menu level costs in most cases is understated!
Packaging • Packaging is part of the raw material cost, similar to the ingredients • Packaging includes: • Bottles, lids • Boxes • Labels • Wraps
The Costing Problem Ingredients
Prime Cost Ingredients Labor
Total Cost Ingredients Labor Overhead
Total Cost Breakdown
Labor & Overhead Costs • Your labor and overhead can be accounted for in the recipe • Prep Time, Labor Routing • Time/motion studies (stopwatch) • Time (hours) is loaded on every recipe • Standard Labor (BOH) Rates • By store • Includes wages and fringes
Direct (BOH) Labor Rate • The direct (BOH) labor rate should include the base rate plus any other additional fringes associated with those personnel • Unemployment Insurance • Workers’ Compensation • Social Security & Medical • Health, dental and vision insurance plans • 401(k) or other retirement plans • Vacation & Sick Pay • Childcare
Overhead Rates • Based on budgeted expenses and direct labor hours (BOH) by location. Total Budgeted Overhead Direct Labor BOH Hours = $0.000/hr. Overhead Rate Predetermined Overhead Rate
Overhead Rates • FOH Labor & Fringes • Advertising & Marketing • Repair & Maintenance • Supplies • Training • Utilities • Communications • Landscaping • Research & Development • Occupancy • Taxes Budgeted Direct Labor Hours Predetermined Overhead Rate
Menu Level Costing
Menu Level Costing Prime Cost
Menu Level Costing Total Cost
Cost Management NRA 2013 Chefs Survey, “Balancing Rising Food Costs” How do you respond to higher costs?
Menu Engineering MENU The Guest Reputation Business Employees Families Community
Menu Engineering Do they know their cost? What is their pricing strategy?
Menu Engineering • Your menu(s) are what you are in the business to do. • Types of Menus • Lunch • Dinner • Brunch • Banquet • Kids • Pricing Structures • By Markets, Demographics
• What are we engineering? • Engineering sections of the menu
• What are we engineering? • Engineering sections of the menu
• What are we engineering? • Engineering sections of the menu
• What are we engineering? • Engineering sections of the menu
• What are we engineering? • Engineering sections of the menu • Similar dishes in different categories should be analyzed separately.
• What are we engineering? • Engineering sections of the menu
• What are we engineering? • Engineering sections of the menu
Cost-Volume-Profit (CVP) The components that we will be analyzing: • Menu items in the category • Quantity/volume sold • Selling Price • Unit Cost • Cost Percentage • Gross Margin Per Plate • Contribution Margin PRODUCT COSTS: Ingredients, Direct Labor and Variable Overhead PERIOD COSTS: Fixed Overhead and Profit
Cost-Volume-Profit (CVP) The components that we will be analyzing: • Menu items in the category • Quantity/volume sold • Selling Price • Unit Cost • Cost Percentage • Gross Margin Per Plate • Total Profit TOTAL COSTS: Ingredients, Direct Labor and Total Overhead PROFIT
My Famous Quote “You cannot place percents in your pocket!”
My Famous Quote Change the focus from cost percent to gross margin dollars Menu Item Qty Sold Menu Price Unit Cost Cost % Unit GM $s Pasta Fettucine 1 $11.99 $1.98 16.5% $10.01 Filet Mignon 1 $32.95 $12.49 37.9% $20.46 Which one would you rather have? Do we focus too much on cost percents?
Loss Leaders Items that are sold at a loss that will result in other menu items being sold at a profit.
Loss Leaders Items that are sold at a loss that will result in other menu items being sold at a profit. Drive profits!
Dog/Star Graph Average Unit Gross Margin $ PopularityIndex% Star High PI %, High GM $s Puzzle Low PI %, High GM $‟s Plowhorse High PI %, Low GM $s Dog Low PI %, Low GM $s
Dog/Star Graph Flaws Flaw #1 Traditional Dog/Star reports only analyze entrees only.
Dog/Star Graph Flaws Flaw #1 Traditional Dog/Star reports only analyze entrees only. Flaw #2 The calculation looks as unit gross margin as a base.
Dog/Star Graph Flaws Flaw #1 Traditional Dog/Star reports only analyze entrees only. Flaw #2 The calculation looks as unit gross margin as a base. Flaw #3 The graph plots all entrees together.
Cost Volume Profit Example Menu Item Menu Price Unit Cost Cost % Unit Profit $s Chopped Salad $5.50 $0.43 7.8% $5.07 Wedge of Iceberg $5.50 $0.33 6.0% $5.17 Caesar Salad $5.50 $0.41 7.5% $5.09 House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS Menu in place for 6 months.
Cost Volume Profit Example Menu Item Menu Price Unit Cost Cost % Unit Profit $s Chopped Salad $5.50 $0.43 7.8% $5.07 Wedge of Iceberg $5.50 $0.33 6.0% $5.17 Caesar Salad $5.50 $0.41 7.5% $5.09 House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS If the decision was based on cost percent alone, the „House Salad‟ would be reviewed for action. Menu in place for 6 months.
Cost Volume Profit Example Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS If you would have chosen the „House Salad‟, you would have reviewed the menu item driving the most dollars to cover fixed overhead costs and profit and possibly removing it from the menu. Menu in place for 6 months.
Dog/Star Calculation Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit Total Profit $s GM MM Rank Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 L H Plowhorse? Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star? Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star? House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse? Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08 Flaw: Gross margin rank for dog/star calculation is based on unit level only, not extended contribution margin dollars. Menu in place for 6 months.
Dog/Star Graph 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% $5.00 $5.02 $5.04 $5.06 $5.08 $5.10 $5.12 $5.14 $5.16 $5.18 PopularityIndex% (¼)*.7=17.5% Menu Item Unit Gross Margin $s $32,475 / 6,396 = $5.08 17.5% $5.08 StarPlowhorse Dog Puzzle House Salad Chopped Salad Caesar Salad Wedge Salad
Stellar / Cellar Graph Menu Item Total Profit $s PopularityIndex% Stellar - The Bank • Sacred Items • Most Profitable Items The Push or Sell • FOH Suggestive Selling • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue The Engineer • Reengineering of Menu Items • Labor Process Improvements • Alternative ingredients • Menu placement • Price increase possibility The Cellar • New menu item opportunity • Exception: Unique menu item
Stellar / Cellar Graph Menu Item Total Profit $s PopularityIndex% Stellar - The Bank • Sacred Items • Most Profitable Items The Push or Sell • FOH Suggestive Selling • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue The Engineer • Reengineering of Menu Items • Labor Process Improvements • Alternative ingredients • Menu placement • Price increase possibility The Cellar • New menu item opportunity • Exception: Unique menu item
Stellar / Cellar Graph 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 Menu Item Total Profit $s $32,475 / 4 = $8,119 PopularityIndex% (¼)=25.0% $8,119 25.0% House Salad Chopped Salad Caesar Salad Wedge Salad The Stellar The Engineer The Cellar The Push
Cost Volume Profit Example Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Profit $s Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be removed? SALADS The proper item to target to be reviewed is the „Wedge of Iceberg‟. Menu in place for 6 months.
What are my options? • Review the menu placement • Reengineer an existing menu item • Review process • Alternative ingredients • Price increase • Remove the item and create a new item
Engineering a New Menu Item When engineering the new menu item, attempt to create the item that will increase the average gross margin on the item being removed. In this case - $5.17/menu item. Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 New Menu Item - $TBD $TBD > $5.17
Menu Placement When reading the menu, customers read from top to bottom of the category they are looking at. Place the menu items that drive the most contribution margin to the top. The two top menu items are my highest “The Bank” category items. Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Field Greens NEW $5.75 $0.43 7.5% $5.32 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 Averages $5.56 $0.44 7.9% $5.12 SALADS
Menu Placement & Eye Gaze Source: Bowen & Morris, 1995; Hug & Warfel, 1991; Kelson, 1994; Scanlon,1998; Main, 1994; Miller, 1992; Panitz, 2000; National Restaurant Association, 2007;Kotschevar, 2008; Pavesic, D.V., 2011
Menu Placement & Eye Gaze Source: Glazer, Emily, Wall Street Journal, “The Eyes Have It: Retailers Now Track Shoppers’Retinas”, 07/12/2012, p. B1
Menu Placement & Eye Gaze Source: Glazer, Emily, Wall Street Journal, “The Eyes Have It: Retailers Now Track Shoppers’Retinas”, 07/12/2012, p. B1
Menu Placement & Eye Gaze Source: Livingston, 1978
Menu Placement & Eye Gaze ABSTRACT “Results offer an average menu scanpath … and suggests traditional menu “sweet spots” may not exist.”
Front of House (FOH) Sales • If the menu layout is structured with the most profitable items on top, it should not be a secret! • FOH personnel can play an active roll in suggesting to the customers items that drive profit!
Where do I start? Step 1: Purchased Items Step 2: Batch Recipes Step 3: Serving Recipes Step 4: Time Standards Step 5: Labor and Overhead Rates Step 6: Performance Benchmarking Ingredient level only
Systems • MBE (Manage By Excel) • Systems & Software (do your research!) • Features (i.e. recipes, production, ordering, • invoicing, menu engineering, etc.) • Service • Cost • Your overall plan (short and long term)
Our Systems
The Top 10 Takeaways
The Top 10 Takeaways Takeaway #1 Ensure that your recipes costs are accurate before the menu engineering process. Understated costs translates to overstated profit.
The Top 10 Takeaways Takeaway #2 Use historic data combined with pricing and costs to assist in future menu decisions. Data should match day part in print.
The Top 10 Takeaways Takeaway #3 Your menu is too important to guess at! Guessing is not good enough! There is too much as risk.
The Top 10 Takeaways Takeaway #4 Separately printed menus should be engineered separately. Engineer any menu that is in print.
The Top 10 Takeaways Takeaway #5 Engineer sections of menu. Do not engineer the complete menu in whole. Decisions should be made within menu categories.
The Top 10 Takeaways Takeaway #6 “You cannot place percents in your pockets!”. Shift the focus from cost percents to cost volume profit methods. Look at total profitability! Money in the bank!
The Top 10 Takeaways Takeaway #7 Make decisions not only based on the passion and emotion of the menu item – but also empirical data. Be methodical.
The Top 10 Takeaways Takeaway #8 The menu layout and placement of menu items does matter. Place higher contribution margin items on top in descending order.
The Top 10 Takeaways Takeaway #9 This is your call to action! Start the process. If you do not have adequate time or skills, get some professional assistance!
The Top 10 Takeaways Takeaway #10 To ensure success – The bottom line is know your costs! Plan for success! Be proactive, not reactive!
Cost Control MENU ENGINEERING ACCURATE RECIPE COSTING JIT Production & Ordering (Dynamic Pars) Benchmarking (Actual v. Theoretical) Audit to Improve Efficiencies
Results • Quality • Consistency • Efficiency Improvements • Discipline • Cash • Profits • Waste • Inventory Levels • Costs
Articles Booklet • “Obtaining Accurate Recipe Costs” • “Improve Your Menu Engineering” • “The Case For Theoretical Food Costs” • “The Advantages of Just-In-Time” • “Robust Supply Chain Management” • “Line Checks That Create Efficiency” • “Traits of Effective Cost Management” http://www.ReturnOnIngredients.com
Other Speaking Events 2013 • Ohio Dominican University – 2/7 in Columbus, OH • Columbus Culinary Institute – 2/12 in Columbus, OH • North American Pizza & Ice Cream Show – 2/17 in Columbus, OH • Canadian Restaurant & Foodservice Association – 3/3 in Toronto, Ontario • International Restaurant & Foodservice Show 3/4-3/5 in New York, NY • Western Illinois University – 3/7 in Macomb, IL • International Boston Seafood Show 03/10 in Boston, MA • Nightclub & Bar Expo – 3/19-3/21 in Las Vegas, NV • Owens Community College – 4/4 in Toledo, OH • ODU Dominican Scholars Dinner – 4/15 in Columbus, OH • ACF Maumee Chefs Association – 5/6 in Findlay, OH • Western Foodservice Expo – 8/18 – 8/20 in Los Angeles, CA • Florida Restaurant & Lodging Show – 09/22 – 09/24 in Orlando, FL • World Congress of Nutrition & Health Conference – 10/12-10/14 in Dalian, China • Americas Food & Beverage Conference – 10/28 in Miami Beach, FL
Culinary Schools This program is offered at no cost to culinary and hospitality schools programs based on availability and budget. • Lexington College (Chicago, IL) • Roosevelt University (Chicago, IL) • Western Illinois University (Macomb, IL) • Lake Michigan College (Benton Harbor, MI) • Central Michigan University (Mt. Pleasant, MI) • Guilford Technical Community College (Jamestown, NC) • University of Nevada Las Vegas (Las Vegas, NV) • Midwest Culinary Institute (Cincinnati, OH) • Columbus Culinary Institute (Columbus, OH) • Hocking College (Nelsonville, OH) • Owens Community College (Toledo, OH) Please email me at Mark@ReturnOnIngredients.com Or call me directly at Cell 614.558.2239
Questions & Answers Mark Kelnhofer, President & CEO Return On Ingredients P.O. Box 2387 Westerville, Ohio 43086-2387 614.423.4410 Fax 614.340.7946 Cell 614.558.2239 Mark@ReturnOnIngredients.com http://www.ReturnOnIngredients.com http://www.LinkedIn.com/kelnhofer
Questions & Answers If you have a questions later, contact me! mark@returnoningredients.com 614.558.2239

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Effective Menu Engineering For Your Food & Beverage Menus

  • 1.
    Effective Menu Engineering ForYour Food & Beverage Menus SlideShare Presentation Westerville, OH n June 27, 2013 © 2013 Return On Ingredients LLC n P.O. Box 2387 n Westerville, Ohio 43086-2387 n 614.423.4410 n Fax 614.340.7946 Request to have this presentation conducted live for your association, group or event at info@ReturnOnIngredients.com
  • 2.
    Mark Kelnhofer • BAin Accounting and Business Administration in 1993 • Masters in Business Administration (MBA) in 2005 • Ohio Dominican University, Columbus, Ohio • Manufacturing Cost (1993 – 2013) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants • Bravo/Brio Restaurant Group (2002 – 2010) • Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery, Zauber Brewing Co., Hospitality USA • Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting • Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
  • 3.
    Bravo/Brio Restaurant Group ReturnOn Ingredients LLC l P.O. Box 2387 l Westerville, Ohio 43086-2387 l 614.423.4410 l Fax 614.340.7946 Return On Ingredients® and its logo are registered trademarks by Return On Ingredients LLC 4.2% = $ millions in savings
  • 4.
    Brio Tuscan Grille– Easton Town Center Columbus, Ohio
  • 5.
  • 6.
    Bon Vie –Easton Town Center Columbus, Ohio
  • 7.
    Mark Kelnhofer • BAin Accounting and Business Administration in 1993 • Masters in Business Administration (MBA) in 2005 • Ohio Dominican University, Columbus, Ohio • Manufacturing Cost (1993 – 2013) • Plastics, Lighting, Tire Repair Kits, Buses, Restaurants • Bravo/Brio Restaurant Group (2002 – 2010) • Return On Ingredients (2009 – Present) • Bravo/Brio Restaurant Group, Eddie V’s, Pistacia Vera, Bob Evans Farms, Gordon’s Gourmet, Midwest Culinary Institute, Luce, Crème de la Crepe, Cooper’s Hawk Winery & Zauber Brewing Co., Hospitality USA • Ohio Dominican University (2007 – Present) • Adjunct Faculty, Financial & Managerial Accounting • Midwest Culinary Institute (2011 – Present) • Adjunct Faculty, Food, Beverage & Labor Cost Controls
  • 8.
    Other Food Manufactures… •Restaurants • Casinos • Hotel & Lodging • Sports Arenas • Hospitals • Colleges and Universities • Catering and Banquet Centers • Theme Parks • Horse Race Tracks • ….and others!
  • 9.
  • 10.
    ROI Methodology Recipe costingis the base for many other aspects of the operations.
  • 11.
    The Reality Is… •Some restaurant operators do not have any written or documented recipes. • Some have recipes that are written are only for execution, not costing. • The few that have costing in many cases do not take a manufacturing approach. • Menu pricing in some cases is not based on proper analysis and data.
  • 12.
    What is inyour control?  Knowing your costs
  • 13.
    What is inyour control?  Knowing your costs  Establishing your selling price
  • 14.
  • 15.
    Weights & Measures •Portion control through the use of utensils (Tbsp, tsp, dishers, spoodles, etc.) • Accuracy of weights and measures is paramount. 1 cup, Basil Leaves 1 cup, Granulated Sugar 0.2 ounce 6.8 ounces Density: 2.5% Density: 85.0%
  • 16.
    Batch Recipes &Yields • Batch recipes should account for the proper yield (what the result is) including known waste and the process (labor) • When the purchased product has changed form in any way, a batch recipe should be created to account for the cost. “Hands on the process”. • If you don’t account for the process and yields, your menu level costs in most cases is understated!
  • 17.
    Packaging • Packaging ispart of the raw material cost, similar to the ingredients • Packaging includes: • Bottles, lids • Boxes • Labels • Wraps
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
    Labor & OverheadCosts • Your labor and overhead can be accounted for in the recipe • Prep Time, Labor Routing • Time/motion studies (stopwatch) • Time (hours) is loaded on every recipe • Standard Labor (BOH) Rates • By store • Includes wages and fringes
  • 23.
    Direct (BOH) LaborRate • The direct (BOH) labor rate should include the base rate plus any other additional fringes associated with those personnel • Unemployment Insurance • Workers’ Compensation • Social Security & Medical • Health, dental and vision insurance plans • 401(k) or other retirement plans • Vacation & Sick Pay • Childcare
  • 24.
    Overhead Rates • Basedon budgeted expenses and direct labor hours (BOH) by location. Total Budgeted Overhead Direct Labor BOH Hours = $0.000/hr. Overhead Rate Predetermined Overhead Rate
  • 25.
    Overhead Rates • FOHLabor & Fringes • Advertising & Marketing • Repair & Maintenance • Supplies • Training • Utilities • Communications • Landscaping • Research & Development • Occupancy • Taxes Budgeted Direct Labor Hours Predetermined Overhead Rate
  • 26.
  • 27.
  • 28.
  • 29.
    Cost Management NRA 2013Chefs Survey, “Balancing Rising Food Costs” How do you respond to higher costs?
  • 30.
  • 31.
    Menu Engineering Do theyknow their cost? What is their pricing strategy?
  • 32.
    Menu Engineering • Yourmenu(s) are what you are in the business to do. • Types of Menus • Lunch • Dinner • Brunch • Banquet • Kids • Pricing Structures • By Markets, Demographics
  • 33.
    • What arewe engineering? • Engineering sections of the menu
  • 34.
    • What arewe engineering? • Engineering sections of the menu
  • 35.
    • What arewe engineering? • Engineering sections of the menu
  • 36.
    • What arewe engineering? • Engineering sections of the menu
  • 37.
    • What arewe engineering? • Engineering sections of the menu • Similar dishes in different categories should be analyzed separately.
  • 38.
    • What arewe engineering? • Engineering sections of the menu
  • 39.
    • What arewe engineering? • Engineering sections of the menu
  • 40.
    Cost-Volume-Profit (CVP) The componentsthat we will be analyzing: • Menu items in the category • Quantity/volume sold • Selling Price • Unit Cost • Cost Percentage • Gross Margin Per Plate • Contribution Margin PRODUCT COSTS: Ingredients, Direct Labor and Variable Overhead PERIOD COSTS: Fixed Overhead and Profit
  • 41.
    Cost-Volume-Profit (CVP) The componentsthat we will be analyzing: • Menu items in the category • Quantity/volume sold • Selling Price • Unit Cost • Cost Percentage • Gross Margin Per Plate • Total Profit TOTAL COSTS: Ingredients, Direct Labor and Total Overhead PROFIT
  • 42.
    My Famous Quote “Youcannot place percents in your pocket!”
  • 43.
    My Famous Quote Changethe focus from cost percent to gross margin dollars Menu Item Qty Sold Menu Price Unit Cost Cost % Unit GM $s Pasta Fettucine 1 $11.99 $1.98 16.5% $10.01 Filet Mignon 1 $32.95 $12.49 37.9% $20.46 Which one would you rather have? Do we focus too much on cost percents?
  • 44.
    Loss Leaders Items thatare sold at a loss that will result in other menu items being sold at a profit.
  • 45.
    Loss Leaders Items thatare sold at a loss that will result in other menu items being sold at a profit. Drive profits!
  • 46.
    Dog/Star Graph Average UnitGross Margin $ PopularityIndex% Star High PI %, High GM $s Puzzle Low PI %, High GM $‟s Plowhorse High PI %, Low GM $s Dog Low PI %, Low GM $s
  • 47.
    Dog/Star Graph Flaws Flaw#1 Traditional Dog/Star reports only analyze entrees only.
  • 48.
    Dog/Star Graph Flaws Flaw#1 Traditional Dog/Star reports only analyze entrees only. Flaw #2 The calculation looks as unit gross margin as a base.
  • 49.
    Dog/Star Graph Flaws Flaw#1 Traditional Dog/Star reports only analyze entrees only. Flaw #2 The calculation looks as unit gross margin as a base. Flaw #3 The graph plots all entrees together.
  • 50.
    Cost Volume ProfitExample Menu Item Menu Price Unit Cost Cost % Unit Profit $s Chopped Salad $5.50 $0.43 7.8% $5.07 Wedge of Iceberg $5.50 $0.33 6.0% $5.17 Caesar Salad $5.50 $0.41 7.5% $5.09 House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS Menu in place for 6 months.
  • 51.
    Cost Volume ProfitExample Menu Item Menu Price Unit Cost Cost % Unit Profit $s Chopped Salad $5.50 $0.43 7.8% $5.07 Wedge of Iceberg $5.50 $0.33 6.0% $5.17 Caesar Salad $5.50 $0.41 7.5% $5.09 House Salad $5.50 $0.48 8.7% $5.02 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS If the decision was based on cost percent alone, the „House Salad‟ would be reviewed for action. Menu in place for 6 months.
  • 52.
    Cost Volume ProfitExample Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS If you would have chosen the „House Salad‟, you would have reviewed the menu item driving the most dollars to cover fixed overhead costs and profit and possibly removing it from the menu. Menu in place for 6 months.
  • 53.
    Dog/Star Calculation Menu ItemQty Sold Menu Price Unit Cost Cost % Unit Profit Total Profit $s GM MM Rank Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 L H Plowhorse? Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star? Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star? House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse? Averages $5.50 $0.41 7.5% $5.09 Which menu item should be reviewed? SALADS MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08 Flaw: Gross margin rank for dog/star calculation is based on unit level only, not extended contribution margin dollars. Menu in place for 6 months.
  • 54.
    Dog/Star Graph 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% $5.00 $5.02$5.04 $5.06 $5.08 $5.10 $5.12 $5.14 $5.16 $5.18 PopularityIndex% (¼)*.7=17.5% Menu Item Unit Gross Margin $s $32,475 / 6,396 = $5.08 17.5% $5.08 StarPlowhorse Dog Puzzle House Salad Chopped Salad Caesar Salad Wedge Salad
  • 55.
    Stellar / CellarGraph Menu Item Total Profit $s PopularityIndex% Stellar - The Bank • Sacred Items • Most Profitable Items The Push or Sell • FOH Suggestive Selling • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue The Engineer • Reengineering of Menu Items • Labor Process Improvements • Alternative ingredients • Menu placement • Price increase possibility The Cellar • New menu item opportunity • Exception: Unique menu item
  • 56.
    Stellar / CellarGraph Menu Item Total Profit $s PopularityIndex% Stellar - The Bank • Sacred Items • Most Profitable Items The Push or Sell • FOH Suggestive Selling • FOH Contests • Review price with value proposition; price too high? • Quality or flavor issue The Engineer • Reengineering of Menu Items • Labor Process Improvements • Alternative ingredients • Menu placement • Price increase possibility The Cellar • New menu item opportunity • Exception: Unique menu item
  • 57.
    Stellar / CellarGraph 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 Menu Item Total Profit $s $32,475 / 4 = $8,119 PopularityIndex% (¼)=25.0% $8,119 25.0% House Salad Chopped Salad Caesar Salad Wedge Salad The Stellar The Engineer The Cellar The Push
  • 58.
    Cost Volume ProfitExample Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Profit $s Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Averages $5.50 $0.41 7.5% $5.09 Which menu item should be removed? SALADS The proper item to target to be reviewed is the „Wedge of Iceberg‟. Menu in place for 6 months.
  • 59.
    What are myoptions? • Review the menu placement • Reengineer an existing menu item • Review process • Alternative ingredients • Price increase • Remove the item and create a new item
  • 60.
    Engineering a NewMenu Item When engineering the new menu item, attempt to create the item that will increase the average gross margin on the item being removed. In this case - $5.17/menu item. Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 New Menu Item - $TBD $TBD > $5.17
  • 61.
    Menu Placement When readingthe menu, customers read from top to bottom of the category they are looking at. Place the menu items that drive the most contribution margin to the top. The two top menu items are my highest “The Bank” category items. Menu Item Qty Sold Menu Price Unit Cost Cost % Unit Profit $s Total Profit $s House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 Field Greens NEW $5.75 $0.43 7.5% $5.32 Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 Averages $5.56 $0.44 7.9% $5.12 SALADS
  • 62.
    Menu Placement &Eye Gaze Source: Bowen & Morris, 1995; Hug & Warfel, 1991; Kelson, 1994; Scanlon,1998; Main, 1994; Miller, 1992; Panitz, 2000; National Restaurant Association, 2007;Kotschevar, 2008; Pavesic, D.V., 2011
  • 63.
    Menu Placement &Eye Gaze Source: Glazer, Emily, Wall Street Journal, “The Eyes Have It: Retailers Now Track Shoppers’Retinas”, 07/12/2012, p. B1
  • 64.
    Menu Placement &Eye Gaze Source: Glazer, Emily, Wall Street Journal, “The Eyes Have It: Retailers Now Track Shoppers’Retinas”, 07/12/2012, p. B1
  • 65.
    Menu Placement &Eye Gaze Source: Livingston, 1978
  • 66.
    Menu Placement &Eye Gaze ABSTRACT “Results offer an average menu scanpath … and suggests traditional menu “sweet spots” may not exist.”
  • 67.
    Front of House(FOH) Sales • If the menu layout is structured with the most profitable items on top, it should not be a secret! • FOH personnel can play an active roll in suggesting to the customers items that drive profit!
  • 68.
    Where do Istart? Step 1: Purchased Items Step 2: Batch Recipes Step 3: Serving Recipes Step 4: Time Standards Step 5: Labor and Overhead Rates Step 6: Performance Benchmarking Ingredient level only
  • 69.
    Systems • MBE (ManageBy Excel) • Systems & Software (do your research!) • Features (i.e. recipes, production, ordering, • invoicing, menu engineering, etc.) • Service • Cost • Your overall plan (short and long term)
  • 70.
  • 71.
  • 72.
    The Top 10Takeaways Takeaway #1 Ensure that your recipes costs are accurate before the menu engineering process. Understated costs translates to overstated profit.
  • 73.
    The Top 10Takeaways Takeaway #2 Use historic data combined with pricing and costs to assist in future menu decisions. Data should match day part in print.
  • 74.
    The Top 10Takeaways Takeaway #3 Your menu is too important to guess at! Guessing is not good enough! There is too much as risk.
  • 75.
    The Top 10Takeaways Takeaway #4 Separately printed menus should be engineered separately. Engineer any menu that is in print.
  • 76.
    The Top 10Takeaways Takeaway #5 Engineer sections of menu. Do not engineer the complete menu in whole. Decisions should be made within menu categories.
  • 77.
    The Top 10Takeaways Takeaway #6 “You cannot place percents in your pockets!”. Shift the focus from cost percents to cost volume profit methods. Look at total profitability! Money in the bank!
  • 78.
    The Top 10Takeaways Takeaway #7 Make decisions not only based on the passion and emotion of the menu item – but also empirical data. Be methodical.
  • 79.
    The Top 10Takeaways Takeaway #8 The menu layout and placement of menu items does matter. Place higher contribution margin items on top in descending order.
  • 80.
    The Top 10Takeaways Takeaway #9 This is your call to action! Start the process. If you do not have adequate time or skills, get some professional assistance!
  • 81.
    The Top 10Takeaways Takeaway #10 To ensure success – The bottom line is know your costs! Plan for success! Be proactive, not reactive!
  • 82.
  • 83.
    Results • Quality • Consistency •Efficiency Improvements • Discipline • Cash • Profits • Waste • Inventory Levels • Costs
  • 84.
    Articles Booklet • “ObtainingAccurate Recipe Costs” • “Improve Your Menu Engineering” • “The Case For Theoretical Food Costs” • “The Advantages of Just-In-Time” • “Robust Supply Chain Management” • “Line Checks That Create Efficiency” • “Traits of Effective Cost Management” http://www.ReturnOnIngredients.com
  • 85.
    Other Speaking Events 2013 •Ohio Dominican University – 2/7 in Columbus, OH • Columbus Culinary Institute – 2/12 in Columbus, OH • North American Pizza & Ice Cream Show – 2/17 in Columbus, OH • Canadian Restaurant & Foodservice Association – 3/3 in Toronto, Ontario • International Restaurant & Foodservice Show 3/4-3/5 in New York, NY • Western Illinois University – 3/7 in Macomb, IL • International Boston Seafood Show 03/10 in Boston, MA • Nightclub & Bar Expo – 3/19-3/21 in Las Vegas, NV • Owens Community College – 4/4 in Toledo, OH • ODU Dominican Scholars Dinner – 4/15 in Columbus, OH • ACF Maumee Chefs Association – 5/6 in Findlay, OH • Western Foodservice Expo – 8/18 – 8/20 in Los Angeles, CA • Florida Restaurant & Lodging Show – 09/22 – 09/24 in Orlando, FL • World Congress of Nutrition & Health Conference – 10/12-10/14 in Dalian, China • Americas Food & Beverage Conference – 10/28 in Miami Beach, FL
  • 86.
    Culinary Schools This programis offered at no cost to culinary and hospitality schools programs based on availability and budget. • Lexington College (Chicago, IL) • Roosevelt University (Chicago, IL) • Western Illinois University (Macomb, IL) • Lake Michigan College (Benton Harbor, MI) • Central Michigan University (Mt. Pleasant, MI) • Guilford Technical Community College (Jamestown, NC) • University of Nevada Las Vegas (Las Vegas, NV) • Midwest Culinary Institute (Cincinnati, OH) • Columbus Culinary Institute (Columbus, OH) • Hocking College (Nelsonville, OH) • Owens Community College (Toledo, OH) Please email me at Mark@ReturnOnIngredients.com Or call me directly at Cell 614.558.2239
  • 87.
    Questions & Answers MarkKelnhofer, President & CEO Return On Ingredients P.O. Box 2387 Westerville, Ohio 43086-2387 614.423.4410 Fax 614.340.7946 Cell 614.558.2239 Mark@ReturnOnIngredients.com http://www.ReturnOnIngredients.com http://www.LinkedIn.com/kelnhofer
  • 88.
    Questions & Answers Ifyou have a questions later, contact me! mark@returnoningredients.com 614.558.2239

Editor's Notes

  • #20 Worked at Bravo/Brio only looked at Food. While my system saved them money it really doesn’t track the entire costing system. So I left to form my own software package that would be a complete cost based accounting system that incorporated dynamic ordering tools.
  • #21 Worked at Bravo/Brio only looked at Food. While my system saved them money it really doesn’t track the entire costing system. So I left to form my own software package that would be a complete cost based accounting system that incorporated dynamic ordering tools.
  • #22 Worked at Bravo/Brio only looked at Food. While my system saved them money it really doesn’t track the entire costing system. So I left to form my own software package that would be a complete cost based accounting system that incorporated dynamic ordering tools.