This document discusses menu engineering techniques to optimize menu pricing, design, and content for profitability. It describes classifying menu items as "Stars", "Workhorses", "Cash Cows", and "Dogs" based on their profitability and sales volume. Menu engineering determines the contribution margin of each item and analyzes factors like food costs, sales, and popularity. The document provides recommendations for pricing, positioning, and promoting different menu items based on their classification to increase profits.

1. Latest innovation in Menu Re-
Engineering
Josh Boutwood

2. A. Marketing approach to evaluate menu
pricing, design and content decisions
B. Classifies menu on base selling price and
margin pesos, not just percentages
C. A cost multiplier pricing formula
inadvertently restrictive to profitability
D. Reliable model does not replace sound
profession judgment
What is Menu
Engineering

3. Why Use Menu
Engineering?
A. Operators have certain degree of control over labor
and food cost but now there is an advanced tool to
control contribution margin
B. Changing economic, social and competitive climate
C. Growth of price/value driver of spending
behaviour
D. Rising food and paper costs
E. Need for pricing strategy models to support
profitability
F. Real time approach to decision-making

4. “Stars, Workhorses, Cash Cows & Dogs”
…
This method rates the menu by measuring each entree as to its profitability
(gross profit) and its sales. It then combines these measurements and places
each menu item into one of four classifications.

5. How to Define your Menu Items
Menu Item Unit SalesLow
Low
High
High
MenuItemGrossMargin

6. “STARS”
A. Most popular and profitable
B. Locate in highly visible position on menu
C. Maintain rigid quality, portion and presentation
D. Test for price elasticity

7. “Work Horses”
A. Higher than average in popularity and lower than average in gross
profit
B. Leader menu items, bring people in the door
C. Test for price sensitivity; price in stages: such as Php 310 to Php 340 to
Php 395
D. Relocate workhorses to low profile on menu
E. Package with lower cost menu item

8. “Cash Cows”
A. High contribution but low in popularity
B. Take off the menu if labor intensive
C. Reposition in higher profile part of menu
D. Rename the item
E. Decrease the price
F. Merchandise the item
G. Limit the number on the menu

9. “Dogs”
A. Menu “losers”, unpopular and low contribution
B. Eliminate the item from the menu
C. Raise item’s price to achieve at least a cash cow
D. Make it a special but do not list on the menu

10. Contributing Margin
✤ Determine the contributing margin (CM) of each item
A. CM is the same as the items Gross Profit
B. Use total food cost
SELLING PRICE - FOOD COST= CONTRIBUTING MARGIN

11. Contribution Margin Pesos vs. Food Cost Percentage
Ribeye Battered Fish Coffee
Selling Price Php 995 Php 295 Php 80
Cost Php 497.50 Php 70 Php 12
Food Cost % 50% 23% 15%
Cont. Margin
Php
Php 497.5 Php 225 Php 68

12. Menu Engineering
(1) (2) (3) (4) (5) (6) (10)
Menu Item Number Sold Item Sales Price
Food Cost
Percentage
Total Sales
(2)x(3)
Total FC
(4)x(5) CM
Chicken 65 Php 395 30% Php 25,675
Php
7800
Php
275
Beef 75 Php 795 36% Php 59,625
Php
21,750
Php
505
Fish 90 Php 425 28%
Php
38,250
Php 10,800 Php
305
Tenderloin 55 Php 995 66%
Php
54,725
Php
36,575 Php 330
285 178,275 79,925
(7) Food Cost Percentages (6) / (5) = 44%
(8) Total Contribution to Margin (5) - (6) = 98,350
(9) Average Contribution Margin/Customer (8) / (2) = 345.08

13. Menu Engineering
(10) Average Popularity
80% of the items sales per entree:
100 / 4 x 80% = 20%
(11) Popularity of each Item:
Number of portions sold divided by total number of meals sold
✤ Chicken 65 / 285 = 22% (Workhorse)
✤ Beef 75 / 285 = 26% (Star)
✤ Fish 90 / 285 = 31% (Star)
✤ Tenderloin 55 / 285 = 19% (Dog)

14. 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

15. FOCAL POINT
Single sheet Menu

16. FOCAL POINT
(Two Fold menu)

17. 2 4
Focal Point
3 Fold menu
3 5

18. Specials
✤ Larger Bolder type than the rest of menu
✤ Longer descriptions
✤ Concept of Closure Peoples eyes are drawn to what ever is
enclosed by a box
✤ Colour, Illustrations, and/or pictures, bullets can be used to draw
attention to signature items.

19. “END”
–Thank You