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Step 1: find the total (weighted) food cost
(# item sold x that item's standard portion cost) + (# other item sold x that item's standard portion cost) = total (weighted) food cost
Step 2: the number sold is multiplied by the selling price to get total sales
(# item sold x selling price for that item) + (# other item sold x price for that item) = total food sales
Step 3: total cost is then divided by total sales to get the product mix for the entire menu
total (weighted) food cost / total food sales =
product mix for entire menu
Menu problems: to see if the these exist, the potential food cost percentage should be compared with the operation's standard food cost
standard food cost - potential food cost percentage = variance
Compare this with any variance between the standard food cost on the budget and the actual from the income statement
standard - actual = variance
Then compare them against one another. If they are equal, it will be necessary to adjust the pricing structire
To identify how menu items contribute to the potential food cost perntage, the product mix must be determined.
This is typically done in spreadsheet form to compare all menu items against each other.
There are numerous software programs that analyze menu product mix.
Menu engineering is similar to analyzing the menu product mix, but also takes into account an item's CM and popularity.
On the menu, items compete against each other. Some are more profitable, others are high sales items, and a few are neither.
An item is assumed "popular" if it produces sales that are at least 70% of its percentage share in the menu mix.
item popularity = .7 x share % of total sales
After this is calculated, the MM percentage of each item is compared to this benchmark to determine if the item is popular or unpopular.
Items w/an MM% at or above are considered popular sellers
Items w/an MM% below are considered unpopular
Operational problems may also be the culprit. This is usually the case when there is a variance between standard food cost and actual food cost.
The two should match; if they do not, it is likely a problem with some kind of operational control.
for example: if a restaurant serves 6 items, then
100% / 6 items = 16.66% expected sales mix
If all three match, then there are no apparent problems regarding food cost. If they do not match, this indicates problems that need to be investigated.
then, to calculate the menu mix popularity of a single item, take 70% of the expected sales mix percentage:
expected sales mix 16.66% x allowable 70%
= menu mix popularity 11.66%
Three items should be examined and compared when considering modifications and adjustments:
For a restaurant or foodservice establishment to be profitable, the menu as a whole must produce a certain standard food cost percentage.
The composite, or "potential", food cost percentage is the weighted average food cost percentage for all items sold in an establishment.
It is this average, not each individual item, that must meet the standard food cost percentage.
The menu mix allows the contribution of each item to be seen for overall sales and cost-effectiveness.
There are several solutions that can be explored to bring the menu into agreement with the desired percentages. There is a wide range of solutions, and a solution should only be pursued after careful and thoughtful consideration.