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Categories of Menu Items

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

  • Stars: items with high popularity and a high CM
  • Plow horses: items with high popularity and low CM
  • Puzzles: items with low popularity and high CM
  • Dogs: items with low popularity and low CM

Determining Item CM

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

Assessing Individual Item Performance

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.

Determining Item Popularity

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%

Menu Modifications and Price Adjustments

Analyzing the Menu Mix

Three items should be examined and compared when considering modifications and adjustments:

  • Standard food cost
  • Potential food cost percentage based on the menu product mix
  • Actual food cost percentage from the income statement

For a restaurant or foodservice establishment to be profitable, the menu as a whole must produce a certain standard food cost percentage.

Composite Food Cost Percentage

Implementing Revised Prices

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.

The Menu Mix

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