Unit 5:

Menu Engineering

Menu engineering is the art and science of maximizing profit through design and item placement on the
menu. It is a sales and menu analysis tool which identifies a menu item popularity and contribution. In
general, the goal with menu engineering is to maximize a firm's profitability by subconsciously
encouraging customers to buy what you want them to buy, and discouraging purchase of items you don't
want them to buy. It is a tool used by modern day managers and chef to analysis the different aspects
such as profitability and popularity of dishes on the menu. It also supports in making pricing decisions
and modifications and modifying recipe design, keeping in mind what guest want.
Menu engineering is an unique tool for controlling the food cost in an outlet/organization. This process
involves the methodical selecting, costing, pricing, and evaluating of the item in the respective menu. It
also provides the information about a menu item’s profitability, as well as popularity, so that proactive
planning, recipe design, customer pricing decision can be made.
Menu Engineering Grid
A graph can be formulated so as to put in all the menu items and can be plotted with an axis of
popularity margin and profitability percentage.

Fig. Menu engineering Matrix (Grid) based on Kasavana and Smith (1982)

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Compiled By: Raja Ram Mahat, Instructor, Food Production and Control
This is a technique of menu analysis that uses two key factors of performance in the sales of individuals
of menu items: the popularity and the profit contribution of each item.

The analysis results in each menu item being assigned to one of four categories such as Stars, Plough
horses, Puzzles and Dogs

 Items of high popularity and high cash gross profit contributions known as Stars.
 Items of high popularity but with low cash gross contribution known as Plough horses.
 Items of low popularity but with high cash gross profit contribution known as Puzzles.
 Items of low popularity and low cash gross profit contribution known as Dogs.
Interpreting the categories
There is a different basic strategy that can be considered for items that fall into each of the four
categories of the matrix.

 Stars: these are both profitable and popular and should normally be left alone, unless there is a valid
reason for change. Because of the popularity of stars, it is sometimes possible to increase their menu
prices without affecting volume, thus increasing their profitability. High visibility should be
maintain on the menu and standard for these dishes should be strictly controlled.

 Plough horses: these are popular, but relatively unprofitable. They should be kept on the menu,
but attempts should be made to increase their contribution margins without decreasing volume. A
possibility is to decrease standard portion size slightly while improving the appearance of the
product. Another is to raise prices on such items, assuming that the volume of those items will
not be adversely affected to any great extent. Lower menu visibility than star is usually
recommended.
 Puzzles: These are exactly that - puzzles. These are comparatively profitable, but relatively
unpopular. They should be kept on the menu, but attempts should be made to increase their
popularity without decreasing their profitability substantially. These are any numbers of ways to
do this, including repositioning items to more favorable locations on the menu, featuring items as
special suggested to diners by servers,, and changing the appearances or menu descriptions of
these items to increase their appeal.
 Dogs: Because dogs are both unprofitable and unpopular, so these are the worst item on a menu
and the first reaction is to remove them from menu. An another alternative, however, is to
consider adding them to another item as part of a special deal. For instant, adding them in a meal
package may have the effect of lifting the sales of the Dog item and may provide relatively low-
cost way of adding special promotion to the menu.

Menu Evaluation and Engineering

Menu is one of the important aspects for the success of any foodservice establishment. Perhaps it is
arguably the soul of the restaurant/ kitchen. Menu analysis can be defined as a range of techniques and
procedures that enable more effective decision making both with respect to marketing and operating the
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menu. Various tactical solutions to menu analysis have been sought in endless attempts by many
restaurant operators to improve menu performance. One of the notable approaches that has gained
enormous popularity is menu engineering'. It can be define as the "systematic evaluation of a menu's
cost and/or sales data for the purpose of identifying opportunities for improved performance".

The menu engineering methodology is designed to categories dishes into good and poor performers.
1. Stars:
For dishes with high popularity and high contribution –

 Do nothing
 Modify price slightly – up or down
 Promote through personal selling or menu positioning
 Ensure that specification and quality standards are maintained.
2. Plough Horses:
For dishes with popularity and low contribution –

 Do nothing
 Increase price
 Reduce dish cost – modify recipe by using cheaper commodities or reducing the portion size.

 Relocate the item to the lower focal point of menu.

 To increase the contribution margin, package it with high contribution items.

 Make sure that there is no loss through wastage, spoilage, or pilferage of such food items as these are high
in food cost.

3. Puzzles:
For dishes with popularity and low contribution
 Do nothing
 Repositioning the item on the menu card and feature it more promptly on the menu.
 Reduce price
 Promote through personal selling
 Rename dish and change presentation.
 Give item a special status
 Remove from the menu

4. Dogs
For dishes with low popularity and low contribution
 Increase the price of the item and raise the status to puzzle.
 Try and up sell the item

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  It the items are new on the menu, check the amount of time it has been there and accordingly improve the
particular dish.
 Remove dish from menu

Menu Engineering Worksheet

A menu engineering wooksheet is formulated every month and this is used as one of the most important
tool in menu engineering.

Computing the Cost of Menu

Computing the cost of menu is yet another aspect of business with must be carried out in consultation
with food and beverage controls and with the involvement of the general manager. The end result of any
business is to generate profit for the organization, and it can be achieved by controlling costs and
wastage. The costing of the dish is first done by first preparing the standard recipe. Standard recipe lists
down the ingredients, its yield, prices, as well as method of preparation. Once the standard recipe is
done, the cost of the recipe is established by adding the net price of all the ingredients. Then the price of
the dish is fixed to arrive at standard food cost, which is generally guided by the standards of the
company. There are two types of costs: actual food cost and potential cost.
The food cost is established on the basis of standard recipe is termed as potential food cost. It is
measured as a percentage and is calculated by the following formula:
Cost of ingrdeients
Actual food cost percentage = × 100
Total food sales
It is important that the standard recipe is followed to avoid any inconsistencies while computing the
cost. It is also important to update the recipes on a periodic basis as the cost of ingredients as well as the
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yield of the product changes from time to time. Once the individual cost of each dish on the menu is
done, it will be easy to establish the cost of the whole menu with regard to the forecasted number of
portions. It becomes challenging, when one has to compute the cost for a fixed menu in which few
choices are available to the guest.

Table: Total cost of the menu

Dish Name Production no. Dish (Rs) Total Cost (Rs)
Roast Vegetable Salad 10 21 210
Chicken Caesar 30 30 900
Minestrone Soup 25 8.5 212.5
Lamb harira 15 12 180
Eggplant Parmigiano 5 50 250
Penne with mushroom 10 28 280
Penne with chicken and mushroom 15 35 525
Grilled bhetki 10 70 700
Tiramisu 30 40 1200
Fresh fruit platter with ice cream 10 15 150
Total 4607.50

Note: The menu is designed to accommodate approximately 32 covers.

Now,
Totoal Cost
Cost of menu =
Actual number of covers
4607.50
=
32
= Rs. 143.98 per cover
Note: Remember that one has to marginally overproduce to allow for customer choice. The excess costs
are incurred because of overproduction.
If this is an a` la carte menu, where the dishes are individually priced, then there is no concern; but in
this case, which is a fixed menu with built in choices, three types of costs can emerge: maximum cost,
minimum cost and average cost.
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Compiled By: Raja Ram Mahat, Instructor, Food Production and Control
 a. Maximum Cost:
If a customer chooses all of the most expensive items from the menu, then it would be the
maximum cost of the menu. For example, Chicken Caesar, lamb harira, grilled bhetki, and
tiramisu= (30+12+70+40= Rs. 152)
b. Minimum Cost:
If the customer choses all of the cheapest item from the menu, then it would be the minimum
cost. For example, roasted vegetable salad, minestrone, penne with mushroom, and fresh fruit
platter = Rs. 72.50
c. Average Cost:
If a customer chooses a selection of items from the menu that are a combination of maximum
and minimum costs, then this would an average cost of the menu.
For instance, Chicken Caesar, minestrone, penne with chicken, tiramisu = Rs. 113.50
In most cases, a vegetarian menu and meat are priced separately, but in case where the guest
would choose from the common menu, then the costing would be done on the cost which will be
the highest among all.
From the above menu, if the cost of the highest menu is Rs. 152 and if the company wants to
maintain the food cost at 25 per cent, then they would sell this menu for Rs. 608 plus taxes.
While fixing a selling price for a` la carte items, one cannot apply this rule of 25 per cent food
cost to each and every dish, as this will result in some dishes being sold at very high prices and
would become no-moving on the menu. In such cases, some dishes like soups and salads are sold
at much higher margin, thereby maintaining a food cost of 5-10 per cent; whereas some high cost
items can be sold at a food cost of 50 per cent. It is important that the overall food cost at the end
of the day or at the end of month is in sync with the standards set by the organization. The chef
must hold a regular briefing of the service staff to sell dishes that are high profit and low cost
margin.

Yield Management
Yield management is a broad term used for revenue generating aspects of business. It is also known as
revenue management and can be defined as the process of understanding customer behavior, and
anticipating their needs in order to strategize the pricing and maximize profits or revenue. This process
is specifically used for very perishable products such as airlines, hotel rooms, and to some extent, food
in a restaurant. A special branch or a department called revenue management has been very popular in
hotels and other service industry selling perishable products. In other words, yield management can be
described as a process wherein the product is sold to the right customer at right price, and the right time.
The concept of happy hours in many restaurants and pubs is a good example of revenue management.
The chef’s role in yield management is limited to an extent as this is mostly done by the revenue
management department. The chef’s role is to control waste percentage or obtain a net portion or yield
of a commodity after processing. The yield in a kitchen is very important, especially expensive
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commodities such as imported vegetables, seafood, meats, etc. if the staff is untrained, then the final
quantity obtained will be less and this will impact the profitability. Let’s understand the impact of yield
on the cost of a dish with the following example.
If a recipe calls for 1 kg of dice potato, then while placing an order for that recipe then order for the
potato has to be more than 1 kg because to obtain dice, it need to be peeled and trimmed. The following
points need to be considered:
1. How much should be ordered?
2. What will happen to the remaining trimming and peels?
3. What will be the final yield?
To understand how much to order, first one need to understand the term called the conversion factor.
The conversion factor is a numerical value, which will be used for converting a recipe form 10 portions
to the desired number of portions.
For instance, if recipe yield 10 portions of sautéed potatoes and the portion size of the potato is 180 g.
The following formula is used for it.
Desired yield
Recipe conversion factor =
Given yield
DY
=
GY

This means if the given yield as per the recipe is 10 portions and again if we need to convert it to 23
portions, then as per the formula:

DY 23
Recipe conversion factor = = = 2.3
GY 10

Therefore, the conversion factor is 2.3 in this case; hence, we should multiply each ingredient
with this numerical value to obtain a yield for 23 portions.

Recipe Conversion Factor (RCF)

To determine the recipe conversion factor (RCF):

Desired yield/original yield = RCF

Once you know the factor, you multiply all ingredients in a recipe by it. The desired yield and original
yield must be expressed in the same way (ounces/ounces or pounds/pounds).

Example: If you have a recipe that makes 12 cupcakes and you need a recipe to make 20 cupcakes
(20÷12=1.66 RCF). You would then take your recipe conversion factor and multiply it with each

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ingredient amount in the recipe. This will give you the new amount for each ingredient to use to make 20
cup cakes.

There might still be another case in which the yield of a new recipe has to be created with a change in
portion size. The above example was a fairly direct calculation; let’s suppose that the 10 portion of
potatoes with 180 g as a portion has to be converted to 23 portions of potatoes with 75 g as one portion
of potato. The formula would still be same, but both the yields have to be used as shown below:

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Compiled By: Raja Ram Mahat, Instructor, Food Production and Control
 DY
Recipe conversion factor =
GY

The desired yield in this case is 23 portions of 75 g and the given yield is 10 portions of 180 g, so

23× 0.075
Recipe conversion factor (CF) = (Note: Divided by 1000 to convert into g)
10× 0.180
(CF)= 0.958
(CF)= 0.96 (rounded off)
Hence, if we multiply 1800g (10 portion and 180 g) of potato with 0.96, we get

1800 g × 0.96= 1728 g.

This is the quantity of potatoes required for 23 portions in which the new portion size is 75 g.

So the chef has to order the required quantity of potatoes from the store.

But to obtain a yield of 1728 g of ready potatoes, the chef has to order more quantity in order to get
desired yield. The yield tests are conducted on periodic basis. To calculate the yield for a potato dices,
take 1 kg of potatoes and peel them. The peeled potatoes are now weighted and the weight is recorded.
Let’s assume that 80 g was the weight of the peel. If the peel is not used anywhere and will go into the
garbage, then this amount will be treated as waste percentage. So let’s look at the formula for waste
percentage:

Waste
Waste percentage = × 100
Original weight
From the example above, the waste percentage of potato is

80
Waste percentage = ×100 = 8%
1000
This means that 8% of the potato is not used anywhere and will be discarded. It also means that 92% of
the potato is edible and can be used in other preparations. This formula extends into another that would
give us the yield percentage that will be represented by:
Waste obtained∨the edible portion
Yield percentage = × 100
Original weight

From the same example as described above, if the total weight obtained after peeling and washing is 920
g, then the yield percentage would be calculated as follows:

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 920
Yield percentage = ×100 = 92%
1000
One can use any one of these factors while calculating recipes. This examples is fairly easy to calculate
because of small wastage percentages; but in case of spinach and other greens such as amaranth leaves,
mustard greens, etc., after cleaning and boiling, the yield percentage would be only approximately 27%.
This mean that from 1 kg of spinach as purchased from market, only 270g of boiled spinach is obtained.
This large figure becomes crucial in costing recipes. If a recipe calls for 1 kg of boiled spinach, then it is
important for chef to know that they will have to order at least a little more than 4 kg of raw spinach.
Sometime guess work might not work and will jeopardize the production planning. So here we will use
yet another formula to calculate how much of spinach we should buy. For this, we first need to establish
the required yield which is obtained by the following formula:
Yield Required = Number of portions × portion size
So if we know that we need 10 portions of spinach, where one portion is 75 g, then:
Yield required = 10 × 75 = 750 g.
This quantity would be ordered if one can get pre-blanched and cooked spinach form the vendor; but if
one has to process it in-house, then we will have to order more in order to get the desired portion size.
This is known as raw weight and can be calculated as follows:
Cleanded weight∨Cooked weight
Raw weigh required =
Percentage of Yield
So, if we know that the cooked weight required is 750 g and the yield percentage is 27%, we can easily
calculate the required raw quantity as follows:

750 g 750
Raw weight required = = = 2777 g
27 % 0.27

Thus we can easily order 2.7 kg or 3 kg of spinach to be able to make 10 portions of 75 g each.

Now, it will become easy to calculate the food cost. It is easy for chefs to feed in the required formulas
in excel sheet, which would automatically calculated the accurate figures. Before understanding how a
food cost percentage is calculated, let’s understand one more aspect of the same, which is called portion
cost. A portion cost can be calculated by the following formula:

Cost of all ingredients ∈a recipe

Portion Cost =
Number of portions (recipe yield)

So, if the cost of ingredients used in preparing 10 portions of sautéed spinach is Rs 160, then it will be
easy to calculate the portion cost by applying the above formula:

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 Rs 160
Portion Cost = = Rs. 16 per portion
10

Once the above formula are available, it is easy to calculate the food cost percentage by using the
following formula:

Portion Cost
Food Cost Percentage = ×100
Menu Price

The price at which the dish should be sold is governed by the food cost factor. Assuming that the
sautéed spinach is being sold at Rs. 200, let’s calculate the food cost percentage of one portion of
sautéed spinach by using this formula:

16
Food Cost Percentage = ×100 = 0.08×100 = 8%
200

Food service establishments have their own benchmarks for a food cost. Normally a food cost of 25%
means that good quality of food is being maintained. But it is important to understand that every dish
cannot be sold at 25% food cost. In a range of dishes on the menu, some dishes will be sold at lower
food cost as in case of sautéed spinach above, while some dishes would be sold at 50% food cost. But it
is important that at the end of the day or at the end of the month, the benchmarked food cost is
maintained.

We can also decide the price of a dish if we know how much food cost would be incurred in a particular
dish. To do this, we will use the same formula as food cost percentage but use it in a different way as
follows:

Portion Cost
Menu price = ×100
Food Cost percentage

Thus, if we wanted to achieve a food cost percentage of 25% while selling spinach, then we should have
sold it at:

16
Menu Price= ×100 = Rs. 64
25 %

In a five star establishment, we can afford to sell this at a higher mark up by achieving low food cost
percentage and similarly some high cost items will not sell if we sold them at 25% food cost. For
example, if an imported steak with accompaniments on a plate would cost Rs 1200, then to make a food
cost of 25% will have to sell this dish at:

1200 1200
= ×100 = Rs. 4800
25 % 25

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There will be very few buyers at this price and the dish will become no-moving in the menu.

The selling price is thus, decided to ensure that whatever is on menu sells and adds a profit to the
organization. Staff should be trained on such aspects and trained to sell dishes that have a higher profit
margin. Every staff member must be educated on the cost and yields to be aware of the costs of
production. This will not only make them accountable but will also motivate them in achieving the
objects of the organization.

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