How many food operations don’t know their recipes cost?  I have heard estimates of 80%-90% of food service operations don’t.  In an industry with a high failure rate, this seems incomprehensible.

Food cost is one of our biggest controllable costs and understanding the expected cost of recipes is fundamental to managing and planning in a food business.  Costing recipes is made easier with software solutions such as Write-a-Recipe (www.writearecipe.com).

A good recipe costing software solution will allow you create sub/batch recipes that can be used as an ingredient in other recipes, reducing duplication and allowing costs to flow through to the primary recipe.

It is also important you are able to factor yields into your recipe costs.  Many ingredients used in recipes “yield”/output a lesser usable amount after the production process.  Meat is a classic example, where butchering, trimming and the cooking process make a material impact on the amount which is plated.  Some software solutions allow you to factor the yield on each ingredient, others factor yield on the total output of the recipe/sub-recipe.

Ingredients are often measured in different ways.  For example, you may purchase flour by the kilogram, but use it by the gram.  Your recipe costing solution should allow you to specify the unit of measure (UoM) for the different ways in which ingredients are used.  It is also important that the system allow you to control the conversion between the different UoMs.

Your solution should also enable you to analyse the performance of your recipe in the context of the menu as a whole.  A balanced menu has a mixture of high margin and lesser margin items that provide a balance between customer value and profitability.  Techniques such as “Menu Engineering” enable operators to monitor this balance and identify menu items that require attention, or just aren’t working.

The food service industry engenders a lot of passion from dedicated operators.  However we all need to keep sight of the fact that we are in a tough business and passion needs to be balanced with adequate management.

PloughHorse_and_Star

All menus have some Plough Horses (also known as Cash Cows). The profitability/contribution metric used in the Menu Engineering Model is based on an average.   The nature of an average means there will always be some items below the average. Assuming all items meet the popularity benchmark, any items below the average are Plough Horses and all those items above the average are Stars.

The popularity benchmark is based on 70% of the average number of items sold.  Any items that don’t meet the popularity benchmark are Dogs or Puzzles.

As a result, we expect to have some Plough Horses on the menu. These are the menu items that our customers keep coming back for. They are perceived as good value for money and are often the backbone of the business.   They tend to sell themselves, leaving us to focus on our Stars.

Resource: Menu Engineering Model

puzzle

Following on from the “What is Menu Engineering” Post:

A “Puzzle” is a menu item that is classified as profitable but not popular using Menu Engineering techniques. This begs the question: “Why is this menu item not popular? How can we transform it into a Star?” In many cases engaging tactics to transform a Puzzle into a Star is a sound approach.

Some reasons why a menu item is not popular include:

  • Price sensitivity/Value proposition – Is the item perceived as too expensive?
  • Profile & Positioning – Is the item positioned poorly or not adequately described on the menu?
  • Cultural Considerations – Are you trying to sell meat to vegetarians?
  • Seasonality – Is this item more popular at different times of the year?

Tactics for transforming a Puzzle to a Star include:

  • Change the description of the item
  • Change the presentation of the item
  • Change the location on the menu where the menu item appears
  • Change the price of the item
  • Offer the item as a special to increase its’ exposure

Finally, if all efforts to transform your Puzzle into a Star fail, it may be time to consider dumping it in favour of a more popular alternative.

skinny_dog

Following on from the “What is Menu Engineering” Post:

In the previous post we took a look at the Menu Engineering process.  Menu Engineering provides an objective method of classifying menu items.

In this post we look at tactics for managing menu items classified as “Dogs”.  Dogs are low profit and not popular when compared with other menu items.

The first and most obvious question is “why is this item on the menu?”.  In many cases the smart approach is to swap this item out for a more popular and/or profitable Item.  However, there may be cases when an item classified as a “Dog” is worth keeping.

In some cases a menu item may assist to position your establishment in the minds of your customers.  For example an Eastern European restaurant may offer a Steak Tartare consisting of finely chopped raw fillet steak, served with raw egg and traditional accompaniments.  This dish is expensive to produce and appeals to a relatively narrow segment of the market, but plays a part in defining the menu as Eastern European.  In this scenario there may be a case to increase the price of the menu item to move it into the “Puzzle” classification.

Unless there are exceptional circumstances, the “Dog” classification is an indicator that the menu item can be removed from the menu.

Menu Engineering Model

June 23, 2009

Here’s a link to an Excel model I put together to assist with the Menu Engineering process.

MenuEngineeringMenu Engineering Model

The model includes all the formulas to automatically classify your menu items based on popularity & profitability and is easy to use and extend (assuming basic Excel skills).

Please leave a comment if you found it useful.

menu_engineering

Engineering is not a term used frequently in the context of the food industry.  Simply put “engineering” is about appling technical, scentific or mathmatical knowledge to get a desired outcome.

Menu Engineering is about taking a more structured approach to building and monitoring a menu.

There are two key measures required for Menu Engineering: the Contribution and Popularity of each Menu Item.

Contribution is the amount of money we make from a Menu Item.  Assuming we have costed recipes, Contribution is calculated by subtracting the recipe cost from the sale price.

Populatrity is the number of a Menu Item sold in a given period as compared to other Menu Items.  The sales numbers can be based on actual results from a point of sale  system, or estimated/forecast sales.

Menu Items can be classified into the following groups using Contribution and Popularity:

  • Stars – High Contribution & High Popularity
  • Plough Horse – Low Contribution & High Popularity
  • Puzzles – High Contribution & Low Popularity
  • Dogs – Low Contribution & Low Popularity

These classifications provide a structured approach to plan, monitor & review menus.