Proven Menu Engineering Techniques - 2017 Mid America Restaurant Expo

Mid-America Restaurant Expo
Greater Columbus Convention Center
400 N. High Street, Columbus, OH 43215
01/30/2017 | 9:30 a.m. | C-172
k l h f d & C O O d ® l S k & h
Request this speaker today! | 614.558.2239 | info@RestaurantInstitute.com
Presenter: Mark Kelnhofer, MBA, President & CEO, Return On Ingredients®, International Speaker & Author
© 2017 Restaurant Institute LLC | Prerequisite: Course# RI-1001: The Art of Recipe Writing
P.O. Box 2387, Westerville, Ohio 43086 -2387 | 614.558.2239
www.RestaurantInstitute.com | @RestaurantInst | info@RestaurantInstitute.com

 Understanding the importance of accurate
recipe costing as part of the menu
engineering process.
 Understand the impact internally and Understand the impact, internally and
externally, that the menu engineering process
has.has.
 Apply menu rationalization to ensure
consistency, quality and increased efficiency.
 Understand the data that is required to make
an informed decision about your future
menus.

s
+
Culina
mbers
aryAr
heNum
rts
Th

Recipe costing is the base for manyp g y
other aspects of the operations.

Recipe Documentation
Course# RI-1001: The Art of Recipe Writing
• Recipe Requirements
• All processes must be documented
Detailed ingredient descriptions• Detailed ingredient descriptions
• Prep Times and Cook Times
• Yield tests (gains and losses) must be
faccounted for
• Densities of products using portioning
control tools must be documented
• Methods, Pictures, Video
• Tools & Equipment
• Food Safety and Shelf LivesFood Safety and Shelf Lives
• Nutritional Analysis

The
Guest
MENU
ReputationCommunity
MENU
BusinessFamilies
Employees

M R i li iMenu Rationalization
Th i f i lifi dThe creation of a simplified
menu for the sake ofe u fo t e sa e of
operational efficiency and
guest satisfactionguest satisfaction.
Source: Managing Service in Food and Beverage Operations, Fourth Edition,
by Ronald F. Cichy, Ph.D., NCE, CHA and Philip J. Hickey, Jr.,
ISBN-13: 978-0133097269

Do they know their cost?Do they know their cost?
What is their pricing strategy?

Do they know their cost?
What is their pricing strategy?What is their pricing strategy?
• 6 menu items at the same price
point?
• Pricing of $7.42?
• Pricing of $12 06?• Pricing of $12.06?

Question of the Day
H i t ti lHow many intentional
not for profit restaurantsnot-for-profit restaurants
do you know?do you know?

FSR Magazine, By Kevin Hardy, December 2014, p. 71-72.

 Your menu(s) are what you are iny
the business to do.
 Types of Menus
◦ Lunch
◦ Dinner
◦ BrunchBrunch
◦ Banquet
◦ Kids
 Pricing Structures
◦ By Markets, Demographics

Wh t• What are we
engineering?
• Engineeringg g
sections of the
menu

• What are we
engineering?g g
• Engineering
sections of the
menumenu
• Similar dishes in
different categories
should be analyzed
separately.

• What are we
engineering?
• Engineering
sections of the
menu

The components that we will be analyzing:The components that we will be analyzing:
 Menu items in the category
 Quantity/volume sold Quantity/volume sold
 Selling Price
 Unit Cost
PRODUCT COSTS:
Ingredients, Direct
Labor and Variable
 Cost Percentage
 Gross Margin Per Plate
Labor and Variable
Overhead
NEEDS TO COVER
g
 Contribution Margin
◦ Selling Price – Variable Cost = Contribution Margin Per Unit
NEEDS TO COVER:
Fixed Overhead
and Profit

The components that we will be analyzing:The components that we will be analyzing:
 Menu items in the category
 Quantity/volume sold Quantity/volume sold
 Selling Price
 Unit Cost
TOTAL COSTS:
Ingredients, Direct
Labor and Total
 Cost Percentage
 Profit Per Plate
Labor and Total
Overhead
 Total Profit PROFIT

“You cannot placeYou cannot place
percents in yourpercents in your
pocket!”pocket!

Change the focus from costChange the focus from cost
percent to gross margin dollars
Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
GM $s
Pasta Fettucine 1 $11.99 $1.98 16.5% $10.01
Filet Mignon 1 $32.95 $12.49 37.9% $20.46
Which one would you rather have?
Do we focus too much on cost percents?f p

Items that are sold at a loss thatItems that are sold at a loss that
will result in other menu items
being sold at a profit.g p f

Items that are sold at a loss thatItems that are sold at a loss that
will result in other menu items
being sold at a profit.g p f
fDrive profits!

%tyIndex
Star
High PI %, High GM $s
Plowhorse
High PI %, Low GM $s
PopularitP
Puzzle
Low PI %, High GM $’s
Dog
Low PI %, Low GM $s
Average Unit Contribution Margin $

Flaw #1Flaw #1
Traditional Dog/Star reports only
analyze entrees onlyanalyze entrees only.

Flaw #1
analyze entrees only.
Fl #2Flaw #2
The calculation looks as unit
contribution margin as a basecontribution margin as a base.

Unit Contribution MarginUnit Contribution Margin
Unit Contribution Margin =
Sales Price less Variable CostsSales Price less Variable Costs
Our Variable Recipe CostsOur Variable Recipe Costs
Ingredients
bDirect Labor
Variable Overhead

Unit Contribution MarginUnit Contribution Margin
Unit Contribution Margin =
Sales Price less Variable CostsSales Price less Variable Costs
Our Variable Recipe CostsOur Variable Recipe Costs
Ingredients
bDirect Labor
Variable Overhead
Variable Costs
not typically
seen in recipe
costing.

Flaw #1
analyze entrees only.
Fl #2Flaw #2
The calculation looks as unit
contribution margin as a basecontribution margin as a base.
Flaw #3
The graph plots all entrees together.The graph plots all entrees together.

Which menu item should be reviewed?
Menu Item Menu
Price
Unit
Cost
Cost % Unit
Profit $s
SALADS Menu in place for 6 months.
Chopped Salad $5.50 $0.43 7.8% $5.07
Wedge of Iceberg $5.50 $0.33 6.0% $5.17
Caesar Salad $5 50 $0 41 7 5% $5 09Caesar Salad $5.50 $0.41 7.5% $5.09
House Salad $5.50 $0.48 8.7% $5.02
Averages $5.50 $0.41 7.5% $5.09

Menu Item Menu
Price
Unit
Cost
Cost % Unit
Profit $s
Chopped Salad $5.50 $0.43 7.8% $5.07
Wedge of Iceberg $5.50 $0.33 6.0% $5.17
Caesar Salad $5 50 $0 41 7 5% $5 09Caesar Salad $5.50 $0.41 7.5% $5.09
House Salad $5.50 $0.48 8.7% $5.02
Averages $5.50 $0.41 7.5% $5.09
If the decision was based on cost percent alone, the ‘House Salad’
would be reviewed for action.

Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
Profit $s
Total
Profit $s
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
Caesar Salad 1 508 $5 50 $0 41 7 5% $5 09 $7 676Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Averages $5.50 $0.41 7.5% $5.09
If you would have chosen the ‘House Salad’, you would have reviewed
the menu item driving the most dollars to cover fixed overhead costs
and profit and possibly removing it from the menu.

Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
Profit
Total
Profit $s
GM MM Rank
Ch d S l d 1 664 $5 50 $0 43 7 8% $5 07 $8 437 L H Pl h ?
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437 L H Plowhorse?
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116 H H Star?
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676 H H Star?
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246 L H Plowhorse?
Averages $5.50 $0.41 7.5% $5.09
( / ) $ / $MM = (1/4) * .7 = 17.5%; GM = $32,474 / 6,396 = $5.08
Flaw: Gross margin rank for dog/star calculation is based on unit level
only, not extended contribution margin dollars.

Dog/Star Graph
35.0%
House Salad
25.0%
30.0%
ex%
5%
StarPlowhorse
Chopped Salad
Caesar Salad
15.0%
20.0%
arityInd
*.7=17.
17.5%
Wedge Salad
5.0%
10.0%
Popul
(¼)*
.08
Dog Puzzle
0.0%
$5.00 $5.02 $5.04 $5.06 $5.08 $5.10 $5.12 $5.14 $5.16 $5.18
$5
Menu Item Unit Contribution Margin $s
$32,475 / 6,396 = $5.08

%
Stellar The Bank
The Engineer
• Reengineering of Menu Items
• Labor Process Improvements
Alt ti i di t
tyIndex
Stellar - The Bank
• Sacred Items
• Most Profitable Items
• Alternative ingredients
• Menu placement
• Price increase possibility
Popularit
The Push or Sell
• FOH Suggestive Selling
• FOH Contests
The Cellar
• New menu item opportunity
• Exception: Unique menu item
P
• FOH Contests
• Review price with value
proposition; price too high?
• Quality or flavor issue
• Exception: Unique menu item
Menu Item Total Profit $s

35.0%
House Salad
25.0%
30.0%
ex%
%
25.0%
Chopped Salad
Caesar Salad
The StellarThe Engineer
15.0%
20.0%
arityInd
¼)=25.0%
Wedge Salad
10.0%
Popul
(¼
19
The Cellar The Push
0.0%
5.0%
$2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000
$8,11
Menu Item Total Profit $s
$32,475 / 4 = $8,119

Which menu item should be removed?
Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
Profit $s
Profit $s
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
Caesar Salad 1 508 $5 50 $0 41 7 5% $5 09 $7 676Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Averages $5.50 $0.41 7.5% $5.09
The proper item to target to be reviewed is the ‘Wedge of Iceberg’.

What are my options?
 Review the menu placement
 Reengineer an existing menu item
◦ Review process
◦ Alternative ingredients
◦ Price increase
 Remove the item and create a new item

Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
Profit $s
Total
Profit $s
Wedge of Iceberg 1,183 $5.50 $0.33 6.0% $5.17 $6,116
New Menu Item - $TBD $TBD > $5.17
When engineering the new menu item, attempt to
create the item that will increase the averagecreate the item that will increase the average
gross margin on the item being removed. In this
case - $5.17/menu item.

Menu Item Qty
Sold
Menu
Price
Unit
Cost
Cost % Unit
Profit $s
Total
Profit $s
SALADS
House Salad 2,041 $5.50 $0.48 8.7% $5.02 $10,246
Chopped Salad 1,664 $5.50 $0.43 7.8% $5.07 $8,437
Field Greens NEW $5 75 $0 43 7 5% $5 32Field Greens NEW $5.75 $0.43 7.5% $5.32
Caesar Salad 1,508 $5.50 $0.41 7.5% $5.09 $7,676
Averages $5.56 $0.44 7.9% $5.12
When reading the menu, customers read from top to bottom of
the category they are looking at. Place the menu items that
drive the most contribution margin to the top The two topdrive the most contribution margin to the top. The two top
menu items are my highest “The Bank” category items.

Source: Bowen & Morris, 1995; Hug & Warfel, 1991; Kelson, 1994; Scanlon,1998; Main, 1994; Miller, 1992;
Panitz, 2000; National Restaurant Association, 2007;Kotschevar, 2008; Pavesic, D.V., 2011

Source: Glazer, Emily, Wall Street Journal, “The Eyes
Have It: Retailers Now Track Shoppers’ Retinas”, 07/12/2012, p. B1

ABSTRACT
“Results offer an average menu scanpath and suggestsResults offer an average menu scanpath … and suggests
traditional menu “sweet spots” may not exist.”

 If the menu layout is structured If the menu layout is structured
with the most profitable items on
top, it should not be a secret!p
 FOH personnel can play an active
roll in suggesting to the customers
h d fitems that drive profit!

FRIENDLINESS & PRODUCT KNOWLEDGEFRIENDLINESS & PRODUCT KNOWLEDGE

Step 1: Purchased Itemsp
Step 2: Batch Recipes Ingredient
level only
Step 3: Serving Recipes
Step 4: Time Standards
Step 5: Labor and Overhead Rates
Step 6: Performance Benchmarking

Systems & Software (do youry y
research!)
◦ Features (i.e.
recipes production orderingrecipes, production, ordering,
◦ invoicing, menu engineering, etc.)
◦ Service
◦ Cost
◦ Your overall plan (short and long term)

Source: National Restaurant Association (NRA), 2016 Restaurant Industry Forecast

hThe
TopTop
TakeawaysTakeaways

Takeaway #1Takeaway #1
Understand the impact recipe
costing has on menu
engineering If costs areengineering. If costs are
understated, profits are
d!overstated!

Your menu is too
important to guess at!
Guessing is not good enough!Guessing is not good enough!
There is too much as risk.

Unique printed menus should
be engineered separately.
Engineer any menu that is inEngineer any menu that is in
print or displayed.

Engineer sections of menu.
Do not engineer the
complete menu in wholecomplete menu in whole.
Decisions should be made
i hi hwithin each menu category.

“You cannot place percents in
k t !” Shift thyour pockets!”. Shift the
focus from cost percents to
cost volume profit methods.
Look at total profitability!p f y
Money in the bank!

Make decisions not only
based on the passion and
emotion of the menu item –emotion of the menu item
but also empirical data. Be
h di lmethodical.

The menu layout and
placement of menu items
does matter Place higherdoes matter. Place higher
contribution margin items
i d di don top in descending order.

Consider and vet systems to
assist in the process.
Utilizing Excel is both timeUtilizing Excel is both time
consuming and
bcumbersome.

This is your call to action!
Start the process. If you do
not have adequate time ornot have adequate time or
skills, get some professional
assistance!

To ensure success –
The bottom line is
know your costs!know your costs!
Plan for success!
Be proactive, not reactive!

Note: This reference is NOT comprehensive. You need to practice the
costing methods discussed in this presentationcosting methods discussed in this presentation.

Note: This reference is NOT comprehensive. You need to practice thef p p
costing methods discussed in this presentation.

Search “Restaurant Institute”Search Restaurant Institute
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04/17/2017 Columbus OH$149 per person 04/17/2017 - Columbus, OH
8:30 a.m. – 5:00 p.m.
Greater Columbus Convention Center
$149 per person

h d f hThe Agenda for the Day
RI-1001 - The Art of Recipe Writing
RI-1003 - Pumping Up Your Recipe Costing
RI-1004 - Proven Menu Engineering Techniques
Lunch Break
RI-1005 - Understanding Your Financial Statements
RI 1006 A l i F ti M th d T Y O tiRI-1006 - Applying Forecasting Methods To Your Operation
RI-1007 - Implementing Just-In-Time (JIT) Practices
RI-1008 - Performance Benchmarking for Greater Profitability
Evening Networking SessionEvening Networking Session
Designed specifically for managers and operators!
Register at www RestaurantInstitute com/events/Register at www.RestaurantInstitute.com/events/

04/17/2017 - Columbus, OH
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If you have any questions, contact me!f y y q
Mark@RestaurantInstitute.com
614.558.2239614.558.2239

Proven Menu Engineering Techniques - 2017 Mid America Restaurant Expo

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