Menu Engineering in Hotel: Definition Formulae Importance Advantages & Limitations

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What is Menu Engineering?

Menu engineering is a strategic approach to designing menus in the food and beverage service industry that focuses on maximizing profitability and customer satisfaction. It involves analyzing the popularity and profitability of menu items and strategically adjusting pricing, promotion, and placement to optimize revenue.

The goal of Menu Engineering is to maximize a firm’s profitability by subconsciously encouraging customer to buy menu items that are more profitable to the business and discouraging purchase of items that are less so.

Formula and Example of Menu Engineering

Menu engineering formulae for Calculation

Food cost percentage is calculated by dividing the cost of the menu item ingredients, including surrounding dish items, e.g., salad, bread and butter, condiments, etc. by the menu price.

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Contribution (gross profit) is calculated by subtracting the menu cost from the menu price. Restaurants typically identify menu items with the highest gross profit, items like steaks and seafood, as the items to promote.

You can see that in above image I included the necessary formulae of Menu Engineering

Menu mix refers to the popularity/customer preference for menu items.

4 Categories or Matrixes of Menu Engineering

Categories of menu engineering

Stars – Popular and profitable. Maintain quality and popularity. Try to increase price slightly for higher profitability.

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Plowhorses – Popular, but relatively unprofitable. Retain on menu, try to improve their contribution margin. Reduce portion size, raise price slightly or club with other items.

Puzzles – Comparatively profitable but relatively unpopular. Retain on menu, help to improve popularity by repositioning on menu to improve visibility, offer better food descriptions, change appearances to increase appeal.

Dogs – Both unpopular and unprofitable. Replace with more profitable items.

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Multi disciplinary approach of Menu Engineering

Fields of study which contribute most to menu engineering include:

  • Psychology (perception, attention,Emotion/effect)
  • Managerial accounting (contribution margin and unit cost analysis)
  • Marketing and strategy (pricing, promotion)
  • Graphic design (layout, typography)
  •  Psychology (perception, attention,Emotion/effect)

Psychology (perception, attention,Emotion/effect)

Perception and attention—Visual perception is inextricably linked to how customers read a menu. Most menus are presented visually and the majority of menu engineering recommendations focus on how to increase attention by strategically arranging menu categories within the pages of the menu, and item placement within a menu category.

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Customer perception of items offered on a menu can also be affected by subtle textual manipulations.

Manipulations Descriptive labelling of item names may produce positive effects, leading to higher customer satisfaction, and higher perceived product value.

Managerial accounting (contribution margin and unit cost analysis)

Contribution margin analysis – The contribution margin is the difference between the menu item’s price and its variable costs, and it indicates how much each item contributes to the restaurant’s profitability.

Unit cost analysis – Unit cost analysis involves calculating the total cost of producing a single unit of a menu item, including direct costs like food and labor and indirect costs like overhead.

Marketing and strategy (pricing, promotion)

Pricing – Menu engineering helps food and beverage managers make strategic pricing decisions by analyzing the contribution margins of each menu item. By understanding the costs and profit margins of each item, managers can set prices that maximize profitability and appeal to customers.

Promotion – Menu engineering helps managers determine which items to promote and how to promote them. By categorizing items into stars, plowhorses, puzzles, and dogs, managers can focus on promoting the most profitable items and finding ways to increase sales of the less profitable items. This can be done through targeted marketing campaigns, menu redesign, and promotions such as happy hour specials or discounts on slow-moving items.

Graphic design (layout, typography)

Layout – The layout of the menu should be easy to read and navigate, with clear sections and categories for different types of items. Items should be listed in a logical order, such as from appetizers to entrees to desserts, and any specials or promotions should be prominently displayed.

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Typography – The font used in the menu should be clear and easy to read, with consistent sizing and spacing. Managers can use different fonts or sizes to highlight certain items, such as the most profitable ones, or to create a sense of hierarchy and organization within the menu.

Color – Color can be used to draw attention to certain items, such as highlighting the most profitable ones in a different color or using color-coding to group items by category. Managers should also consider the psychology of color, such as using warm colors like red and orange to stimulate appetite, or cool colors like blue and green to create a sense of calm.

Imagery – The use of images in menus can be a powerful tool to stimulate appetite and make certain items stand out. Managers should choose high-quality images that accurately represent the item and make it look appealing.

Role of Menu Engineering in Food and Beverage service

Menu engineering plays a crucial role in the success of a food and beverage service establishment by maximizing profitability, improving customer satisfaction, managing inventory and waste, and supporting marketing efforts. Below I will tell you in detail information how it can be effective in Food and Beverage.

Maximize profitability

Menu engineering helps to identify the most profitable items on the menu, and to promote those items to customers through strategic placement and pricing. By emphasizing high-profit items, menu engineering can increase revenue and improve the bottom line.

Increasing customer satisfaction

By offering a well-designed and balanced menu that caters to different tastes and dietary preferences, menu engineering can enhance the customer experience and satisfaction. This, in turn, can lead to repeat business and positive word-of-mouth recommendations.

Managing inventory and waste

Menu engineering can help to manage inventory and reduce waste by promoting items that use ingredients that are readily available and in season. Additionally, it can help to identify items that are not selling well, and to adjust the menu accordingly to reduce waste.

Supporting marketing efforts

Menu engineering can support marketing efforts by highlighting signature dishes, promoting specials, and using enticing descriptions and imagery to entice customers.

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Importance of Menu Engineering

  • Maximize profitability and revenue.
  • Optimize menu offerings based on customer preferences.
  • Control food costs by minimizing waste and optimizing ingredient use.
  • Improve customer satisfaction and experience.
  • Support marketing efforts to attract new customers and build a loyal customer base

Advantages of Menu Engineering

  • Menu engineering helps to streamline the portion size.
  • Increased profitability and revenue by identifying and promoting high-profit items.
  •  Helps revise the purchase specifications.
  •  Improves staff productivity & innovation.
  • Limited menu items helps to reduce inventory, space requirements and expenditure on equipment.

Limitation of Menu Engineering

  • Menu engineering may not account for external factors that can impact sales, such as changes in the economy, weather, or local competition.
  • The analysis required for menu engineering can be time-consuming and may require a significant amount of data to be collected and analyzed.
  • Menu engineering may not take into account the intangible factors that can impact customer satisfaction, such as the ambiance, service quality, or brand reputation of a restaurant.
  • Menu engineering can be limited by the creativity and expertise of the menu designers, who may not be able to come up with innovative menu ideas or effectively execute them.
  • Menu engineering may not be effective for all types of food and beverage service establishments, as it may not be suitable for establishments with highly specialized menus or unique customer demographics.

Conclusion

In conclusion, menu engineering is a strategic process used in the food and beverage service industry to design a menu that maximizes profitability and customer satisfaction. It involves analyzing and manipulating the menu to influence customer behavior and increase revenue. The formulae used in menu engineering includes the analysis of sales data, food costs, and customer preferences.

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