How is restaurant menu engineering calculated?

1.Menu Mix:

Menu mix is the percentage of total sales that each menu item generates. To calculate menu mix, divide the sales revenue for each menu item by the total sales revenue for your restaurant. This gives you the percentage of sales that each menu item generates. By analyzing your menu mix, you can identify your most popular and profitable items. You can use this information to highlight these items on your menu and adjust pricing and placement to maximize sales and profits.

2.Contribution Margin:

Contribution margin is the profitability of each menu item. It is calculated by subtracting the variable cost of the item from the item’s selling price. To calculate contribution margin, you need to know the variable cost of each menu item, including the cost of ingredients, labor, and other expenses that are directly tied to the production of the item. You can then subtract the variable cost from the selling price to determine the contribution margin. By analyzing contribution margin, you can identify your most profitable items. You can use this information to adjust pricing, portion sizes, and menu placement to maximize profitability.

3.Menu Engineering Grid:

The menu engineering grid is a tool that helps you analyze your menu items based on their popularity and profitability. It divides your menu items into four categories: stars, plow horses, puzzles, and dogs. Stars are high-profit and high-popularity items that should be prominently featured on your menu. Plow horses are high-popularity but low-profit items that should be evaluated for potential price increases or cost reductions. Puzzles are low-popularity but high-profit items that may require a menu description or design changes to increase their appeal. Dogs are low-profit and low-popularity items that should be removed from your menu. To determine which category each menu item falls into, you need to analyze its contribution margin and menu mix. You can then plot each item on the menu engineering grid to identify opportunities for improvement.

4.Menu Item Profitability:

To calculate the profitability of each menu item, you need to analyze its total revenue and total cost. This includes the fixed costs of running your restaurant, such as rent, utilities, and labor, as well as the variable costs associated with producing each menu item. Once you have calculated the total revenue and cost for each menu item, you can determine its profitability by subtracting the total cost from the total revenue. Analyzing menu item profitability can help you identify which menu items are driving your profits and which items may need to be adjusted or removed from your menu.

5.Cost of Goods Sold (COGS):

Cost of goods sold refers to the cost of the ingredients and materials used to produce each menu item. To calculate COGS, you need to know the cost of each ingredient and the portion size used in each menu item. Analyzing COGS can help you identify which menu items are the most expensive to produce and where you can potentially reduce costs.

In conclusion, restaurant menu engineering involves analyzing various metrics to evaluate the performance of your menu items. By understanding these metrics and using them to strategically design and price your menu, you can maximize profits and customer satisfaction.