Menu Planning, Costing, Engineering
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Menu Planning, Menu Costing and Engineering.
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Menu Planning, Costing, Engineering
- 1. Menu Planning, Menu Pricing & Menu Engineering Food & Beverage Management III Yr. Bhavin Parekh 07/11/10 F&B Management - III Yr. - Bhavin Parekh
- 6. FLOW CHART OF CONTROL POINTS Menu Planning Purchasing Receiving Storing Issuing Preparing Cooking Holding Serving Guest Satisfaction Production Activities
- 21. Priority Concerns of the Menu Planner Guest Quality of Item Wants & Needs Concept of Value Item Price Object of Visit Socio - Economic Demographic Concerns Ethnic / Religious Concerns Cost Availability Peak Volume Production / Op. Concerns Sanitation Layout Equipment Flavor Visual Appeal Temperature Texture/Shape Aroma Consistency Nutrition
- 73. MENU MIX POPULARITY CONTRIBUTION MARGIN THE MENU ENGINEERING GRID PUZZLES PLOWHORSE STARS DOGS PUZZLES
- 90. COMPUTER BASED MENU MANAGEMENT – Sample Menu Item Analysis Report
- 91. COMPUTER BASED MENU MANAGEMENT – Sample Menu Mix Analysis Report
- 92. COMPUTER BASED MENU MANAGEMENT –
- 93. COMPUTER BASED MENU MANAGEMENT – Four Box Analysis ************************************************************ STARS DOGS HORSE PUZZLE NY Strip Steak Top Sirloin Fried Shrimp Fried Chicken Prime Rib Red Snapper Tenderloin Tips King Prime Rib Lobster Tail Chopped Sirloin
- 95. Additional Information (For the Smart Guys Only) 07/11/10 F&B Management - III Yr. - Bhavin Parekh
Editor's Notes
- As per the Control Point Chart we can define the following: Serving: It is defined as the Flow of Products from the Kitchen into the hands of the Servers / Waiting Staff. Service: On the other hand Service can be defined as the Flow of Products from the Servers / Waiting Staff to the Guests. Inferences from the Flow Chart: Preparing / Cooking / Holding Control Points are grouped under the broad category of Production Activities as they take pace in the kitchen. Beginning with Menu Planning, each Control Point plays a crucial role in determining the success or failure of the Food & Beverage Operation. Each Control Point is a Miniature System with its own Structure and Functions. Each Control Point (Basic Operating Activity) has it’s own Specific Objectives, Guidelines, Standards and Internal Processes that contribute to the success of the Operation and the Ultimate Goal: GUEST SATISFACTION.
- The Menu has an impact on all aspects of Food & Beverage Operation: It creates an image of your operation in the minds of the Guests. It satisfies his needs. It influences his purchasing decisions. It merchandizes your products.
- Example: There may be a Grill Station in the Kitchen as per the requirements of the Menu. If most of the Menu Items have Grilling as their method of Cooking, then the Grill Station would be highly pressurized during the Peak Operation hours, while the other station, for example the Hot Range / Oven would be under – utilized.
- Note: Let us consider an Operation with a single Product to offer, say a Burger. It becomes fairly simple to control the Revenue in such an Operation. If each Burger costs INR. 50.00, then a Sale of 100 Units in through the day should see a Revenue of INR. 5000.00. Also, Product Inventory Procedures become very simple. If there are 100 Burger Buns consumed through the day, it is logical that 100 Burger Patties would also be consumed and that the sale for the day would be 100 Units. If the per unit cost is INR. 50.00, then the Revenue would be INR. 5000.00. However, in the case of a Specialty Restaurant, this would not be a simple process. Such a Restaurant may have a long list of Beverages and Food Items. Each of these items have a different Selling Price on the Menu. It becomes more complex to ascertain the Revenue from the Sale of each Menu Item and hence the Total Revenue of the Operation. Inversely, the Product Control Procedures (Inventory) is also complex as one ingredient may be a component of several different Menu Items. It is hard to determine the Menu Mix of Items based upon mere Inventory. There are greater chances of Theft by the Staff, wherein the Item is Produced and Served to the guest, but the Revenue is pocketed.
- Notice that the most important concerns for a Menu Planner are for Guests and the Quality of the Items.
- Today, most Food Service operators are searching for new menu item alternatives. The increasing number of Convenience Foods available have made it possible for such Operators to offer additional Menu Items / Increase Menu Variety without having to buy additional Equipment for Production or increasing their Labor Costs, as such foods have built – in labor. However, Convenience Foods have a Higher AP Price than Raw Ingredients from which they are made.
- Modular Cuisine: Menus designed with interchangeable Courses.
- F&B Outlets situated in Transient Hotels (Airports / Railway Station / Ports). The clientele changes frequently hence having a Static Menu (Not Changing for a Pre – Determined Period of time) would be suitable. Daily Specials can be added to a Menu of a F&B Operation where the Clientele is repetitive. This adds more choice for the Customers and at the same time the F&B Operator can make use of the Freshly available Seasonal Local Ingredients to prepare dishes. This reduces his AP Price of Raw Ingredients and contributes to a greater extent to his Profit Margin, as such Specials have a higher Contribution Margin (Low Costs and can be priced at a Premium)
- External Factors: Consumer Demands: They are the most important factor in deciding whether a Menu Change must be effected or not. A F&B Operation may change the menu based upon the Clientele that it intends to target. After changing the menu, it must be evaluated in light of the Positive or Negative effects it may have on the existing Customer Base. Economic Conditions: These will ultimately decide the Price of your Raw Materials and hence their Contribution Margin and Profitability of your Operation. c) Competition: Competition will also play a role in deciding what items you will place in your menus. Example: You might want to add to your menu some Popular (Fast Moving) items that your Competitor is selling in order to retain your existing clientele and attract more customers. Also, if your competitor is an Oriental Food Restaurant serving the Best Food in town, you might not want to add Oriental Cuisine to your menu. Instead offer something different like Italian / Continental. d) Supply Levels: Supply Level relate the price to the Quality and Quantity. Supply Levels are varied for some seasonal raw ingredients. Hence, adapting the menu to these changes is highly advisable for maintaining a Profitable Operation and keeping the Consistency of Value for Money from the Guests Point of View. e) Industry Trends: Provide general information about the Dining Trends and “Value for Money” from the Customer’s point of view. Trends currently point to a sophisticated Consumer looking for a higher “Price – Value” relationship. Internal Factors: Facility’s Meal Pattern: A typical meal pattern is Breakfast / Lunch / Dinner. Management must decide if the existing Meal Patterns should be continued or not. Based upon the “Load” during each serving period. Target Market’s expectations have a direct influence on this decision. Concept / Theme: Any change must fit the Operation’s Theme. Example: The Steak House in the city might do more harm than good by adding an extensive variety of Fish and Shell Fish to it’s menu. An establishment’s image may rule out certain menu items. Example: An ethnic Italian Restaurant also adding Chinese Cuisine to it’s menu due to popularity. It just does not fit into the projected image of the restaurant. Menus are also modified by the establishment’s Operational System. For example: a new menu may demand extensive purchasing of costly equipment. This process may prove too costly for the operation. One also has to look into the Skills of the Labor (Production and Service)
- Base Selling Price is necessarily the Final Selling Price of the Product. Rather the Base Selling Price or B.S.P. is the starting point to which other Operational Costs must be accurately assessed and added to reach upon the Final Selling Price. Note: The Ingredient Costs (In this case the Standard Recepie Cost / portion) can be determined from the Standardized Recepie Costing. In order to determine the Multiplier we need the Desired Food Cost . Now Food Costs can be obtained from In – House Analysis of your Menu Item Sales over a period of time. On this we arrive at the Standard Food Cost of the Operation. This can be computed on a daily basis.
- Base Selling Price as mentioned before is not necessarily the Selling Price of the Item. This Price is further subjected to Increases based upon your Non – Food Costs (Labor / Utility) in order to cover them. The Costs are then compared to the Market Rates (Competition). If found to be at par, then the B.S.P. becomes the Selling Price of the Item. Else it has to undergo further adjustments.
- Plate Cost: The Plate Cost is defined as the Average Cost of All Non - Entrée Items or other relatively inexpensive items with compliment the Entrée / Main Course. This might include Salads / Vegetables / Potato Dish / Bread and Butter / Juices etc.
- The advantage of this method is it’s simplicity. We can save a lot of time as only the Food Costs / Portion of the Entrees have to be calculated and the other Costs of relatively inexpensive Non – Entree items accompanying the Main Course are simply added up into a Plate Cost. This Pricing method is very good for F&B Operations offering a choice of Entrees with a variety of Accompaniments like Potato / Vegetables / Salads / Juices etc. The Only Disadvantages of this type of Pricing method is that the Plate Costs are not truly representative of the Costs associated with Non – Entree Items.
- Determining Desired Food Cost %: Desired Food Cost % is the most important step in the Mark – Up Pricing methods. In order determine the Food Cost % Managers takes the following approaches: For some Managers, Determining the Desired Food Cost % is based upon experience. At times it is the “ Rule of Thumb ”, such as the Traditional 40%. Some Manager’s use the Food Cost % of last year. Some use Industry averages published by journals. Another source to obtain the desired Food Cost % is from the Operating Budget of the Operation. However, the impact of Sales Mix cannot be overlooked i.e. if your operation sells more High Cost Menu Items than the low Cost Menu Items, the Food Cost % is bound to go up. However, if your Multiplier is determined by the Desired Food Cost % from the Operating Budget, then it will yield undesirable financial results.
- Advantages of the Contribution Pricing Method are that: It is fairly simple to calculate the Base Selling Price and that the information on which the calculations are based is accurate as this is derived from the Operating Budget. It is practical to use this method, when the costs of serving the Guest are the same. This could be the case with a Fast Food Joint like McDonalds. However, in a fine dining we are not being fair to our clientele as we are evenly dividing the Non Food Costs (Labor / Utilities) and the Profit Requirements among all the guests irrespective of what they order. Example of : Guest A Ordering for Sweet Corn Chicken Soup . Cost per Portion $ 1.5 Guest B Ordering for Peking Duck. Cost per Portion $ 5.5 Using the Contribution Pricing method with all other data remaining the same, the Base Selling Price for the above mentioned items would be: Sweet Corn Chicken Soup = $ 6.152 + $ 1.5 = $ 7.652 Peking Duck = $ 6.152 + $ 5.5 = $ 11.652 We observe that the Cost of N.F.C. and Profit Requirements is shared by both Guests Equally. But this is not being fair to our clientele. N.F.C. related to the Preparation of Sweet Corn Chicken Soup are far less than those associated with the Preparation of the Peking Duck (We are basically referring to Labor Cost and the Cost of Utilities). Hence, a fair share would be to associate a larger portion of the N.F.C. to the Peking Duck then the Sweet Corn Chicken Soup.
- Ratio Pricing Method is simple to use and the Raw Data is accurate as this is derived from the Operating Budget of the Food and Beverage Operation. Disadvantages: Each Meal equally shares the Non – Food Costs and Profit Requirements. The Ratio Pricing Method does not compensate for the Higher Labor Costs that are involved in the preparation of certain Menu Items. Taking the same example as previously of the Sweet Corn Chicken Soup and the Peking Duck. Determining the Base Selling Price of these items using the Ratio Pricing Method: Ratio is 2.03. Standard Food Cost of the Menu Items: Sweet Corn Chicken Soup = $ 1.5 Peking Duck = $ 5.5 B.S.P. of Sweet Corn Chicken Soup Amount of N.F.C. + Profit Requirements = $ 1.5 x 2.03 = $ 3.045 B.S.P. = $ 3.045 + $ 1.5 = $ 4.55 B.S.P. of Peking Duck Amount of N.F.C. + Profit Requirements = $ 5.5 x 2.03 = $ 11.165 B.S.P. = $ 11.165 + $ 5.5 = $ 16.665 In this case, we find that the Customer pays for N.F.C and Profit Requirements according to the Menu Items that he orders. If the Guest orders for a menu items which is easier to prepare and is less labor intensive he pays only $ 3.045 but in the case of the Peking Duck is the amount he pays is $ 11.165 The disadvantage is that Labor Costs are equally shared among the dishes offered.
- This method is very similar to the Ingredients Mark – Up Method in that instead of considering the Ingredients Costs only, we consider the Prime Cost which includes the Ingredients Cost + Labor Cost. The Multiplier here is determined on the basis of the Desired Prime Cost % instead of the Desired Food Cost %. Hence, this method takes into account Labor Costs associated with the F&B Operation.
- Hiking Up the Prices of Menu Items or Decreasing the Pricing: When we hike the Prices of the Menu Items, fewer Menu Items would have to be sold in order to Meet Profit Requirements. However, Hiking up the Price of the Menu Items is worthwhile only if the Revenue generated from the Price Hike is sufficient to counter the Loss due to fall in demand for your Menu Item. In some cases it may be worthwhile to Drop the Prices of the Menu Items. This would Increase demand (Volume) and hence compensate for Profit Requirements by increasing total revenue. Economic Concept of “Elasticity of Demand” comes into the picture here.
- Computation of Average Contribution Margin: Contribution Margin = Selling Price – Food Cost. Hence, Contribution Margin is the amount of money left with the Operator to meet Non – Food Costs and Profit Requirements. The Contribution Margin of every dish is hence known. In order to Compute the A.C.M. we would require the Total Revenue Generated through selling of Menu Items and the Total Food Cost. Hence, Total Contribution Margin = Total Revenue Generated – Total Food Cost Therefore, Average Contribution Margin = Total Contribution Margin / Total No. of Items Sold
- Increase in the Prices: If the Price of a certain Menu Item is to increased, then it should be done in several stages rather than doing it one time. Test the demand for the Menu Item at every stage of the Price Increase. It might also help to Re-Package the Product .
- Menu Engineering can be used to Objectively to evaluate Menu Revision. Let us suppose that in the Old Menu, the Average Contribution Margin was $ 2.50 and with the revised menu the C.M. is $ 2.75. Then, we can consider the New Menu to be better than the old menu as long as there no decrease in the Guest Count. With the new menu in place, the Guest leaves $ 0.25 more towards the Contribution Margin of the F&B Operation.