Level 2-Menu pricing

© Copyright 2017 by the National Restaurant Association Educational Foundation (NRAEF). All rights reserved.

MENU OVERVIEW

MENU TYPES

•THE MENU IS THE NUMBER ONE SELLING
TOOL.

•SALES ARE INITIALLY WON OR LOST WHEN THE
GUEST SEES THE MENU

•8 COMMON TYPES OF MENU USED IN
RESTAURANTS

•A LA CARTE: EVERY ITEM AND COURSE IS
PRICED SEPARATELY.

•IF YOU WANT FRIES WITH THE STEAK, YOU PAY
FOR THEM!

•DU JOUR MENU: MEANING “OF THE DAY”

•LISTS ITEMS THAT ARE AVAILABLE ON THAT DAY

MENU TYPES

•CYCLICAL MENU: MENU ITEMS
CHANGE AFTER A CERTAIN
PERIOD OF TIME, COULD BE
SEASONAL MENUS.

•LIMITED MENU: MINIMAL MENU
OFFERINGS.

•MAKE COSTING AND KEEPING
TRACK OF ITEMS EASY.

•USED IN QUICK SERVICE AND
CAFES

MENU TYPES

•FIXED MENU: OFFERS THE SAME
ITEMS EVERYDAY.

•USUALLY USED IN ADDITION TO A “DU
JOUR” MENU FOR SPECIALS

•CALIFORNIA MENU: ALL MEALS ARE
AVAILABLE ALL DAY LONG. 24 HOURS.

•YOU CAN GET BREAKFAST AT NIGHT
AS AN EXAMPLE

MENU TYPES

•PRIX FIXE MENU: MEANING “FIXED
PRICE” ALL ITEMS ARE OFFERED AT
ONE PRICE. INCLUDES THE
APPETIZER, SALAD, BEVERAGE,
ENTRÉE AND DESSERT.

•TABLE D'HÔTEL MENU: BASICALLY
THE SAME AS A FIXED PRICE MENU
BUT BUNDLES VARIOUS ELEMENTS
INTO ONE PACKAGE. VERY POPULAR
IN BANQUET FACILITIES, PARTY
CENTERS.

•LIMITED TIME OFFER: MENU ITEMS
ONLY OFFERED FOR A VERY SHORT
PERIOD OF TIME

ORGANIZING A MENU

ORGANIZED BY WHEN ITEMS ARE ORDERED

SAMPLE ORDER:
• APPETIZERS
• SOUPS
• SALADS
• SANDWICHES (CAN ALSO BE BEFORE SALADS)
• ENTRÉES
• VEGETABLES
• DESSERTS
• BEVERAGES

CREATING A MENU: PLANNING

• PHYSICAL LAYOUT OF FACILITY

o SIZE OF FACILITIES: STORAGE, PREP, COOKING AREAS
o DETERMINES EFFICIENCY OF PRODUCTION AND TYPE OF MENU

• SKILL OF PERSONNEL

o NEED SKILLED CHEF TO PRODUCE SPECIALIZED ITEMS
o SKILL LEVEL OF STAFF SHOULD MATCH FOOD ITEMS

• AVAILABILITY OF INGREDIENTS

o BALANCE COST OF INGREDIENTS TO EXPECTED PROFIT
o CONSIDER COST AND AVAILABILITY OF INGREDIENTS

CREATING A MENU: PLANNING

• WANTS AND NEEDS OF TARGET MARKET

o FOCUS ON GUEST PREFERENCES

RATHER THAN THOSE OF
OWNERS/MANAGERS

• EXPECTATIONS OF TARGET MARKET

o MEETING GUESTS’ NEEDS
o IMPORTANT TO BE CONSISTENT

• PROFIT MARGIN

o PROFIT: AMOUNT OF MONEY LEFT

AFTER EXPENSES ARE PAID

o OPERATIONS SHOULD SET A TARGET

MARGIN OF PROFIT

CREATING A MENU: DESIGNING

• SHOULD BE EASY TO UNDERSTAND AND

REFLECT OPERATION’S DESIGN

• VARIOUS ELEMENTS OF MENU DESIGN

o MEDIUM- HOW IT IS PRESENTED
o LAYOUT – THE ORDER OF THE ITEMS
o COLOR
o FONT – EASILY READ
o ART – FOR KIDS, FOREIGNERS

MENU SALES MIX ANALYSIS

• SALES MIX ANALYSIS

o ANALYSIS OF POPULARITY AND PROFITABILITY OF MENU ITEMS
o IDEALLY PERFORMED FOUR TIMES A YEAR
o DETERMINE MENU CHANGES

• MENU ENGINEERING

o BREAKS DOWN A MENU’S COMPONENTS
o DETERMINES THE SALES PERFORMANCE OF MENU ITEMS
o DATA COLLECTED AFTER CERTAIN AMOUNT OF TIME

MENU SALES MIX ANALYSIS

• SALES VOLUME

o NUMBER OF TIMES ITEM IS SOLD IN A CERTAIN TIME PERIOD
o QUANTITY RECORDED BY HAND OR POS SYSTEM

• SALES VOLUME PERCENTAGE

o NUMBER OF EACH MENU ITEM SOLD TO TOTAL SALE
o PERCENTAGE OF TOTAL SALES

PRICING THE MENU

• PRICING A MENU DETERMINES PROFITABILITY

o PRICE MUST ACCOUNT FOR COSTS
o COSTS INCLUDE FOOD, LABOR, AND OVERHEAD

o WHAT IS OVERHEAD IN A RESTAURANT?
o THINGS NOT DIRECTLY RELATED TO THE FOOD OR LABOR
o WINDOW WASHING FEES
o FLOWERS FOR TABLES
o LINENS
o ANYTHING ELSE?

CLASSIFYING MENU ITEMS

• FOUR CATEGORIES OF MENU ITEMS

o STARS
o PLOW HORSES
o PUZZLES
o DOGS

CLASSIFYING MENU ITEMS

• STARS

o POPULAR AND PROFITABLE
o PRIORITIZE ON MENU, DON’T WORRY ABOUT

BEING HIGH PRICED

o HIGHEST-PRICED ITEMS

• PLOW HORSES

o POPULAR, LESS PROFITABLE
o CAN INCREASE RESTAURANT’S POPULARITY
o MONITOR PROFIT OF ITEM

Multiple Choice

What is an example of a "Star," when classifying a menu?

• Chicken Tikka Masala
• Caesar Salad with Croutons
• Grilled Salmon with Lemon Butter Sauce
• Spaghetti Bolognese

Multiple Choice

What is an example of a "Plow Horse," when classifying a menu?

• Caesar Salad
• Grilled Salmon
• Vegetable Stir Fry
• Cheeseburger

CLASSIFYING MENU ITEMS

• PUZZLES

o UNPOPULAR BUT PROFITABLE
o LIMIT PUZZLES ON MENU
o PROMOTE WITH ADVERTISING, MENU

PLACEMENT, NAME CHANGE

o DECREASE MENU TO HELP WITH

POPULARITY

• DOGS

o UNPOPULAR AND UNPROFITABLE
o REMOVE FROM MENU IF POSSIBLE

Multiple Choice

What is a example of a "Dog," when classifying menu items?

• Seasonal dessert special
• Popular salad that sells well
• Gourmet burger that rarely sells
• Daily soup of the day

Multiple Choice

What is an example of a "Puzzle," when classifying a menu?

• A traditional burger served with fries.
• A salad with mixed greens and dressing.
• A deconstructed sandwich with separate components to assemble.
• A bowl of soup with bread on the side.

CLASSIFYING MENU ITEMS IN A VIDEO

PRICING MENU ITEMS: FOOD COST PERCENTAGE METHOD

• FOOD COST PERCENTAGE IS SET IN ADVANCE
• EXAMPLE: ALL ITEMS MUST BE COSTED AT A 33% FOOD COST
• HERE IS THE FORMULA:

o ITEM FOOD COST ÷ FOOD COST PERCENTAGE = MENU PRICE

EXAMPLE:
IT COSTS US 8.00 TO MAKE THE SALMON ENTRÉE
MY BOSS TELLS ME THAT OUR MENU MUST BE COSTED OUT AT 33% FOOD COST
8.00 / .33 (33%) = $24.242
MY MENU PRICE FOR THAT SALMON ENTRÉE SHOULD BE $24.24
ALWAYS TRY TO ROUND UP TO AN EASY TO READ NUMBER ($24.50)

Math Response

It cost $12 to make a Filet mignon entree. How much is that on a menu with a 33% Food cost percentage?

Type answer here

Correct Answer: 12\div.33=36.36

Deg^°

Rad

PRICING MENU ITEMS: CONTRIBUTION MARGIN METHOD

• USES DATA TO DETERMINE DOLLAR AMOUNT TO BE ADDED TO ITEM’S COST
• WORKS FOR À LA CARTE ITEMS AS WELL AS GROUPED ITEMS
• CAN DETERMINE PRICE FOR ALL MENU ITEMS OR EACH SEPARATELY
• TWO-STEP FORMULA

o (TOTAL NONFOOD COST + TARGET PROFIT) ÷ NUMBER OF GUESTS =

CONTRIBUTION MARGIN

o CONTRIBUTION MARGIN + FOOD COST = MENU PRICE

o EXAMPLE:
o IT IS DETERMINED THAT THE CONTRIBUTION MARGIN DOLLAR AMOUNT IS $5.00
o IT COSTS US $8.00 TO MAKE THAT SALMON ENTRÉE
o WE NOW ADD $5.00 TO THE PRICE OF SALMON ENTRÉE
o $5.00 + $8.00 = $13.00 MENU SELLING PRICE