12.4: Chapter Glossary and Notes

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Glossary

Menu engineering. An interdisciplinary field of study devoted to the deliberate and strategic construction of menus. It is references Menu Psychology. In general, the term menu engineering is used within the hospitality industry (specifically in the context of restaurants), but can be applied to any industry that displays a list of product or service offerings for consumer choice. Typically, the goal with menu engineering is to maximize a firm's profitability by subconsciously encouraging customers to buy what you want them to buy, and discouraging purchase of items you do not want them to buy.

Number Sold. (1) A total of all menu items sold. (2) A total by menu category (appetizers, entrées, desserts, etc.).

Menu Mix (M.M. %). (1) a percentage of the total number of all menu item sales, (2) a percentage of the total number of sales by specific category, (2) both category and total number of all sales.

Item Food Cost (Item F.C.). The food cost of the recipe – with no additional costs added.

Item Selling Price (Item S.P.). The calculated price (possibly a combination of mark-up methods) for an item as stated on the menu.

Item Contribution Margin (Item C.M.). The selling price minus the food cost, (2) various other cost could be subtracted to arrive at the contribution margin figure such as labor and utilities.

Menu Cost. The ‘food cost’ multiplied by the ‘number of items sold’.

Menu Revenue. The item’s ‘selling price’ multiplied by the ‘number of items sold’.

Menu Contribution Margin. The item contribution item multiplied by the number of items sold, (2) the ‘menu revenue’ minus ‘menu cost’.

Food Cost. The ‘menu cost’ divided by ‘menu revenue’.

Average Contribution Margin. Contribution margin divided by number of item sales. (2) ‘Contribution’ calculates by item, menu category, or total menu items.
Revenue per Average Seating Hour (REV PASH). Total menu revenue divided by the total number of covers served. Computing total possible revenue if all seats are in occupancy.

Revenue per Occupied Seating Hour (REV POSH). The total sales per hour divided by the number of covers served per hour. Your actual revenue.

Stars. A ‘Star’ is extremely popular and has a high contribution margin. Ideally, Stars should be your flagship or signature menu items.

Plow Horse or Workhorse. A ‘Plow Horse’ is high in popularity but low in contribution margin. Plow horse menu items sell well, but do not significantly increase revenue.

Puzzles. A ‘Puzzle’ is generally low in popularity and high in contribution margin. Puzzle dishes are difficult to sell but have a high profit margin.

Dogs. A ‘Dog’ is low in popularity and low in contribution margin. They are difficult to sell and produce little profit when they do sell.

Contribution margin. The excess between the selling price of the good and total variable costs. For example, if a product sells for $100, total fixed costs are $25 per product and total variable costs are $60 per product, the product has a contribution margin of the product is $40 ($100 - $60). This $40 reflects the amount of revenue collected to cover fixed costs and retention as net profit. Fixed costs are not a part of calculating the contribution margin.

Break-even point. In sales dollars, breakeven calculates by dividing ‘total fixed costs’ by the ‘contribution margin ratio’. The contribution margin ratio is the contribution margin per unit divided by the sale price. Using the example above, the contribution margin ratio is 40% ($40 contribution margin per unit divided by $100 sale price per unit). Therefore, the break-even point in sales dollars is $50,000 ($20,000 total fixed costs divided by 40%). This figured may be confirmed as the break-even in ‘units’ (500) multiplied by the sale price ($100) equals $50,000.

Costing a menu. Refers to the process of breaking down every item on your menu to its individual ingredients and determining exactly how much it costs to create each of these items. Establishments absolutely must cost their menu to the penny for food (not labor) costs because the engineering process depends heavily on the profitability level of each menu item.

One-panel menu. People make decisions faster with these menus, but they will not order as much, thus leading to lower profitability per customer. The reason for this phenomenon is that this menu cover configuration does not evoke a full dining experience; it indicates something more light and casual.

Two-panel menu. Whenever possible, this is the best configuration to use. It is easy to read and induces the strong feeling of a full dining experience.

Three-panel menu. This is a valid choice if you have many items to sell and need the space, but the two-panel version is easier to read.

Many-panel menu. The more panels you have in your menu cover the less control you have over the menu. Larger menus hinder your ability to influence customers’ actions.

Notes

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