Step 1 – Collect the Necessary Data

Determining the cost and margin of a menu item is made relevant to your business when real sales data is collected. Most point-of-sales systems will do this job for you by providing a report listing each menu item and the corresponding number sold. The quantity sold is the relevant number for this comparison, not the sales ($) of each item.

Choose a period to collect data, or take a «snapshot» in time. We recommend a minimum of four weeks of data, though increasing the period provides better representation. Obviously promotions or specials will skew the numbers so try to look at a period that is not influenced by incentives. Also, group the items by category, such as entrée, appetizer, salads, etc. For our examples, we will only be looking at entrées and how they perform against each other.

You will notice on the sample report that the New York steak represents only 14.8% of the sales mix but 32.6% of the revenue generated.

Step 2 – Calculate the Food Margin

Food Margin, unlike Food Cost, measures dollars rather than percentages. After all, you bank dollars and your financial statements are based on dollars. To accurately calculate a plate’s margin, like anything, you will need accurate inputs. This means that you must:

• Use up-to-date pricing for all your ingredients. Prices change regularly. If you are using last year’s pricing for striploins, your calculations will be out.
• Account for any yield loss of the raw ingredients. For example, you may pay $14.00/ kg for a whole striploin but only use center-cut steaks in your dish. If the yield on your striploin is 63%, then you must apply the meat cost of the center-cuts only, $22.22/ kg in this case.
• Accurately measure the portion size for all ingredients.
• Be certain that your calculations are carried through the operation and actually practiced. Otherwise, this will look great on paper but not be a true reflection of costs.
• Account for any promotions: 2 for 1, 10% off, etc. These incentives should be worked into the plate’s cost, rather than a promotional line item.

Step 3 – Plot Each Item

Now you have the two critical numbers needed: Quantity Sold for the period and Food Margin for each item. Now we want to see how each stacks up against the others. Remember, we are comparing similar categories only.

The grid below plots both Food Margin and Quantity Sold. Regardless of the period you chose, all items plotted must be derived from the same period. The «X» (horizontal) axis measures Food Margin, with $0.00 at the bottom and the highest item’s margin on the top. The «Y» (vertical) axis plots quantity sold, with «0 sold» on the bottom and the highest number sold on the top. Where the lines intersect is the mid point for both margin and quantity. Now plot each item using the two axes as a reference.

Step 4 – Analyze the Results and Understand the Results

The items that you plotted on the graph have fallen into one of four quadrants and each tells a story about the performance of that menu item. For reference, we will use the following names to refer to each zone, and to the characteristics of the corresponding menu items too. This is where you take the emotion out of your menu. Forget about what you have offered since you first opened, Grandma’s famous recipe, or the dish that Mrs. Smith asks for once a month. Let the numbers speak for themselves.

The Dogs represent items that have Low Margins and Low Quantity sold. These are the «losers» on your menu and have probably seen their day. These items seldom sell and, when they do, produce small profits.

Recommendation: Remove most dogs from the menu as they are taking up valuable space. It may make sense to keep some of them where ingredients are shared with other item, In this case, the dogs should be «hidden», or downplayed on the menu.

The Plow Horses represent items that have Low Margins but a High Quantity sold. You can always count on Plow Horses to be popular dishes. Though they are not the highest profit generators, Plow Horses keep on selling.

Recommendation: Plow Horses are ideal candidates for modest price increases. Of course a slight increase in price may decrease quantity sold so the overall balance needs to be considered.

Puzzles are those items that have High Margins but have Low Quantity sold. You want to sell more Puzzles so added attention needed.

Recommendation: Reposition Puzzles on the menu, enhance them with colour, graphics, photos, etc. Draw your guests to the Puzzles through menu enhancement, promotion and staff knowledge.

Stars are the winners on the menu: High Margins and High Quantity sold. You want everything on your menu to move toward the Star quadrant. The nature of the four box analysis will not allow everything to be a star, though that should be the direction of the menu.

Recommendation: Don’t mess with success. Stars need to be the center of the menu, enjoying prime marketing and be subjected to increased controls. Since you sell a lot of Stars, something like over-portioning by 1 oz on a Star can have a dramatic impact on your margins.

Generally speaking, following the above recommendations will have a positive impact on the profitability of your menu. There is some consideration needed on where in a grid a particular item falls. For example, increasing the selling price of a Plow Horse that plots very close to the Star quadrant will be less affected in Quantity Sold than the same increase on an item further from the Star quadrant.

The science portion of the menu engineering involves the calculations and plotting. The numbers and implications this exercise will provide will lend some valuable insights to your menu opportunities. While we have outlined the theory of menu analysis, taking this information and applying it to a successful menu redesign may require professional services to make the most of it.

Buy Quality

How you merchandise your menu has an impact on its perceived value, but each meal still has to consistently deliver quality and a great eating experience. When it comes to beef you get what you pay for. Because beef pricing is generally dictated by supply and demand dynamics there are seldom any deals on beef – especially at foodservice. Most guests are looking for a tender, juicy and flavourful steak, not the cheapest steak available. Work with your supplier to ensure that your beef specifications include the following measurable quality attributes:

Highly marbled beef – marbling is the small flecks of intramuscular fat in the lean of the muscle, which contributes to juiciness and flavour. Marbling is measured by the grade (A, AA, AAA, and Prime) and its determination is a function of the Canadian Beef Grading Agency (CBGA). MORE

Well-aged beef -the term «aging» refers to the length of time beef is stored under controlled conditions while naturally occurring enzymes within the meat slowly break down some of the connective tissues that contribute to toughness. This is an important component to a great steak. The aging process usually occurs at the distributor level and is primarily «wet aged» in cryovac. For most beef cuts 21 days aging is optimal. MORE

Chose the right cut of beef for your application. Price doesn’t always dictate quality and won’t necessarily mean a better eating experience. How the product is cooked impacts greatly on the finished steak or roast. Familiarize yourself with the various cooking techniques and what method each cut performs best under. It is recommended that you work with your beef supplier to determine which cuts will work best for your operation.

Execute on the Quality

Photo of the Cooked to Perfection bookletProper receiving, handling, storage and food safety techniques play a big part in the quality of the finished product. For example, if frozen beef is not properly tempered (defrosted), quality will deteriorate and may also introduce unnecessary food safety risks to the product. Think of your decision to purchase high quality beef as only the first step to deliver a quality beef program in your foodservice operation.

Steak doneness is one of the most important factors in determining a quality steak. In fact, recent surveys have shown that 50% of customers say getting their steak done the way they like it is the biggest determining factor to a great steak experience. Getting steak doneness right is a team effort, starting at the table. Remember, one person’s idea of «medium-rare» may not be everyone’s.

Communicate Quality

With your decision to purchase and promote a high quality beef program on your menu you must take every opportunity to communicate this quality to your guests. Once they appreciate that the quality of your beef means a more enjoyable eating experience, they will understand the increased menu price.

When talking quality on your menu, point of sale materials or through your staff make sure you relay the quality factors that your guests understand and that influence the eating experience. For example, «We select only Canada AAA beef to ensure a juicy and flavourful steak every time» or «Our beef is aged a minimum of 21 days for maximum tenderness».

With your beef dishes generating some of the highest revenue on the menu your time is better spent communicating the quality of these items rather than items on your menu like pasta dishes which historically produce less food margin. Steaks and roasts are not a «hard sell» to guests, they just want to know that they are going to receive value and have a great experience.

Train Yourself

There are training materials and promotional resources available to you as a supporter of Canadian beef. Improving your overall beef knowledge will go a long way in determining the success of your beef program. Become an expert in all aspects of the beef in your operation: the source, quality specifications, how to handle, cook and cut it, and how to merchandise for best results.

Train Your Customers

There is a lot of misinformation about what makes a good steak. Many consumers believe what they’re told by so-called experts, whether right or wrong. And to most restaurant patrons, the staff and management are experts on the items sold on the menu but remember, your guests were someone else’s guests before and who knows what they were told about quality beef. Your job is to clear up the «smoke and mirrors» and teach your guests what really makes a great steak.

Communicating your beef quality and teaching your guests the «hows» and «whys» of quality beef will benefit you very quickly. Assuming their steak is tender, juicy, flavourful and cooked to perfection, and the knowledge of what contributes to steak quality, will undoubtedly have your guests searching the town for similar quality steaks. You will have set a new standard of excellence with your guests and now they know where to go to meet their expectations.

Your guests will become your best form of marketing – knowing what makes a great steak and where to find it. There is one school of thought that says all recipe information and kitchen operations are closely guarded secrets but that approach is a thing of the past. With the popularity of open-style kitchens, the promotion of fresh and quality ingredients, and the increase in restaurant-style cooking shows, clearly your guests want to know what they are eating.

If you buy quality beef and consistently deliver quality steaks and roasts, flaunt it at every opportunity. This will enhance the perceived value of the menu thus generate added revenue and grow your business.

Train Your Staff

Ensure your staff has the necessary knowledge and tools to make your beef program succeed. Just like the point of sale material on the table, if your staff cannot speak to the quality of your beef program and make informed recommendations to your guest they just become part of the furniture.

Take every opportunity to pass on your knowledge so that serving staff can effectively merchandise the menu to the guest. There are number of things you need to keep in mind when training wait staff.

• Keep it short – Attention spans are often short so keep to the point.
• Make it visual – Again, it is much easier to train if you are using visual aids like our Steak Cooking video or your own slide presentation on beef quality.
• Communicate why this information is important and what is in it for them when they are successful. Point out that bigger cheques mean bigger tips. Stick to information they can use with the guest – you may want to briefly discuss the quality of Canadian cattle but this is likely not relevant for the service staff. Concentrate on descriptions of the menu items, grade, aging, cooking and doneness, and how to deal with issues at the table such as over-cooks.
• Involve the kitchen – The back of the house is often ignored so if the chef can participate and back you up, the whole training process gains more credibility. They may also be able to communicate procedures to help ensure smooth service.
• Put the training to the test – Reinforcing knowledge through testing is proven to be beneficial.
• Bring leave behind materials for reinforcement and to train new staff.