Menu Engineering Case Study

ABC Menu Engineering

This approach can be used to analyze individual menu items in terms of profitability and popularity, which helps to identify the menu items which are contributing towards profitability and items which are incurring loss.

A three step approach is used to calculate ABC Cost of all menu Item (20 items) in a buffet. In the First step cost contributed by individual customer to per item is calculated by Dividing individual customer cost with the no of menu items ($56.71/20 = $2.84 from Table 1). In the Second step cost determined from first step is added to the individual menu item ABC Cost (eg $2.84 + $14.95 = $17.78 for Salmon sashimi Table 3 Column 3). In the third step price for each item is determined hypothetically by multiplying

3) Plow Horses: Lower than average profitability and higher than average popularity.

4) Dogs: Higher than average profitability and higher than average popularity.

Items in Each category:

Star: Shark fin soup, Steamed fish, Stirred fried crab with ginger, Stirred fried clam with black bean sauce, Stirred fried shredded chicken, Stuffed crab shells with cream sauce, Oyster Rockefeller, Deep fried fillet of sole, Chicken kebob and Lamb stew.

Puzzle: Stirred fried beef, Curry beef stew, and Yang Zhou fried rice.

Plow Horses: Salmon sashimi, Fresh oysters, Boiled shrimp and Grilled eel with Japanese aauce.

Dogs: Steam fresh scallop with garlic sauce and BBQ ribs.

From ten items of Star Category only three items are having positive operating profit and all other seven items are having profitability negative but greater than average operating profit. Therefore this item are classified into new categories as “Diminished Stars” having negative operating profit but greater than average operating profit and popularity greater than average popularity. Thus with the use of ABC/ME method there is addition of one more group in comparison to traditional

• It allows restaurant managers to better classify their menu items in term of profitability and popularity and avoid losing money in terms of loss.

• By using ME/ABC methods it was able to identify another category known as “Diminished stars” having profitability higher than average profitability but was creating overall negative profitability.

• The result also shows that menu Items belonging to “Diminished Star” and “Plow Horses” category are adding more to negative profit in case of Unprofitable restaurants which are contrary to the finding of Traditionally ME method according to which “Dogs” Category items are adding more to negative