University Institute of Tourism & Hospitality

Management
Hotel Management
MENU ENGINEERING

Menu Engineering DISCOVER . LEARN . EMPOWER

 Menu Engineering

Menu engineering is the study of the profitability and

popularity of menu items and how these two factors
influence the placement of these items on a menu. The
goal is simple: to increase profitability per guest.

Menu engineering can (and does) include the following

actions:

• Rewording a menu item to be more descriptive

• Marking a meal, drink, or appetizer as “featured” because

you want to sell more of it

• Removing dollar signs from your prices so people will

spend more this actually works by the way)

• Changing the portion sizes or ingredients of a dish.

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 COURSE OBJECTIVE
• To understand about the Menu merchandising , Menu Engineering,
• To understand about The costing and menu pricing
• To know about pricing principles of menu engineering.
• To understand about the calculating the menu item cost.

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 DEFINITION
• A restaurant menu management software is a feature
of the POS software that is used to create
and manage the restaurant menu. It is integrated with
the billing and the inventory management module and
helps you curate and manage the restaurant menu.By
just calling the room service department and place
order of food and drinks to be sent to their room.

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 COSTING & MENU PRICING

Menu pricing is the engine behind your company's success, as sales

are your restaurant's sole source of revenue. Pricing for food directly
impacts your ability to fund essential aspects of your business,
including equipment, utilities, labor, ingredients, and more
Cost is typically the expense incurred for a product or service being
sold by a company. ... Price is the amount a customer is willing to pay
for a product or service. The difference between the price paid and
the costs incurred is the profit.
Choose your ideal food cost percentage.
Determine the raw food cost of the menu item.
Calculate your price.

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 Factors that Affect Restaurant Menu Pricing
1. Direct costs
These are costs that
are directly associated with the food item in the restaurant menu itself. This involves the purchasing of food, portion
sizes, drip loss while storing, and food waste from spilling, spoiling or overcooking.
2. Indirect costs
They are not the actual ingredients that go into the dish but are needed to prepare the dish, and they add value and
quality to your food. For example, your labor costs. Some dishes demand extensive preparation and plating up. For
such dishes, you need to raise the price for the time and effort involved to make and serve it.
Similarly, you need to take into account the overhead expenses like decor, ambiance, lighting, crockery and cutlery and
marketing efforts.
3. Volatile food costs
These are the costs of food that keep fluctuating in the market. You need to maintain an account for the price
fluctuation of fruits, vegetables and meat according to the seasons, certain other natural factors or due to economic
reasons such as inflation and taxes.
For instance, due to nonseasonal rainfall or hailstorm, the cost of Alphonso mangoes can suddenly shoot up, or due to
poor rain, the vegetable prices can go up. If you have to pay more VAT on procuring your ingredients, that can affect
prices too.
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4. Competition
Check out your competition. For the same items, your pricing should usually be around your competitor’s. But,
if you plan to charge more, you should have good enough ‘differentiating’ reasons to justify. Perhaps, your chef
is more qualified than the competitors? Just make sure that your customer knows why you are charging what
you are.
5. Service costs
The type of service offered can affect your restaurant menu pricing. If it’s a casual restaurant, you can charge
less because you spend less on service. But, for a fine dining restaurant, the prices will go up as the quality of
your customer service will also be better.
6. Boundary pricing
You know your costs the best; the rent you pay for its location, the quality of your food and service, etc. Figure
out the lowest price you can charge while still making a reasonable profit and the highest price your customers
will pay for your items.

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 Menu Pricing Methods
1. Pricing by Portion Cost
A standard portion cost is a cost of serving one item or drink as per standard recipe. In this method, you determine
the portion cost by dividing the purchase cost by the portion.
2. Pricing by Raw Food Cost of Item
In this method, you consider the raw food cost of the item and divide it by the desired food cost percentage to get
the final price. For the same, you should know the cost of every ingredient in your recipe – from the meat to the
vegetables, oil/butter and condiments. You even account for the ketchup, mustard or any other sauce served. An
account must be maintained for every item that goes on the plate
Raw Food Cost of Item ÷ Desired Food Cost Percentage = Price
3. Pricing by Competition
In this method, you take the prices determined by your competition as your reference price. However, you can
choose to price your items the same as your competitor, price your item slightly lower to attract customers who are
looking for a bargain or price your item slightly higher to attract customers who are looking for higher quality.
However, as your restaurant needs to function within a certain price limit, it may put a strain on you to work out your
profit.
4. Pricing by Demand
This concept works on the rule of demand and supply. Restaurants in airports or food courts at malls charge more for
their food as they are the only available source of food. As the demand is more than the supply, they are willing to
get away with it. If your restaurant serves exclusive or specialty menu items or offers a different ambiance . 8
 The Principles of Menu Engineering
Menu engineering is the study of the profitability and popularity
of menu items and how these two factors influence the placement
of these items on a menu. ... Simply put, if you sell items that have
varying levels of profitability and popularity, menu engineering may
help you increase your profits
Steps Menu Engineering Analysis:
•Choose a Timeframe
•Measure Profitability
•Measure Popularity
•Design with These Considerations in Mind
•Determine Your New Menu's Success

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 Calculating Menu Item Cost
One of the main tasks that you must do before you open the restaurant or bar is to price your menu
items.
If you own a restaurant or bar then you know how important it is to determine the cost of food and drinks
to form a realistic price for menu items that guarantees profits for your catering facility. Calculate the
percentage of the costs of purchasing alcoholic drinks. In most bars, depending on its type it varies from
20% to 25%, but in night bars it goes to more than 30% and it is the lowest in the fast food restaurants,
coffee shops, and milk bars. This would be easy to do if you conducting an inventory in your bar.
Determine the costs for preparation of each drink. This is the amount of the ingredients needed for the
preparation of a beverage or alcoholic drink.
How to calculate the cost of one drink? I will explain that on one simple example, very popular alcoholic
drink gin tonic. To clarify the calculation of cost for one drink, you need to summarize all ingredients that
you use to make it: 0.03L of Gin, 0.1L of Tonic, 0.02 kg of lemon and one straw.
If the purchase price of 1 liter of gin costs $12 then the price of 0.03L would be $0,36. In the same way,
you can calculate the cost of the tonic, if a liter of tonic costs $1 0.1L will cost $0.1 Pack of 140 straws
costs about $3, one piece will cost $0.21, 1kg of lemons cost $2 and slice of lemon (0.02 kg) will cost
$0.0,04. If you summarize the costs of individual items a total cost of the drink in this case would be:0.36
+ 0.1 + 0.21 + 0.04 = 0.75

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 LEARNING OUTCOME

• Student will be able to understand about the Menu merchandising, Menu Engineering,
• Student will be able to understand the menu costing .
• Student will be able to understand the menu pricing and principles of menu engineering.

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 Assessment Pattern
.

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 APPLICATIONS
• As the chapter progressed and the case studies were performed, one began to distinguish a distinct difference between theme
restaurants and theme restaurants with forms of entertainment not related to the dining experience.
• The purpose then became to write a theory about restaurant design with an emphasis on experiential entertainment
restaurants. A goal for this purpose was to introduce the history of restaurants and entertainment environments, along with the
psychological roles of these types of environments.
• The modern examples of themed restaurants are part of the long evolution of the restaurant in history that began before the
Ancient Greeks and continued to the present day American examples. I also found the history of restaurants beginning before
the Ancient Greeks along with a continuing evolution to present day.
• I found, upon analysis of the case studies, that there are three categories of restaurant design. The first type of
• restaurant design simply being self-referential restaurant design or the design of a restaurant in a basic form and using its
identity, or logo, as a primary marketing strategy.
• The second type of restaurant design found was theme design, or the design of a restaurant that intentionally creates another
time, space, place, atmosphere or environment to transcend the participants every day experience within the dining space.
• The third type of restaurant design found was experiential entertainment restaurant design, or the design of a theme restaurant
with additionally programmed spaces, such as retail, bars, rides, and/or games, along with a restaurant, as experiential
cultivators in attracting users for initial visits, keeping them within the space and attracting them for return visits based on the
positive experience perceived.

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 REFERENCES
• How to Manage a Successful Catering Business, Second Edition, by Manfred Ketterer, John Wiley & Sons, 1991.
• Mike DeLuca, editor, Restaurant Hospitality magazine, copyright Penton Publishing, July 1992.
• Connie Sitterly, president, Management Training Specialists and Sittcom., Inc., Fort Worth, Texas. (www.sittcom.com)
• Carol McKibben, in Special Events magazine, November 1991.
• Jefferson Center for Character Education, Mission Viejo, California. (www.jeffersoncenter. org)
• Lessons in Excellence, by Charlie Trotter, Ten Speed Press, 1999.
• The Experience Economy, by James H. Gilmore and B. Joseph Pine II, Harvard Business School Press, 1999.
• https://www.bing.com/images/search?view=detailV2&id=58CC7531B75773605E6A73245DF770652F589985&thid=OIP._psSQcrZUGl-
SckU7EvjXgHaFW&mediaurl=https%3A%2F%2Fwww.expodine.com%2Fblog%2Fwp-content%2Fuploads
%2F2017%2F01%2FRestaurant-trends-
2017.jpg&exph=780&expw=1080&q=Restaurant+Trends&selectedindex=1&ajaxhist=0&vt=0&eim=1,6
• https://www.managementstudyguide.com/market-segmentation.htm
• https://www.bing.com/images/search?q=swot+analysis+of+mcdonalds&FORM=HDRSC2
• https://www.bing.com/images/search?view=detailV2&id=BFD33AFBFD08AA1E9A315766FAF4DC29AC48D3E3&thid=OIP.V4Sgfm6iMKnV
VX55eQfOvAHaFP&mediaurl=https%3A%2F%2Fs-media-cache-ak0.pinimg.com%2Foriginals%2F4d%2F1c%2Fda%2F4d1cdaa588d2a6a6f
1650b35714e5ba1.jpg&exph=905&expw=1280&q=Restaurant+Design+Plans&selectedindex=6&ajaxhist=0&vt=0&eim=1,6
• https://www.bing.com/images/search?q=market+segmentation+on+gender+&FORM=HDRSC2
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 THANK YOU

For queries
Email: pankaj.e8015@cumail.in