The new report called ‘Menu Analysis’ combines three principal approaches in one: ABC analysis, Kasavana and Smith Menu Engineering Model (based on the BCG matrix), and David Pavesic Model. In addition, the report shows an overall sales picture.
ABC analysis is an inventory categorisation technique, dividing menu items based on their impact on the overall result. The three following parameters are used to determine the relative importance of a menu item:
• Sales frequency—how frequently this menu item is sold.
• Sales turnover—the total sales of this menu item, i.e. its contribution to the overall turnover of the venue.
• Profit margin—sales contribution of this menu item to the total profit of the venue.
This report uses multidimensional ABC analysis. Each menu item is assigned a rating based on its contribution to the sales turnover, sales volume, and profit margin. Each item can be rated in the following way: AAA (a perfect menu item), ABB, etc. In total, there are 27 possible rating results, which provides a detailed analysis for each menu item.
Kasavana and Smith Menu Engineering Model
This method is based on Boston Consulting Group's (BCG) matrix model, which Michigan State University's Dr. Michael Kasavana and Donald Smith extended and adapted for the restaurant industry. Menu structure analysis defines which menu items perform more profitably depending on their contribution margin and popularity. Contribution margin is the income sum covering the salary expenses and operating costs; it represents operating profit of a company.
In a nutshell, this approach is using menu items popularity and gross profit as criteria for dividing them into four basic groups, as follows:
• Stars—high profitability and high popularity menu items.
• Plow-horses—low profitability and high popularity menu items.
• Puzzles—menu items with a high profitability and a low popularity.
• Dogs—low profitability and low popularity menu items.
The menu analysis based on the Pavesic Model encompasses three key elements: the food cost of the menu items, their contribution margin, and sales volume. The weighted contribution margin of each menu item is accounted based on its sales volume and compared to its food cost. Evidently, the most profitable menu items would be the ones with a low food cost and a high weighed contribution margin.
• Primes are menu items with a low food cost and a high weighted contribution margin (gross profit).
• Standards are menu items with a high food cost and a high weighted contribution margin.
• Sleepers are menu items with a low food cost and a low weighted contribution margin.
• Problems are menu items with a high food cost and a low weighted contribution margin.
The new Tillypad report consolidates the data of the three models taking into account key factors of menu analysis: quantity, sales volume, contribution margin (gross profit), and food cost. Moreover, it generates summary recommendations about each menu item.
The report is available in Tillypad 9.7.