Using the contribution margin aspect of menu engineering to enhance financial results

Abstract

Managing food service operations to achieve a specific food cost percentage has long been a fundamental principle of the restaurant business. Management bonuses and other rewards are often based on achieving these predetermined goals. Available tools such as menu engineering and contribution margin, although sound in theory, are not frequently used. Demonstrates the use of menu engineering and contribution margin concepts in terms of customers served. Concludes that the goal of any restaurant should be to apply marketing techniques based on menu engineering and contribution margin concepts in order to achieve the highest possible financial results.

Management accounting practices in the British food and drinks industry

“…This is particularly relevant given the twin conclusions of past research that, firstly, the industry lags in the monitoring and control of business results (LeBruto et al, 1997;Mann et al, 1999a), and secondly, powerful retailers treat suppliers' cost management systems as an important criterion when developing supply chain relationships (Fearne and Hughes, 1999). Our findings are based on the analysis of 122 questionnaires completed by management accountants.…”

“…Drury et al (1993) found that only 3% of respondents always or often used regression techniques, and 6% often or always used probability analysis. However, they argued that the advancement of such techniques in textbooks would lead to their wide adoption; for instance regression analysis was recommended by LeBruto et al (1997) for separating fixed and variable costs in the food industry. The results of our survey do not support this expectation.…”

“…Respondents also rated these analyses as important -72% and 59% respectively. CVP analysis, recommended for the food industry by LeBruto et al (1997), is seen to be important or moderately important by 86% of respondents and is also surprisingly frequently produced with 44% indicating that such analyses are used at least often. Stock control models are largely moderately important and sometimes used.…”

The application of menu engineering and design in Asian restaurants

“…Kasavana and Smith (1982) and LeBruto et al (1995LeBruto et al ( , 1997 underline that the computation of a dish's profitability is by measuring the number of dollars generated per unit sale but not the food cost percentage, as the latter variable cannot be deposited in banks. In menu engineering, an entr!…”

“…This is because the latter variables are assumed, ''yequally related to all menu itemsy'' and thus, can be ignored (Kasavana and Smith, 1990, p. 126). LeBruto et al (1995LeBruto et al ( , 1997 suggest that linear regression analysis can clearly distinguish the fixed costs from variable costs and argue that all variable costs should be included in order to compute the ''true'' net profit for individual dishes.…”