Financial Issues in International Hospitality Management

1

Financial Issues in International Hospitality Management

Menu Analysis

Word count: 2988

2

Abstract

This essay critically analyses major techniques of menu analysis. It is essential for restaurants in an increasingly competitive sector, to offer a well -designed and properly priced menu to succeed. Thus, this topic constitutes a very important issue for the contemporary hospitality industry. The different approaches of menu analysis have several advantages and disadvantages, which gets emphasized in this essay. Furthermore, the application of the seven P’s of menu design gets explained. This essay concludes with recommendations for restaurant operators to develop a restaurant tailored menu.

3

Introduction

The term menu analysis is a complex construct. Thereby, restaurant operators want to analyse their menu sales mix to determine the impact of each menu item on final sales, costs and profits. Due to menu analysis, if the designated profit is not met, menu prices and food costs get adapted (Pavesic & Magnant, 2005). The purpose of menu analysis is to identify menu items which should be aggressively advertised and placed in the prime sales location of the menu. Furthermore, it identifies dishes which should be reprised, eliminated or replaced and those which should be retained (Merricks & Jones, 1986). The concept of menu analysis determines the most successful and unsuccessful items on a menu, by being able to use several different methods that have been analysed and are still used in recent times. It does not only contain mathematics, but it also includes marketing, sociology, psychology and emotional aspects (Dopson & Hayes, 2011). It should always be considered that guests are more swayed by an eye-catching menu design, a menu item description, a certain placement of the menu item on the physical menu, the price and the popularity of the menu item, instead of a significant financial analysis.

Most of the menu analysis methods are striving to use food cost percentage, popularity, contribution margin, selling price, variable expenses and fixed expenses as operational variables. Several researchers tried over years to improve the techniques of menu analysis. This essay deals with four major approaches of menu analysis. The first one, invented by Miller is called the food cost percentage method. Kasavana and Smith came up with a second approach which is based on Miller’s matrix approach, the contribution margin method. The third approach, called the cost-margin analysis was introduced by Pavesic. The last technique, named the goal value analysis was developed by Hayes and Huffman. Criticism and advantages and disadvantages of the different