Shedding Light on Menu Engineering’ in Terms of Growing a Business

Menu engineering is an interdisciplinary approach in the deliberate and strategic construction of menus.

Sometimes called -Menu Psychology’, the term menu engineering is generally adopted as a standard Best Practice within the Hospitality and Restaurant Industries. The objective with menu engineering is to maximize a concept’s profitability by leading the customer to certain purchases, and avoiding others, in addition to -engineering’ recipes to maximize profits at the product and category level.

Menu Engineering is comprises of five key areas

Psychology (perception, attention, emotion/effect)

Recipe construction and the best balance between quality and cost

Managerial Accounting (contribution margin and unit cost analysis)

Marketing & Strategy (pricing, promotion)

Graphic Design (layout, typography)

Psychology of menu engineering

Visual perception is inextricably linked to how customers read a menu. By strategically arranging menu items and categories within the pages of the menu, operators can promote high profit dishes while allowing less profitable dishes to be understated. This strategy enhances the sales mix, profitability, and thus represents a key element in the business strategy.

Managerial accounting

The primary goal of menu engineering is to encourage purchase of targeted items, generally the most profitable items, and to discourage purchase of the least profitable items. With this in mind, restaurants should first calculate the true cost of each menu item, (including condiments and non menu foods such as salt, pepper, oil, etc.) therefore extending to all items listed on the menu, and reflecting all costs incurred to produce and serve [each item]. Optimally item costs should include: food cost (including wasted product and product loss), incremental labor (e.g., cost in on site production, dessert production, or additional preparation), condiments and packaging. Only incremental costs and efforts should be included in the item cost, as there will be a static labor requirement in all cases.

After an item’s cost and price have been determined (see pricing in the Marketing section), evaluation of an item’s profitability is based on the item’s Contribution Margin. The contribution margin is calculated as the menu price minus the cost. Menu engineering then focuses on maximizing the contribution margin of each guest’s order. Recipe costing should be updated (at least the ingredient cost portion) whenever the menu is reprinted or whenever items are re-engineered. Some simplified calculations of contribution margin include only food costs.

Marketing (price & promotion)

By using guest demand (also called the menu mix) and gross profit margins, the relative performance of each menu item is determined, and assigned one of the following terms (based on the BCG Matrix):

Stars

Stars are extremely popular and have a high contribution margin. Ideally Stars should be your flagship or signature menu item.

Plow Horse

Plow Horses are high in popularity, but low in contribution margin. Plow horse menu items sell well, but don’t significantly increase revenue.

Puzzles

Puzzles are generally low in popularity and higher contributions. Puzzle dishes are very difficult to sell, but have a high profit margin.

Dogs

Dogs are low in popularity and low in contribution margin. Basically, they are difficult to sell and when sold they are not particularly profitable.

In general, items within a relevant comparable set (for example, entrees, or chicken entrees) should be priced to have similar contribution margins – this way, the restaurant would make the same amount of money, no matter what item the guest chooses to order.

Additional considerations

While the practice of menu engineering has been around now for about 30 years, and focuses on the combined menu sales mix and item profit, additional factors can come into play in an effort to enhance profitability through careful menu analysis. A primary area to evaluate is purchasing, as poorly executed purchasing can often lead to substantial over payments – for example; buying from a large distributor, while providing ease of purchase and convenience, can add up to 50% more on certain ingredient costs thus making a substantial increase in overall food cost, (not to mention the elevated carbon footprint). By using local and specialist purveyors, restaurants can often reduce their ingredient cost and enhance quality.

The Next Idea demonstrated this exact point when engaged to review the menu of a themed restaurant brand. Through its discovery stage, it became apparent that, in an age where the consumer was becoming increasingly aware of product quality and value, this client was failing on both accounts, as the menu was essentially provided by a national US Distributor, and ingredients were purchased frozen and simply re-heated on site, resulting in a lack of differentiation, high menu prices and mediocre customer satisfaction. TNI challenged the food production and supply chain process (which was typical for the industry). Our proposal was to produce food from scratch, within the kitchens, which we had concluded, would enhance quality and substantially reduce costs. After considerable analysis and trials, we were given the approval to implement this new operational approach across the portfolio. The result was a 12% higher customer satisfaction rating, 2% reduction in labor cost, and massive 4% reduction in food cost.

In summary: Menu engineering has been employed by food service professional industry for many years now, and operators generally possess a sophistication level where work in this area is both very helpful and critical to support a profitable business. It is important to note that, like all other management strategies, menu engineering is not something that can simply be purchased. Success depends on the right mix of products and services, and of course the necessary expertise. In the end, a well-implemented menu engineering program will represent a significant tactic to elevate food and beverage profitability.

About The Author

The author is associated with The Next Idea. The Next Idea provides all cafe interior design, cafe logo, photography, restaurant Interior design, menu engineering, etc. Our restaurant design capabilities include: exterior restaurant marketing display design and manufacturing, restaurant marketing display design, and restaurant decor theme creation.

Why Being A Loan Officer In The Mortgage Business Is Horrible

Why Trying to Be a Loan Officer (that is, Sell Mortgages) Is Especially Grim

… and why pursuing a career in home loans is pretty much doomed to failure.

I gave the mortgage industry — the whole loan originator gig — a serious go of it a few years back. That was just before the entire real estate market melted down.

But even then, I knew after about six months that it just wasn’t for me. And as it worked out, I ditched just before thousands of loan officers were driven out by the economic collapse.

It’s odd, really, that I even gave it a whirl. I already had a great freelance sales gig in place, and that was earning me a great income. But I’m the kind of guy who is always out there looking for something new and more exciting. It was right when I was moving to Dallas, and the whole “mortgage consulting” thing seemed as if it could be fun, and I had buddies in the industry pulling down $25K a month routinely. So I thought what the hell, and I gave it a go.

But it didn’t take long for me to realize I was in the WRONG PLACE.

Because there was no way it was ever going to create the lifestyle I wanted for myself.

Even leaving aside all of the stuff I’m about to cover here, (even leaving aside having to pander to real estate agents, and what that does to your soul), at the end of the day, trying to sell mortgages — working in that industry — is just nowhere near capable of creating the kind of life I’ve got going on and had come to get used to.

The hours, the office, the boss, the stress, the tedium, the grief … It’s enough to make you want to jump off a bridge. Seriously.

But even leaving that stuff aside. Even assuming you’re a glutton for misery and your idea of a good time is a life of constant, bitter struggle and mind-wracking tedium … Fundamentally there are three main reasons why I think trying to sell in the mortgage industry is a really bad idea, especially right now.

FIRST –
The gravy train is over. It has become harder than ever to close deals.

There are several reasons for that. I’ll list a few of them:

The housing market has tanked, taking with it a lot of the people who used to be in the industry. The ones who are left are desperate for business. This has the effect of not only putting you on a crappy level with the client (since it’s get the deal or eat Ramen noodles all next month, you end up begging for business, cringing under anything a client says or demands), but it also has the effect of making the whole mortgage racket more and more a rate game.
And that’s the second reason for why it’s harder than ever to close deals. Rate are too damn high, they’re fluctuating all over the place because of all the government interference in the economy, and your prospects are OBSESSING over rate, ready to cut your throat and run to the guy down the block and leave you high and dry with nothing, over an eighth of a point.
What else is making it hard to close deals is the fact that they’ve taken away all but a small handful of programs — I think you’ve got THREE now; used to be dozens. Everyone needs to put money down, and everyone is stuck in a fixed rate. Like it or lump it. (Problem is, a lot of people are choosing to lump it.)
And finally, one other thing making it harder to close deals is the increased difficulty of getting lenders and proposed loans to fall in line with the new guidelines. Used to be, deals could be slam-dunks and you knew it. You could bury three points in the YSP and still slam-dunk it. Nowadays nothing is a slam-dunk, even at par, and underwriting can kill a deal sixteen different ways before sun down, and leave you feeling you’ve been mugged in a back alley.

So those are some of the reasons why it’s become harder to close deals. And that’s assuming you can even find prospects and get the deals into processing and submitted to begin with. That takes me to the second reason I think trying to sell mortgages as a loan officer is a bad idea:

SECOND REASON –
It is just flat out hard as hell to attract attention anymore, much less differentiate yourself from all of the other loan guys out there.

For one, people are jaded and afraid of getting screwed. They’ve become insanely suspicious — in part because they’re being flooded every day with offers for free credit reports, refinancing opportunities, doom-and-gloom horror stories of foreclosures and mounting unemployment.

Try marketing yourself as a loan officer. Good lord. You’re competing against fifty thousand other hungry mortgage guys. You’re competing against huge banks and desperate net branches. And everyone is selling on price, price, price. Selling on having the “lowest rate.” Everyone is fighting to make a buck. They’re running ads, they’re running banners, they’re sending out useless mailings, they’re falling over each other trying to get someone –anyone — in town to refer them some business.

Not a pretty sight.

And to make it worse, the big advantage you USED to be able to have was in specializing in something, some niche. The guys making the best money were framing themselves as “mortgage consultants,” and trying to stand somewhere between being a loan officer and a financial advisor.

And it worked for long time. The guys who were good at it made a fortune.

But things have changed. Back in the day, you had dozens of programs to choose from. You could customize a mortgage solution for a client, and really bring value to that interaction. You could build a plan for them, around their goals and dreams, and show them how the mortgage you were structuring for them would help them and their families get where they wanted to go.

Well … That’s all gone now.

You’ve got THREE programs you can offer nowadays. Conventional, VA, or FHA. Fixed, fixed, or fixed. That’s it. That’s all.

No more no-money-down programs. No more stated-income or stated-asset programs. No more negative amortization loans with investment plans behind them.

Increased restrictions on investment properties.

Massive reduction of new-construction loans, and the effective extinction of jumbo (much less super-jumbo) loans.

There’s no way to “consult” or offer “mortgage-planning” when it comes down to a fixed rate. People have been trained to focus exclusively on price.

And there’s always someone willing to cut your throat for an eighth of a point.

So the second reason why I’m against selling in the mortgage industry came down to how hard it is to find good leads, and how hard it is to differentiate yourself, or in any way rise above price.

The third reason is more personal:

THIRD –
It just takes so much damn WORK to try to close a mortgage deal.

Even leaving aside the effort it takes to bring in a qualified lead. (And “qualified” has a whole other meaning when it comes to home loans. Someone can want a new home loan all he wants. Whether he qualifies, under the new guidelines, however … That’s a completely different story.)

Even leaving aside the effort it takes to get the prospect to want to work with you.

That still leaves all of the endless documentation required to get the deal closed and a commission check in your pocket.

There is the appraisal, the sales contract, the gigantic loan application, the credit check, the required bank statements and pay stubs, the verification of employment and income, the verification of bank funds, the home-owners insurance, the mortgage insurance, and on and on and on it goes.

Then the client has to actually get approved.

And come up with the down payment.

(And somehow, during all this, manage to avoid the hoard of hungry banks and mortgage companies and other loan officers out there trying to steal your deal out from under you before you can get it to closing.)

And even THEN it’s not over. Because it takes time, you see. And you have the pure joy of sweating under the stress of endless underwriting grief, where nothing is easy anymore, and every closing is precarious and uncertain.

So let us try to sum up …

At the end of the day, trying to sell home loans in the mortgage industry is hell on wheels. It is getting harder and harder, to earn less and less.

This year the industry is predicted to take another slug in the head, and thousands more will end up unable to close enough loans to pay their bills, or see their mortgage companies chain their front doors closed, without so much as a severance check from commissions on deals that had already funded.

I predict that we’re headed toward complete and utter commoditization of mortgage lending, with mounting government controls, where everything becomes cookie-cutter and in the hands of a few gigantic banks.

So unless you want a future in a cubicle, taking down loan applications over the phone and entering them into a computer for eight bucks an hour (assuming things don’t go completely automated, and they still need someone to at least type the stuff in) …

Here’s my recommendation:

– Forget the mortgage industry.
– Find something different.
– Find something better.

I’ll be talking a lot more about that “something better” here real soon …
At MaverickSalesGuy (dotcom)

My Honest Tips For Establishing A Home Business

All of us learned about home business concepts on the Internet and a lot of folks have been trying them out in the past couple of years. Some people actually succeeded on this endeavor while a few are still considering the probability of generating a lot. Home-based business won’t be depending on luck alone. You’ll need the skill and comprehension if you wish to be successful.

Some people still doubt these home-based businesses, but lots of them already began their job on this field. If you’re still thinking that starting a small business at house isn’t a great idea, you must look at the different advantages below.

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You’ve got all the time in the world to work so you can just do your work for a few hours and start out late if you desire. This is something that you cannot do if you are working for a organization because they are very stringent on the timeframe that they are implementing. Home-based businesses can provide you the versatility that you always desired.

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It’s always wonderful to check a few house based business ideas because they offer a lot of advantages. It is feasible to definitely earn lots of money without spending a lot for the operation costs and large capital. You will surely benefit from this if you know what your are performing.