Chapter 6 Flashcards
Menu Formats
- The standard menu is fixed day after day.
- The standard menu is most commonly used.
- Menu tip-ons are smaller menu segments clipped on to more permanent menus to advertise one or more products.
- The standard menu can be changed seasonally
cycle menu
A cycle menu is a menu in effect for a specific time period. The length of the cycle refers to the length of time the menu is in effect.
The cycle menu is an effort by management to enjoy the best aspects of the standard (fixed) and daily menus while minimizing their disadvantages.
Total revenue is generated by the following formula
Price x Number Sold = Total Revenue
Factors Affecting Menu Pricing
- Guests seek a good price/value relationship when making a purchase.
- The price/value relationship reflects guests’ view of how much value they are receiving for the prices they are paying.
- Increasing prices does not always mean increased revenue.
Factors Affecting Menu Pricing
Economic conditions Local competition Service levels Guest type – price sensitivity Product quality Portion size Ambience Meal Period Location Sales mix
Sales mix
Sales mix refers to the specific menu items selected by guests. Sales mix will most heavily influence the menu pricing decision.
Price blending
Price blending refers to the process of pricing products, with very different individual cost percentages, into groups with the intent of achieving a favorable overall cost situation.
In general, menu prices in food and beverage operations have historically been determined on the basis of one of the following two concepts
- Product cost percentage
2. Product contribution margin
The formula for computing food cost percentage is
Cost of Food Sold/ Food Sales= Food Cost %
This formula can be worded somewhat differently for a single menu item without changing its accuracy. Consider that
Costs of a Specific Food Item Sold/ Food Sales of that Item= Food Cost % of That Item
Product Cost Percentage
The principles of algebra allow managers to rearrange the formula as follows
Cost of a Specific Food Item Sold/ Food Cost % of That Item= Food Sales (Selling Price) of That Item
Pricing Factor
1.00/ Desired Product Cost %= Pricing Factor
Menu Price
Pricing Factor x Product Cost = Menu Price
Contribution margin is defined as the amount that remains after the product cost of a menu item is subtracted from the item’s selling price.
Selling Price – Product Cost = Contribution Margin
selling price
Product Cost + Contribution Margin Desired = Selling Price
Special pricing situations include
Coupons Value pricing Bundling Salad bars and buffets Bottled wine Beverages at receptions and parties
buffet product cost per guest
Total Buffet Product Cost/ Guests Served= Buffet Product Cost per Guest
Price spread
Price spread is the range between the lowest and the highest priced menu items.
