Cost/margin analysis: a third approach to menu pricing and design

The article presents a menu analysis methodology that is compared to menu engineering and the Miller matrix. Cost/margin analysis uses item food cost percentage and weighted dollar contribution margin to develop a sales mix that will both minimize the overall food cost percentage and optimize sales revenue and gross profit return. Previous methods of menu analysis have treated food cost percentage and dollar contribution margin in a mutually exclusive manner. This has resulted in biased interpretation of the data. Cost/margin analysis displays the food cost and contribution margin graphically and clearly identifies the menu items that are helping or hindering the revenue-cost-profit objectives. This information allows the menu to be designed to improve forecasting and cost control techniques.