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Wednesday, February 24, 2010

Menu Analysis: Quick Checklist

Do you keep your old menus? If you have a stack somewhere in your office, try to locate the menu from 2004. I would suggest you put your current menu side-by-side and perform the following checklist:

1. Count the number of choices in each major category for both menus. Fewer is better in this environment. If your current menu has more selections in the appetizer and entree zones, make a list of the items added in the last 5 years.

2. How do the prices compare between the two menus? Normal inflation over the 5 year period was low but food commodity markets had tremendous volatility during the oil price boom and bust. Perhaps you have cut menu prices to encourage more customers. Look for the highest and lowest priced entrees and put this information in perspective.

In 2004, proper pricing of the highest priced entree was very important. Diners were spending more 5 years ago. Today, the lowest priced entree is quite important. Many diners are searching for value. You may not be charging enough for your budget selections.

3. Try to remember your previous pricing strategy. Look back 5 years ago and think of your game plan. Were you raising menu prices 10% each year? Maybe 5%. A 10% annual increase will add up to 60% over 5 years. The 5% annual increases amount to 28% over the same 5 years.

If your current prices are looking similar to 5 years ago, your average increase for the 10 year period is about half of the number from the 2004 strategy. Should you bring your costs in line with this new reality? In the short run, most companies have been forced to make drastic cuts. Take a long term view and decide what the future holds for the next 5 years.

In summary, this is a great time to review your most recent 5 years. Sometimes people look at the future through an optimistic lens. Other times (like now), the pessimistic lens is used. By looking at the complete picture, you will see things as a realist.

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