The sales mix is a means of ranking menu items according to their contribution to the overall volume of sales. Actively used in restaurant management as a means of tracking the popularity of individual menu items, the sales mix has limited use in a catering menu program. It is important, however, to periodically evaluate sales to identify those menu items that are creating the highest volume sales.
It is also necessary to assess the contribution each menu item makes to over- all profit in order to ensure that the menu price is actually generating the desired profit margin. For example, a catering menu for prime rib of beef priced below cost for competitive reasons may result in an increased volume of sales but at the same time drain the overall profit margin. In order to restore the profit mar- gin, management may need to change some of the surrounding menu items or identify another entrée item to promote.
The contribution-to-profit method is based on selecting menu prices accord- ing to what the customer pays for an item and the contribution that the sales of the menu item make to the gross profit of the operation.
Each menu item is evaluated according to customer acceptability and pro- jected sales volume. The initial selling price for each item is based on a desired food-cost percentage, as in the chart in Figure 7.16. The final selling price is determined by management’s estimation of what the customer will perceive as an acceptable selling price for that item, as in the following example:
An 8-ounce preprepared stuffed chicken breast and surrounding vegetable and starch items has an actual food cost of $2.85. This item, when calculated at a 35 percent food cost, has a selling price of $8.14. Management feels that
. Figure 7.15, WEEKLY REVIEW FOR SIX-DAY PERIOD
Inventory requisitions $ 3,450.00
Food purchases _________900.00
Total costs $4,350.00
Total sales $15,000.00
(FC) $4,350.00 ÷ (SP) $15,000 = (FC%) 29%
customers will accept a higher selling price of $10.50. At $10.50, the contribu- tion to gross profit on this item is $7.96.
(FC) food cost ÷ (FC%) food-cost percentage = (SP) selling price
$2.85 ÷ 0.35 = $8.14
(ASP) adjusted selling price – (FC) food cost = contribution to gross profit
$10.50 – $2.85 = $7.96
The differential between the menu price of an item and its food cost is called the contribution to gross profit. Gross profitrefers to all monies left after the food cost is deducted from the selling price. Remaining costs must then be deducted in order to calculate thenet profit.
To address customer needs, a well-balanced menu program includes items that represent high, medium, and low contributions to profit. An item may have a low contribution to profit and a low sales volume, but its presence on the menu satisfies a certain percentage of the customers. The profit from items with a high contribution to profit and high sales volume balance the loss of profit on the less profitable menu items.
Control systems that monitor production, purchasing, and costing on a daily, weekly, and monthly basis are instrumental in achieving revenue and profit goals.
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Package Pricing
Package prices can combine reception, dinner, beverage, flowers, entertainment, and theme costs as one per-person price. The pricing structure of the menu is often controlled by the overall package price. Any number of services can be in- cluded in the per-person price; the costs for flowers and entertainment are bro- ken down on a per-person basis and added to the total package price. This marketing approach often creates a perceived value for the customer and the as- sumption that the overall function price is less expensive than if each item were charged for at a flat fee.
. Figure 7.16, CONTRIBUTION-TO-PROFIT METHOD
SELLING MENU GROSS
ITEM FOOD COST FC% PRICE PRICE PROFIT
A $2.29 35 $ 6.54 $ 9.25 $6.96
B $5.18 40 $12.95 $ 8.95 $3.77
C $4.55 33 $13.67 $13.95 $9.40
. Figure 7.17,
THE HOTEL DEL CORONADO’S WEDDING RECEPTION MENU PACKAGES
(Courtesy of The Hotel Del Coronado, Coronado, California)
The function package most common to catering services is the wedding re- ception. The wedding reception plan in Figure 7.17 offers a one-hour bar, a se- lection of hot and cold hors d’oeuvres to be passed during the cocktail reception, a sit-down dinner entrée selection, wine to be served with dinner, and a cham- pagne toast. Wedding cake is offered as a separate item, as seen in Figure 7.18, and priced according to style and size.
The Hotel DuPont offers a variety of wedding packages based on the day of the week and time of day. The wedding reception plan shown in Figure 7.19 in- cludes a five-hour open bar, a champagne toast, a selection of hors d’oeuvres, a
. Figure 7.18,
WEDDING CAKE SELECTION. (A) TRADITIONAL TIERED BRIDE’S CAKE.LAYERS OF BUTTER CAKE WITH RASPBERRY FILLING. GARLANDS OF PASTE FLOWERS SURROUND THE BASE, AND A NOSEGAY TOPS THE CAKE.
(B) BUTTERCREAM BASKET CAKE.DENSE CHOCOLATE LAYERS WITH MOCHA FILLING ARE COVERED WITH FRENCH BUTTERCREAM “BASKETWEAVE,” TOPPED WITH GUMPASTE FLOWERS AND LEAVES
AND MARZIPAN FRUITS AND BERRIES.
(Courtesy of Rosemary Littman, Rosemary’s Cakes, Teaneck, New Jersey)
(A) (B)
four-course sit-down dinner, wine with dinner, wedding cake, and a gourmet cof- fee and dessert table. In contrast, Figure 7.20 is the midafternoon reception plan offering a four-hour open bar, a champagne toast, hors d’oeuvre stations, wed- ding cake, and a gourmet coffee and dessert station. The per-person price for these receptions is based on the packaging of all of the selling prices and gratu- ities, as shown in Figure 7.21.
In some situations, one item, such as the wedding toast or wedding cake, is sold at cost in order to offer a more competitive package price.
. Figure 7.19, THE HOTEL DU PONT’S EVENING WEDDING RECEPTION PLAN III
(Courtesy of The Hotel Du Pont, Wilmington, Delaware)