Menu Engineering
What is contribution margin on a menu item?
Direct answer
Contribution margin on a menu item is menu price minus ingredient cost. It shows how many dollars each sale contributes toward labor, rent, overhead, and profit.
Key points
- Contribution margin is measured in dollars, not only percentages.
- A high food cost item can still be valuable if dollar contribution is strong.
- Menu engineering uses contribution margin with popularity to choose actions.
What to do next
- 1Subtract ingredient cost from menu price.
- 2Rank items by contribution margin inside each category.
- 3Compare contribution margin with sales volume before changing the menu.