Abstract
The menu serves as a form of advertisement and has also been recognized as an important marketing communication tool between restaurant and consumer. Extant literature have assessed the menu item performance by using the multi-factor efficiency index. However, there is a paucity of literature focusing on the efficiency disaggregation in order to improve the performance of individual food, labor, and other resources. The aim of this study was to determine the input targets for each menu item by comparing the efficiency frontier established by all menu items in two types of restaurant chains. In order to achieve this goal, the study sought to establish the food and labor cost performance assessment model utilizing the total-factor framework combined with a slack-based measure (SBM) of efficiency in data envelopment analysis (DEA) (SBM-DEA). Resource-saving target ratios (RSTR) for panel data with 35 menu items in these two different cultural type of restaurant chains including Chinese-style and Japanese-style restaurants for twelve months were assessed in a total-factor framework. The four-quadrant analysis based on efficiency and unit profit offered different strategies to the restaurateur being studied. The empirical findings indicated that the average total-factor food cost efficiency (TFFCE) was better than the total-factor labor cost efficiency (TFLCE) in these two types of restaurants. The TFFCE (80%) and TFLCE (61%) of the Chinese-style restaurant were better than those (TFFCE (76%) and TFLCE (50%)) of the Japanese-style restaurant in the observant periods. Even though the Chinese-style restaurant had a better resource efficiency, the restaurateur was still able to improve at least 20% in terms of food cost efficiency and 39% of labor cost efficiency, respectively. Managerial discussion and future study are also discussed.
Highlights
The food sector is an essential contributor to the world economy, and there is an increased diversity of dietary preferences and needs with a growing population and varying lifestyle [1]
This paper developed two types of Resource-saving target ratios (RSTR) including the food cost-saving target ratio (FCSTR) and the labor cost-saving target ratio (LCSTR)
A zero FCSTR or LCSTR value means that a sector is on the frontier with the best total-factor food cost efficiency (TFFCE) or total-factor labor cost efficiency (TFLCE) among the observed menu items and indicates that no redundant or over-consumed resource use exists in this menu item; otherwise, an inefficient menu item with a value of RSTR larger than zero shows that the resource needs to be saved at the same output level
Summary
The food sector is an essential contributor to the world economy, and there is an increased diversity of dietary preferences and needs with a growing population and varying lifestyle [1]. Due to the characteristics of small profit margins and relatively high failure rates in the restaurant industries, existing menu analysis or menu engineering only considering the food cost would distort the economic value for menu items and lead to inappropriate decision making for restaurateurs [7,8]. The first is a ratio analysis such as that of the food cost per menu item, employee productivity, and sales volume [9] Applications of this method are limited due to the possibility that different ratios will produce different performance results.
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