Glossary
Contribution margin
Contribution margin is the dollars a dish leaves behind after its food cost is subtracted from its menu price.
Why dollars beat percentages
Contribution margin is menu price minus plate food cost. It is the cash each sale puts toward labor, rent, and profit. A dish with a high food cost percentage can still be the best earner on the menu if the dollar margin is large.
Menu engineering ranks dishes by contribution margin precisely because the bank deposits dollars, not percentages.
How to use it
Compare items by what they contribute, then feature the high-margin sellers and rework the low-margin ones. A $38 steak at 32 percent food cost contributes more than a $14 salad at 22 percent, so it earns the better position on the page.
Example
A $26 pasta with $6.50 of food cost has a contribution margin of $19.50. A $9 side salad with $1.80 of food cost contributes only $7.20, even though its food cost percentage is lower.
See also
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