From the total-factor framework to food cost performance disaggregation—developing an innovative model to enhance menu performance

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.