This study assessed the performance of entrées in Chinese chain restaurants based on revised menu engineering that incorporated factors including labor costs and indirect operating expenses (IOEs) and variable return-to-scale (VRS) data envelopment analysis (DEA). We collected panel data on 20 entrées covering three-month periods that included both the peak and slump operating periods of the year for two same-brand chain restaurants. The empirical results indicated that revised menu engineering and output-oriented VRS-DEA may provide specific criteria for identifying entrées to be replaced and retained, respectively. The DEA further provided return-to-scale and output surplus analyses of each inefficient entrée for further improvement, which the menu engineering could not offer. The financial performance observed when using the VRS-DEA model is expected to be better than the performance observed when using a revised menu engineering model.
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