Stars: High Profitability and High Popularity These treatments are the stars of the spa; as such, it is convenient to highlight them in the menu design. It is important not to apply changes here, but rather to keep things consistent and promote these treatments. Plow-horses: Low Profitability and High Popularity These are treatments that actually make the spa looses money. The best thing would be to create a more profitable version of these treatments without compromising volume. Puzzles: High Profitability and Low Popularity These are the items of the menu that are highly profitable, but difficult to sell. Sometimes it works reinventing these treatments, while others, by simply lowering prices, popularity will increase enough to produce higher profits. Maybe these treatments need to be communicated in a different way. Dogs: Low Profitability and Low Popularity These treatments are not contributing to the profit of the spa at all. However, it is very important to analyze the situation before eliminating them from the menu. Creating a successful treatment menu is not a simple task to perform. A well-written menu contributes significantly to the bottom-line of a spa. However, it is a process that requieres constant analysis and understanding of the treatments and, above all, what customers are demanding. Dogs and Horses in the House Menu Engineering approach considers both the profitability and popularity of competing items and how these two factors influence the placement of these items on a menu. The process is based on gross margin, so the spa manager needs to know each menu item's direct cost, selling price and quantity sold over a specific period of time. Gross margin is calculated as revenues minus direct expenses. The resulting gross margin of each item from the menu is then compared to the average gross margin for all competing menu items sold. Note: It is very important to keep comparisons between similar menu items. For example, a 90-minute massage should be compared to a 90-minute body treatment, not to a 60- minute mani. Menu engineering is a process that will help Sylvie and Valerie to have the right menu for their customers by streamlining their offer. Remember customers tend to get confused with complex menus; not to mention training expenses, hiring additional staff and maintaining high inventory levels. The process requires the menu to be split into four different sections in order to identify the treatments that are being sold the most and the impact they have on the bottom-line. These sections are: Plows horses Stars Popularity Dogs Puzzles Profitability Creating a successful treatment menu is not a simple task to perform. A well-written menu contributes significantly to the bottom-line of a spa. However, it is a process that requieres constant analysis and understanding of the treatments and, above all, what customers are demanding. The attached spreadsheet provides you with sales data and direct costs for both profit centers: (1) Massage and (2) Skin Care, for the first 6 months of operations of the Get-A-Well Wishing Spa. Even though it is always better to analyze information in a 12-month period, for this assignment, you are requested to classify each treatment as a star, plow-horse, puzzle or dog, based on the gross margin and menu mix. Please consider the following Notes: Treatment duration includes clean-up time. Payroll percentage is calculated based on average payroll for each treatment and it includes benefits for Therapists. Cost of Goods Sold is the sum of professional products used for the delivery of each treatment plus supplies used. Direct Costs is the sum of Cost of Goods Sold plus Payroll. Gross Margin, also called Contribution Margin, is calculated as revenues minus Direct Costs. Number of Treatments Sold is the total number of treatments sold during the first 6 months of operations of the Get-A-Well-Wishing Spa. Menu Mix is the number of times each given treatment was used, expressed as a percentage of the total of all treatments, where Massage profit center represents 85% and Skin Care department, 15% of the total GAW Wishing Spa revenues. Gross Margin Category will either be high or low, based on whether it exceeds or falls below the Average Gross Margin per Treatment of 109.9. Menu Mix Category will either be high or low, based on whether it exceeds or falls below the hurdle rate. It is calculated as follows: (100% / actual number of treatments offered) * 70%. D E F G H Number of Treatments 1 60min 90min 2 Massage 824 1 310 2,134 3 Skin Care 152 255 407 4 Total Number of Treatments 2.541 5 6 Prices 7 60min 90min 8 Massage 180 240 9 Skin Care 190 240 10 11 Net Revenue 12 60min 90min 13 Massage 148,320 214,400 462.720 14 Skin Care 27.360 61.200 88,560 15 Total Revenue (wo Retail) 551280 16 17 18 GAW Volume Sales Figures GAW Spa Menu Number Styles Cells Editing Ideas Sense B1 Get-A-Well Wishing Spa Menu Engineering D Get-A-Well Wishing Spa Menu Engineering Massage SCOGS * Payroll Menu Mix Revenue High or Low? High or Low Gross Margin Menu MX Category Category Direct Costs Payroll Gross Margin Classificatun Duration Iminutes) 50 90 50 Selling Price Josda 180 240 100 240 33,453 40.887 90 4 Wishing Wel Custom Massage Wishing We Custom Massage Althmec Dream Aromatherapy Massage 7 Alchemc Dream Aromatherapy Massage Dreams Come True Four Hands Massage 9 Wishing Stones Massage 10 Wishing Hard Deep Tissue Massage 11 Wishing Hard Deep Tissue Massage 12 Get-A-Well Wishing Journey 13 59 696 995 105 18% 18% B9 95 40% 40% 40% 404 % 409 404 40% 40N Unitary Payroler Cost per Number of Cost Treatments Treatment Treatment Solit 93 72 81 413 13.5 96 110 523 182 72 88 124 243 98 120 129 378 96 134 65 378 96 134 130 14.4 22 86 287 216 90 118 396 480 96 144 54 2.134' Cost of Goods Sold 3.712 7,057 2,00 3.135 2.457 5027 4133 8554 3072 39.164 163N 20.8% 49% 51% 2.6% 52% 11.3% 156% 25% 84.0% 90 90 60 90 74,340 126 120 22,220 20.960 15,600 31,020 51,660 95,040 15,360 462,720 240 240 180 29736 50,209 8,928 12,384 6,240 12.760 201,664 39,016 6,144 185,OBR 67259 10.937 15 519 8,097 17,795 24,797 46,570 9,210 224,252 GOSS Margin per 99.00 13050 91 80 119.70 10620 106 20 93.00 122.40 9600 68,252 11,393 15,441 5,90 14,125 26,863 48.470 6144 238.480 Gross Margin 550 54.4% 5109 49.9% 4434 44395 52.0% 51.0 400W 51.55 240 240 90 20% 42 60 90 60 Skin Care 14 is Wishing Well Custom Facial 16 Wishing Well Custom Facial 17 Magic Oxygen intused Facial La Magic Oxygen imused Facal 19 Aging Well Faca 20 Gel A-Well Wishing Skin Retreat 21 22 106 142 46 100 240 180 240 240 240 12 14% 14% 14% 34% 3496 1095 40% 40% 409 % 4096 40% 216 32.4 25.2 33.5 810 31.0 72 95 72 95 95 99 94 128 97 130 4.2% 5.65 18% 2.4% 1.6% 0.45 16.01 100.05 90 90 19,080 34,000 8.200 14 880 9600 2.640 88,560 951.280 7,532 13.632 3312 192 3840 2,290 4601 1,159 2,077 3,240 091 14,258 53,421 02 40 11 407 9,922 19,233 4,471 8,029 7,080 1,947 49,602 273,933 9.158 15.847 3.809 8051 2.500 093 38,878 277347 86.40 11150 R2 RO 110.50 63.00 63.00 40.0% 455N 430% 480N 25 % 2539 49.95 177 177 90 1066 35,424 270.512 2,541 Z. 49.79% Hurdle rate Average Direct Costs per Treatment Average Gross Margit per Treatment 100.1 GAW Volume Sales Figures GAW Spa Menu + Stars: High Profitability and High Popularity These treatments are the stars of the spa; as such, it is convenient to highlight them in the menu design. It is important not to apply changes here, but rather to keep things consistent and promote these treatments. Plow-horses: Low Profitability and High Popularity These are treatments that actually make the spa looses money. The best thing would be to create a more profitable version of these treatments without compromising volume. Puzzles: High Profitability and Low Popularity These are the items of the menu that are highly profitable, but difficult to sell. Sometimes it works reinventing these treatments, while others, by simply lowering prices, popularity will increase enough to produce higher profits. Maybe these treatments need to be communicated in a different way. Dogs: Low Profitability and Low Popularity These treatments are not contributing to the profit of the spa at all. However, it is very important to analyze the situation before eliminating them from the menu. Creating a successful treatment menu is not a simple task to perform. A well-written menu contributes significantly to the bottom-line of a spa. However, it is a process that requieres constant analysis and understanding of the treatments and, above all, what customers are demanding. Dogs and Horses in the House Menu Engineering approach considers both the profitability and popularity of competing items and how these two factors influence the placement of these items on a menu. The process is based on gross margin, so the spa manager needs to know each menu item's direct cost, selling price and quantity sold over a specific period of time. Gross margin is calculated as revenues minus direct expenses. The resulting gross margin of each item from the menu is then compared to the average gross margin for all competing menu items sold. Note: It is very important to keep comparisons between similar menu items. For example, a 90-minute massage should be compared to a 90-minute body treatment, not to a 60- minute mani. Menu engineering is a process that will help Sylvie and Valerie to have the right menu for their customers by streamlining their offer. Remember customers tend to get confused with complex menus; not to mention training expenses, hiring additional staff and maintaining high inventory levels. The process requires the menu to be split into four different sections in order to identify the treatments that are being sold the most and the impact they have on the bottom-line. These sections are: Plows horses Stars Popularity Dogs Puzzles Profitability Creating a successful treatment menu is not a simple task to perform. A well-written menu contributes significantly to the bottom-line of a spa. However, it is a process that requieres constant analysis and understanding of the treatments and, above all, what customers are demanding. The attached spreadsheet provides you with sales data and direct costs for both profit centers: (1) Massage and (2) Skin Care, for the first 6 months of operations of the Get-A-Well Wishing Spa. Even though it is always better to analyze information in a 12-month period, for this assignment, you are requested to classify each treatment as a star, plow-horse, puzzle or dog, based on the gross margin and menu mix. Please consider the following Notes: Treatment duration includes clean-up time. Payroll percentage is calculated based on average payroll for each treatment and it includes benefits for Therapists. Cost of Goods Sold is the sum of professional products used for the delivery of each treatment plus supplies used. Direct Costs is the sum of Cost of Goods Sold plus Payroll. Gross Margin, also called Contribution Margin, is calculated as revenues minus Direct Costs. Number of Treatments Sold is the total number of treatments sold during the first 6 months of operations of the Get-A-Well-Wishing Spa. Menu Mix is the number of times each given treatment was used, expressed as a percentage of the total of all treatments, where Massage profit center represents 85% and Skin Care department, 15% of the total GAW Wishing Spa revenues. Gross Margin Category will either be high or low, based on whether it exceeds or falls below the Average Gross Margin per Treatment of 109.9. Menu Mix Category will either be high or low, based on whether it exceeds or falls below the hurdle rate. It is calculated as follows: (100% / actual number of treatments offered) * 70%. D E F G H Number of Treatments 1 60min 90min 2 Massage 824 1 310 2,134 3 Skin Care 152 255 407 4 Total Number of Treatments 2.541 5 6 Prices 7 60min 90min 8 Massage 180 240 9 Skin Care 190 240 10 11 Net Revenue 12 60min 90min 13 Massage 148,320 214,400 462.720 14 Skin Care 27.360 61.200 88,560 15 Total Revenue (wo Retail) 551280 16 17 18 GAW Volume Sales Figures GAW Spa Menu Number Styles Cells Editing Ideas Sense B1 Get-A-Well Wishing Spa Menu Engineering D Get-A-Well Wishing Spa Menu Engineering Massage SCOGS * Payroll Menu Mix Revenue High or Low? High or Low Gross Margin Menu MX Category Category Direct Costs Payroll Gross Margin Classificatun Duration Iminutes) 50 90 50 Selling Price Josda 180 240 100 240 33,453 40.887 90 4 Wishing Wel Custom Massage Wishing We Custom Massage Althmec Dream Aromatherapy Massage 7 Alchemc Dream Aromatherapy Massage Dreams Come True Four Hands Massage 9 Wishing Stones Massage 10 Wishing Hard Deep Tissue Massage 11 Wishing Hard Deep Tissue Massage 12 Get-A-Well Wishing Journey 13 59 696 995 105 18% 18% B9 95 40% 40% 40% 404 % 409 404 40% 40N Unitary Payroler Cost per Number of Cost Treatments Treatment Treatment Solit 93 72 81 413 13.5 96 110 523 182 72 88 124 243 98 120 129 378 96 134 65 378 96 134 130 14.4 22 86 287 216 90 118 396 480 96 144 54 2.134' Cost of Goods Sold 3.712 7,057 2,00 3.135 2.457 5027 4133 8554 3072 39.164 163N 20.8% 49% 51% 2.6% 52% 11.3% 156% 25% 84.0% 90 90 60 90 74,340 126 120 22,220 20.960 15,600 31,020 51,660 95,040 15,360 462,720 240 240 180 29736 50,209 8,928 12,384 6,240 12.760 201,664 39,016 6,144 185,OBR 67259 10.937 15 519 8,097 17,795 24,797 46,570 9,210 224,252 GOSS Margin per 99.00 13050 91 80 119.70 10620 106 20 93.00 122.40 9600 68,252 11,393 15,441 5,90 14,125 26,863 48.470 6144 238.480 Gross Margin 550 54.4% 5109 49.9% 4434 44395 52.0% 51.0 400W 51.55 240 240 90 20% 42 60 90 60 Skin Care 14 is Wishing Well Custom Facial 16 Wishing Well Custom Facial 17 Magic Oxygen intused Facial La Magic Oxygen imused Facal 19 Aging Well Faca 20 Gel A-Well Wishing Skin Retreat 21 22 106 142 46 100 240 180 240 240 240 12 14% 14% 14% 34% 3496 1095 40% 40% 409 % 4096 40% 216 32.4 25.2 33.5 810 31.0 72 95 72 95 95 99 94 128 97 130 4.2% 5.65 18% 2.4% 1.6% 0.45 16.01 100.05 90 90 19,080 34,000 8.200 14 880 9600 2.640 88,560 951.280 7,532 13.632 3312 192 3840 2,290 4601 1,159 2,077 3,240 091 14,258 53,421 02 40 11 407 9,922 19,233 4,471 8,029 7,080 1,947 49,602 273,933 9.158 15.847 3.809 8051 2.500 093 38,878 277347 86.40 11150 R2 RO 110.50 63.00 63.00 40.0% 455N 430% 480N 25 % 2539 49.95 177 177 90 1066 35,424 270.512 2,541 Z. 49.79% Hurdle rate Average Direct Costs per Treatment Average Gross Margit per Treatment 100.1 GAW Volume Sales Figures GAW Spa Menu +