ABC-XYZ Analysis: Profitable and Loss-Making Dishes

ABC-XYZ analysis rates each dish on two measures: how much revenue (or profit) it brings (ABC) and how stable its sales are (XYZ). The result shows which dish to strengthen and which to remove or change.

Many restaurant owners don't know exactly which dish brings the main profit and which loses money. Without menu analysis, loss-making items stay on the menu. Below we explain the analysis in plain words.

Key points:

• ABC groups dishes by their share of revenue or profit.
• XYZ groups dishes by how stable demand is.
• Combine both and each dish gets a clear decision.

What is ABC analysis?

ABC analysis divides dishes into three groups by their contribution to revenue. Group A is the small number of dishes that bring the most revenue, B is the middle, and C is the large number of dishes that give the smallest share. Usually dishes are sorted by revenue in descending order and split by cumulative share.

Typical boundaries: A up to about 80%, B the next 15% or so, C the remaining 5% or so. You set the exact boundaries yourself. If you use profit instead of revenue, the analysis is more accurate: a dish that sells a lot may bring no profit.

What is XYZ analysis?

XYZ analysis divides dishes by sales stability. X means stable demand: it sells about the same every day. Y is seasonal or fluctuating demand. Z is irregular sales that are hard to predict.

This analysis helps plan stock and preparation: for X dishes you can calculate supplies precisely, while Z dishes raise the risk of waste.

What do we get when we combine them?

Combine both and you get nine groups, each with a usual decision. For example, AX are stable dishes that bring the main profit: keep them always ready and promote them. CZ are low-revenue and irregular, often candidates for removal from the menu.

This is a general direction. The decision depends on each restaurant: a low-share dish may fill out the menu or draw a customer in.

Example

Suppose a restaurant has 30 dishes. The analysis shows that 5 dishes give most of the profit share (A). Several of them sell steadily (AX). Of the 10 least profitable dishes, half sell irregularly and are often wasted (CZ).

Decision: place AX dishes prominently on the menu, always keep them prepared, and remove or reduce the CZ dishes. These are approximate numbers for an example, and on your own menu the result will be different.

How is it calculated in Excel?

In Excel, for ABC, sort dishes by profit (or revenue) in descending order and calculate each one's cumulative share. For XYZ, take each dish's variation (deviation from the mean) in monthly sales.

• Collect sales and profit for each dish for the last 3–6 months.
• Sort by profit, calculate the cumulative share and mark A, B, C.
• Calculate the variation in each dish's monthly sales and mark X, Y, Z.
• Place them in the table and write a decision for each group.

By hand this is long, and you have to gather data from different places. In Delever ABC-XYZ analysis is ready, and there is also an AI demand forecast: data is collected from the POS and channels by itself. To calculate profit correctly, enter the cost too: delivery order cost.

What do you do with the result?

Use the result in three places: menu, promos and preparation. On the menu, show A dishes more; tie promos to profitable dishes; and in the kitchen and stock keep X dishes in reserve.

The same analysis is needed when choosing a promo: discounting an unprofitable dish increases the loss. We calculated this in is your promo profitable.

Conclusion

• Run the analysis on profit, not revenue.
• Strengthen A dishes and review CZ dishes.
• Repeat the analysis every quarter: menu and season change.

We show ABC-XYZ analysis on your own menu: delever.io or @delever_bot on Telegram.