You have chosen your menu items, written enticing descriptions and created an amazing design….now what? PRICING THE MENU!!
Factors to Consider … Prices are too high = no customers/lose sales Prices are too low = lose money/not cover operating costs Operating Cost: is anything that is a cost of doing business So what do you have to do??? Make sure the menu prices cover operating costs & be fair to customers
Prices are Influenced by … Labor: Menu items that take more time to create and more skill in preparation are often higher priced Competition: Use your competition as a guide…see where they price similar items at Customers: The type of customers your restaurant will attract influences prices Atmosphere: Customers expect fine dining restaurants to have higher prices than more casual restaurants. Location: Restaurants in cities usually have higher prices than restaurants in smaller towns.
Pricing Methods: Factor Method Factor Method: Uses a pricing scale based on a percentage of the food costs needed to operate the restaurant successfully. To Use: First: Determine what the food cost % should be How do you find food cost %? –Divide the total cost of food by the total food sales Total cost of food $4000.00, Total Sales $16,000.00 »$16000.00 / $4000.00 =.25 (Food Cost %)
Factor Method (cont.) Next: Take the food cost % & divide it into 100% If you have a club sandwich and sweet potato fries cost $1.50 to make.25 / 1.00 = 4 (factor) Finally: Multiply the factor by the cost of the menu item $1.50 x 4 = $6.00 (selling price) Factor Pricing: Low Risk
Pricing Methods: Markup-On-Cost To find the selling price using this way… 1 st : Take the food cost of an item and divide it by the desired food cost % Example: you want the food cost % to be 25%, a salad & half a sandwich cost $1.25 to make….25 / $1.25 (item cost) = $5.00 (selling cost) The salad & half a sandwich would be priced at $5.00 Markup-On-Cost: Moderate Risk
Pricing Methods: Average Check Method This system prices items near an average check that you would like to see each customer spend Example: –if you want the average check total of $10 per customer per lunch, your menu should be set so that customers will automatically order food & drinks that come out to that total Cobb Salad $ 8.75 + Soda $ 1.75 = $10.50 (cost of meal) Average Check Method: Moderate Risk
Pricing Methods: Competitors’ Pricing This system charges approximately what their competitors charge for similar menu items It can be risky since each establishment has different overhead costs such as; rent, labor, food costs & profit. Example: –“Pizza My Heart” charges $ 3.50 for a slice of pizza…down the street is “New York Pizza” charges $3.75 for a slice of pizza Competitors’ Pricing: High Risk
Pricing Methods: Psychological Pricing Once the selling price is determined using another method, this method can be used…this system is based on how a customer reacts to the menu prices. Example: –A customer may be more willing to order a $7.00 French dip sandwich with French fries if it is priced at $6.95 (moving from one dollar category to another influences how customers view the value they get for their money) Psychological Pricing: Moderate Risk