| One thing that restaurant owners often struggle | | | | A Menu Pricing Formula |
| with when they open a restaurant is menu pricing. | | | | There are a lot of different menu pricing formulas |
| There are some basic guidelines that you can | | | | that can help you set prices. Formulas offer a |
| follow to come up with the ideal prices for your | | | | basic guide to get you started but you may have |
| restaurant concept and location. While you can | | | | to make adjustments to the results as your |
| learn a lot by observing the prices of your | | | | unique situation will differ from other restaurants. |
| competitors, a large part of your pricing will come | | | | Instinct and experience definitely count for a lot |
| down to instinct. Find out exactly how to price a | | | | when it comes to pricing. |
| restaurant menu by reading the following article. | | | | One common formula requires you to calculate |
| Pricing Just Right | | | | how much a dish costs in terms of ingredients |
| It is important that you take the time to come | | | | and then multiply that amount by three to allow |
| up with menu prices that will optimize your profits. | | | | for overheads, wages and profits. It is important |
| If you price your menu items too low then you | | | | to be aware of food cost percentages. This |
| will have trouble covering costs and you will | | | | method automatically gives you a food cost |
| struggle to make a profit. On the other hand, if | | | | percentage of 33.3% or one third. |
| you price them too high then you will scare away | | | | This method can be a little overly simplistic though |
| prospective diners and not get the volume of | | | | and non food related costs have risen a lot in |
| business that you need. It is crucial that you hit | | | | recent years. However, many restaurateurs are |
| the target with prices that are competitive and | | | | able to get their food cost percentages much |
| profitable will still offering great value. | | | | lower than this with some able to keep this ratio |
| What are Other Restaurants Charging? | | | | as low as 20%. |
| Visit a number of local restaurants, particularly | | | | Price Promotions |
| those that are directly competing with you due to | | | | Some customers are extremely conscious of |
| having a similar concept or being in the immediate | | | | price when they browse a menu. Market to this |
| vicinity of your establishment. Sample some of | | | | kind of customer by highlighting 'house specials' or |
| their dishes and check out what kind of service | | | | 'chefs specials' that are discounted for a certain |
| and atmosphere they offer in relation to their | | | | time period. You can also offer set menus that |
| prices. These days you can also check numerous | | | | include a number of courses and beverages for a |
| menus online by quickly going through restaurant | | | | certain number of people for a fixed price. |
| websites. | | | | Discounts work well for most casual dining |
| Consider the number of competitors that are | | | | establishments and give people the perception |
| located around you. Other restaurants represent | | | | that they are getting a great deal. |
| an alternative to customers who don't like the | | | | The Psychology Behind Pricing |
| look of your prices. However if your restaurant is | | | | Some consumers subconsciously respond to |
| unique in your area or has a well established | | | | certain price points without realizing it. One |
| reputation then you may be able to get away | | | | example is how a price like $19.95 is considered |
| with charging premium prices. | | | | by many consumers to be a much better deal |
| If there are two local options for Italian then | | | | than $20 would be. |
| customers may compare prices between the | | | | Depending on your location and your concept |
| two. However, if you are the only Indian | | | | some consumers may feel that main courses |
| restaurant in town then customers may be | | | | under $20 are a good deal and ignore those |
| prepared to pay a little more to dine with you if | | | | above that level. The key is in identifying the right |
| they just happen to feel like your specialty of | | | | price points for your target market. |
| cuisine. | | | | Price Range and Minimums |
| Costs Affect Pricing | | | | Give some thought to the range of prices that |
| Keep in mind that some ingredients are subject to | | | | your restaurant will offer and whether it will be |
| fluctuations in market prices, usually due to the | | | | perceived as being value, mid-range or expensive. |
| fact that some items are seasonal. You can either | | | | Think about the minimum amount that you want |
| limit these ingredients, add menu inserts with the | | | | to get out of each customer that comes through |
| latest prices for certain dishes or simply fix a | | | | your doors. You may even go as far as having a |
| price that you know will allow you to make a | | | | minimum charge per head at times when your |
| healthy profit most of the time. Some | | | | restaurant is really busy. |
| establishments, such as seafood restaurants have | | | | Once you know how to price a restaurant menu |
| a chalk board where they can adjust the prices | | | | you will be able to find the perfect price points |
| of menu items on a regular basis. Some menu | | | | that allow you to fill your tables, offer value to |
| items have to be priced differently due to the | | | | customers as well as make enough money to be |
| labor costs involved with their preparation if they | | | | profitable. |
| take an exceptionally long time to prepare. | | | | |