Your menu is the main force in encouraging your customers to come to your restaurant. They want to pay for the quality they receive. Also, the prices on your menu will directly affect the profitability of your restaurant. This means you have to consider the method of pricing you use carefully. While this may seem like a challenging and daunting task, it doesn’t have to be. There are several tips that can help with this important decision.
Keep reading to learn some of the most popular and common methods used by restaurants for establishing menu prices here.
The Ideal Food Cost Pricing Method
With this method of pricing, you take the real cost of your menu item and divide it by the established ideal food cost percentage. For most, this ranges between 25% and 30%.
For example, if you have grilled barbeque chicken as a menu item and it costs $4.25 to make, you would divide that cost by 30%, which yields $14.16. However, $14.16 isn’t considered an ideal price. This means you should lower the price to $13.99.
Keep in mind, though, this method isn’t always reliable because you have to consider other factors, such as competitor’s costs, price instability, and indirect costs. You must account for items, such as salt, pepper, condiments, and fryer oil. If you have a food cost percentage goal of 30%, it’s smart to aim for 26% to make up for these additional costs.
The Competition Pricing Method
With this method, you would assign prices on your menu based on the general market price or the prices charged by the competition. There are three basic options to choose with this option:
- You can price your item the same as your competition
- You can choose to price the item higher to attract people who are searching for higher quality options
- You can choose to price the item lower to attract those who are looking for a deal
The Demand-Driven Pricing Method
When the demand for food is higher than the supply available, people will pay more. Airports and sports stadiums will gouge prices because people here don’t have the option of going anywhere else. If you have specialty items on your menu or if you have created a unique atmosphere, you can do this because your guests are paying for the experience provided with the food.
It’s a good idea to maintain a balance in pricing so you don’t drive potential customers away.
Seek Help When Pricing You Menu Items
It’s clear that pricing the items on your restaurant’s menu can be challenging. While this is true, there is help available. In addition to using one of the methods here, you can also seek the help and guidance of the professionals. Restaurant consulting services can help with this pricing and ensure you use the method that will yield the most profits while still appealing to local customers, which is the ultimate goal of any restaurant.