4 Methods for Pricing Menu Items
The menu is a main driving force in getting customers in the door, and they want to pay for the quality they are receiving. The prices on the menu directly affect your restaurant’s profitability and these guidelines can help you get the most out of your pricing decisions.
Ideal Food Cost Pricing Method
The actual cost of a menu item divided by your ideal food cost percentage (typically 25-30%)
Raw Food Cost of Item + Desired Food Cost Percentage = Price
Since $14.16 is not an ideal price, consider lowering the price to $13.99
Not always the most reliable pricing method because of indirect costs, price instability, and competitor’s costs.
Account for items like fryer oil, condiments, and salt and pepper at a variance of about 4%. If your goal for food cost percentage is 30%, aim for 26% to account for the extra costs.
Competition Pricing Method
Assigns prices based on the general market price or those of the competition·
- Price the item the same at competitor’s·
- Price is slightly lower to attract those looking for a deal·
- Price higher to attract those looking for higher quality
Demand-Driven Pricing Method
Supply and Demand
The demand for food is greater than the supply, so people are willing to pay for it. Sports stadiums and airports gouge prices because guests do not have the option of going somewhere else. Restaurants with specialty menu items or unique atmosphere can do this because guests are paying for the food and experience.
Maintain balance in price so to not drive customers away.
Evaluate Current Profitability
Know the highest grossing items; the ones that make the most profit. In a seafood restaurant, the lobster often achieves the highest gross profit. Maximize profit by raising other prices slightly, or train servers to promote lobster as a special or featured item.