5 tactics to pricing the menu:
1. Cost Plus Menu Pricing
The most basic way to price a menu to guarantee profit is to know the cost of each dish and multiply that cost by 3 or 4. If a burger costs R25 to produce, sell it for R80.
To ensure the best food cost control, know where your costs are coming from. Most restaurants operate with food costs between 25-35%, or roughly 1/3 of all costs, together with 1/3 labor and 1/3 operational costs.
This is the most basic approach, and while it guarantees your menu is priced for profit, it doesn’t guarantee that guests will be willing to pay the amount you charge.
2. Market Minus Menu Pricing
A smarter tactic to increase restaurant profitability is to evaluate what the market, your guests, are willing to pay for a dish, then divide by 3 to get the food cost you need to work with to produce the dish. If the market is willing to pay $100 for a burger, then plan no more than $33 in food costs.
With that food cost, get the best quality ingredients possible and control the portion size carefully and consistently. For example, instead of reducing the quality of meat you buy for a burger, you might stick with high quality beef and reduce the burger size.
The lower you can get the food costs (without compromising on the quality you want to deliver), the higher your margin will be. Which is why this is a smarter way to pricing the menu.
3. How to find out what guests are willing to pay
Guests appreciate if your pricing matches the value of your restaurant, and they will be more likely to return.
- Check competition in the area and match them. If you are more casual, price lower. If you are more high-end, price higher.
- Survey your guests and ask if the price matches value and if not, why not. There are many ways to run surveys, from training waitstaff and table cards with QR codes to facebook surveys in lead ads. Offer a small incentive to reward respondents.
4. Loss Leader Menu Pricing
Take a product on the menu you know is in high demand and price it unusually low to attract guests in, knowing that they will order more high profit items from the menu once they are there. Examples:
- Happy hour specials where one popular product – drink or food – are deeply discounted to bring groups in.
- A restaurant that lowers the price of normally high markup wine can attract many guests in for a full meal using an offer than makes them stand out, with more sales overall to cover the profit lost on the wine.
5. The importance of portion size
Costs are like kids – if you leave them unattended, they will run wild!
To keep the costs you set from running wild, it’s critical to control portion size. Be consistent in every service with every team member to best manage your restaurant profit and loss.
Consider creating a photograph wall in prep stations for kitchen staff to ensure accuracy and spot check.
More tips in Careful prep to save costs
6. Other considerations
- Higher demand for specific products gives you room to raise your prices on those products.
- Control the cost of extras. Create guidelines with a separate menu and set of charges for extras like condiments and sides to share with your staff.
- Your staff have great power over the cost of food. Help them reduce waste, ensure portion consistency, and up-sell profitable items by training them thoroughly and sharing your menu pricing strategy.
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7. Menu pricing software
Food cost control becomes a lot easier if you implement a software solution. By integrating your suppliers in the system, you always have current pricing for your ingredients and dishes.