Top Management Story

Writen by Lydia Quinn

Menu pricing is one of the most important decisions for any restauranteur. It may look easy, but the fact is that you cannot price it simply by your intuition. It requires consideration, observation and asking certain questions. For instance, do you remember your last visit to a market or a mall as a buyer? How many goods had an acceptable price enticing enough to motivate you to make a purchase? In reality, pricing must be an amount that someone else is ready to pay for your service or product.

Creating a restaurant menu is tricky business. Not only does it involve selecting attractive and popular dishes, but also pricing them competitively. Pricing is important not only to make the business profitable, but also to offer good value to customers to win them over.

Tips on Pricing the Food Items

Let's see how to price the food items on the menu:

* Generally, successful restaurants keep the food costs in the range of 27 to 32% of food sales. These percentages can be higher or lower depending upon the type of restaurant. However, to be more accurate, it's best to compare your cost percentage with restaurants having similar menus and services.

* While calculating the cost of food, all ingredients must be included. Work out the cost of each recipe for each menu item and don't forget to include things, like spices and garnishes in the cost.

* Your recipe costs for items and sales prices will determine whether your food cost is in line with the industry averages. This will also help in monitoring your performance and analyzing problems and trends.

* Ideally you should be able to determine a consistent overall food cost which, when combined with proper pricing, will positively impact on your profitability.

* It's also important to remember there are other costs of operating a restaurant that need to be taken into account to determine optimal pricing for menu items. These include the cost of labor, rent and debt.

Tips on Pricing Alcoholic Beverages Now, let's see how to price the alcoholic beverages on the menu:

* Beverage costs are generated in the mid-20% range of beverage sales. As for food, these can be higher or lower. Fine dining establishments may run up to 40%. On the other hand, restaurants serving draft beer may run as low as a 15% beverage cost. So, it's important to find out the industry averages by comparing your cost percentage to restaurants with similar menus and service levels.

* Beverage costs, like food costs, must be constantly monitored, by comparing with previous performance, with other restaurants and the industry averages. This will help you to competitively price the items and increase profitability of your total operation.

* Although you'll need to cater for normal taxes, you must be clear about additional taxes in your local jurisdiction, as they may impact beverage pricing. In Philadelphia, for instance, there is an additional beverage tax of 10%.

If you take the above factors into account while pricing the items on your menu, you'll certainly succeed in running a profitable restaurant.