Establishing the Right Prices to Ensure Satisfied Customers
Pricing is a difficult task for anyone who owns a food service business. You have to walk a fine line between making a profit and keeping the customer happy. This means taking the time to examine a set of factors that will determine what you should charge for each dish to guarantee that you make money while also not turning away your target audience. There are many things that will affect the variance in prices from one establishment to another. Your job is to understand these factors and use them to determine what you will charge before you open the doors to the public.
Nothing will affect your prices as much as the cost of preparation. Each meal consists of a variety of foods and garnishments that are placed together to create your specific dish. When you determine the cost of the dish you will need to account for every food item and garnishment that is used on the plate. So before you can set a price you need to first establish what each dish on your menu costs to prepare and serve. This is your starting point as this should account for over one third of the price you charge the customer.
For every item that you serve in your business you must also pay additional costs. This includes the expense of paying the staff and the costs of running the business. If you do not factor these costs into your pricing you will end up not meeting your bottom line each month. It is important to know what your business operating costs are and what payroll costs you. You will use these figures to help decide on a price that ensures you exceed these costs so that your business is able to become profitable once customers begin visiting.
Customers pay for the atmosphere they receive. This is why a fast food business cannot charge as much as an upscale restaurant. The atmosphere that is created in your establishment will play a role in the pricing on your menu. If your business is considered upscale then your customers will expect to pay for that. However, you should know that they will also expect the entire experience to be worth the expense. When you are determining pricing you will look at the ambiance in your business and use that to decide what your customers expect to get. If they walk in looking for inexpensive meals in a casual environment then that is what they should receive.
You can also base a lot about your prices on the location of your business and the competition around it. If you are in an area where the real estate is higher and the dining is considered to be a higher caliber then your menu will reflect this. Customers will expect to pay more if they are eating somewhere that is reservation only or located in a fashionable area. It is also true that the more competition nearby, the lower your prices will have to be. If you are unique to the area you have the ability to charge a little more. Pricing is something that will affect the success of your establishment from a business perspective. Regardless of how many customers you have, if your prices are too low you still may fail because you cannot cover your expenses. This is why it is vital that you spend a vast amount of time going over the pricing to ensure that it meets the needs of your business and your customer.