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Establishing the Right Menu Pricing for your Restaurant

Establishing the Right Menu Pricing for your Restaurant

Anyone in the food service business understands that pricing their menu items accurately is one of the keys to success. While you need to ensure that your price range falls within your customers' expectations, the bottom line is that making a profit, while keep your customers happy, is your ultimate goal. There are many things that will influence the prices you will be charging for your menu items but with some thought, planning and good old number crunching, the method of pricing doesn't have to be mysterious or overwhelming at all. 

Food Costs

Food costs take into consideration the amount you pay for each menu item. Each menu offering on your menu consists of a variety of foods and garnishes that are placed together to create a specific menu item. When you determine the cost of any particular menu item, you will need to break down each and every component of that menu item, up to and including the garnishes, according to their proportions. The key to success of many restaurants is portion control and consistency in how each dish is served exactly the same way, each time it is ordered. This also works well when establishing food costs as each meal will use exactly the same amount of ingredients, simplyfing the pricing process.

Once you have compiled that information, you can then begin to set your prices. This is only your starting point, as this amount will account for approximately one third of the price you will charge the customer for the menu item.

Operating Costs

For every item on your menu, you will also need to add operational costs. This includes the expense of paying the staff and the costs of running the business, such as rent, electricity, water and more.. It is important to know what all of your business operating costs are so that you can use these figures to add to the cost of the menu item. 

Ambiance Costs

The atmosphere that is created in your establishment will play a role in establishing the pricing on your menu. Customers pay for the ambiance of a restaurant and expect less from a fast food chain then from a fine dining establishmene. If your business is considered upscale, then your customers will expect to pay more and they will also expect more. Ambiance costs may include the decor, background music, service, and other details whose costs will need to be added into the cost of the menu item.

Location Costs

You will also need to add the location costs into your menu item pricing. If you are in an area where real estate costs are higher and the dining is considered to be upscale, then your menu should reflect this. Customers will expect to pay more if they are eating at a restaurant that requires reservations or is located in a certain area. It is also true that the more competition there is nearby, the lower your prices will have to be in order for you to stay competitive. If you are unique to the area, you will be able to charge a little more. If you run an eatery in a business district, the prices should reflect the type of guests that you want to attract to your restaurant.

Pricing is something that will strongly affect the success of your establishment. Regardless of how many customers you have, if your prices are too low you may fail because you cannot cover your expenses, if they are too high you will alienate customers. This is why it is crucial that you spend time going over the pricing of each and every menu item to ensure that it's pricing will accurately reflect everything that goes into making each dish.

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