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Establishing the Right Menu Pricing for your Restaurant

Pricing is a complicated 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 how much to charge your customers for each dish so that you can make a profit, while not turning away potential customers. There are many things that influence the prices you set for your menu items, the better you understand these factors the less complicated will seem the daunting task of restaurant menu price setting.Establishing the Right Menu Pricing for your Restaurant

Food Costs

Each meal consists of a variety of foods and garnishes that are placed together to create a specific dish. When you determine the cost of any dish, you will need to account for every food item and garnish that is going to be used according to their proportions. Once you have compiled that information, you can then 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 in operational costs. This includes the expense of paying the staff and the costs of running the business, such as rent, electricity, water and more. If you do not factor these costs into your pricing, you will not meet your bottom line each month, never mind make any profit. 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

Customers also pay for the ambiance of a restaurant. 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 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 cost into your menu item pricing. If you are in an area where the real estate is 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.

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 it.

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