How to Price A Menu For-Profit
October 5, 2020
Article Overview10min read
A menu is often the most interesting aspect of a restaurant and its prices, the most critical component for your business’ success. Portions and cost of food will help provide an estimate on how to price the menu – your major concern should be to prevent pricing yourself out of the market.
Here’s a look at a few tips on how to effectively price your menu.
Figure Out The Profit Margin
As menu design consultants will tell you, The gross profit margin percentage should be the main focus of any restaurateur. This figure refers to the overall profit remaining after settling all expenses related to your business including labor and the cost of goods.
The best way to calculate this is to divide the expenses of your restaurant into two categories; wages and food and beverages. In an ideal setting, you will be spending between 25 – 30% of the profits on food and beverages and approximately 30% for wages.
Analyze Your Food Cost
The food cost indicates the menu price of a specific dish in comparison to the cost of preparing the said dish. Since the food cost should be between 25% to 30%, every dollar spent should equal a minimum of $2.85.
While it may look excessive to some, this figure accounts for the manpower spent on preparing the dish, serving it, and cleaning up the table. The gross profit will also pay for the building and other costs required to keep the restaurant running.
Be Mindful Of Portions
A huge part of the success of chain restaurants can be attributed to their ability to precisely manage portions. Chefs are educated on exact quantities of every ingredient to be added to a particular dish as this helps keep costs to the exact figures.
To effectively manage the portions being sent out of the kitchen, it is important that every ingredient is measured. The meat must be weighed while other ingredients like shredded cheese can be stored in pre-measured cups.
Another common tactic is to purchase ingredients that have already been portioned. These include bites like pizza dough, chicken breasts, and burger patties. The downside of this is the increased cost of the ingredients, however, you do save on labor costs and reduce food wastage.
How Balanced Is The Menu?
The price of food varies throughout the year, depending on the season, climate, unexpected natural hazards, and more. There is very little that you, as the restaurant owner, can do about this fluctuation.
What you have control over is the food cost. A very common strategy utilized by restaurant advisors is mixing together items with stable prices with expensive menu items that fluctuate in price. This tactic ensures that there is a relatively stable ordering going on regardless of any fluctuations.
Regardless of the style of restaurant you run, pricing the menu right is key to running a restaurant that will be successful in the long term.