How to Price Out Your Menu
The first step in pricing a menu is to have a food cost goal. The second step is to be loyal to it, no matter what. These two steps represent the nuts-and-bolts of your kitchen and its presentation to your guests. Restaurants soar with food cost loyalty and sink without it. Creating a menu with price points that maintain sound food cost should be the cornerstone of your kitchen.
The food cost a restaurant maintains depends on the type of restaurant. One major, well-known sandwich/bread-style national chain maintains a food cost of around 26%. Another, well-known national steakhouse chain keeps its food cost at around 33%. Of course, for national corporations healthy cost goes hand-in-hand with the power of bulk purchasing to reduce costs. However, you get the point. A lunch-style diner should have a food cost below 30% and a dinner-style chophouse or seafood restaurant can expect food cost to be a little higher.
Your menu prices have to make these goals reasonable.
When creating your menu’s prices, be sure to cost out the <em>entire</em> entrée. Every sauce, ingredient and garnish should be included when determining the total cost of a menu.
Many operators like to use a plate-and-table wraparound cost that covers the average sum of ingredients that aren’t essential to the recipe but which are used nonetheless. A wraparound cost would include items like bread, butter, salt and pepper. This should be part of the cost of your entrée, and is a factor in determining their total cost. However, it’s more accurate to take the time to price out each specific ingredient on a spreadsheet and add it all up. Easy-to-forget items include:
- A lemon wedge for the salmon entrée
- Kale or lettuce garnish
- Bottled sauces like Worcestershire or A-1
- Ketchup and other condiments for french fries
- Mints for the hostess stand
Vary Your Price Points
You have a concept, and your price points are a central part of that concept. That’s good. But are your price points the same as those of the restaurant across the street? You don’t have to have price points that are different from everyone else’s. But price points that are different from those of other restaurants make it easier to create your niche within the marketplace. Don’t be afraid to actively compare your menu prices to those of the competition.
The best price points either represent a unique level of quality that is worthy of the expense or demonstrate significant value to your customers. For most customers, your menu prices are essential to your business’s identity, and are the first thing they notice about your menu. Reaching something few or no other restaurants are reaching for gives you an instant identity. However, you don’t want that identity to be “overpriced”.
It’s worth it to vary the prices on your menu. If you are a low-end family concept, have a couple of entrees that let your guests celebrate. If you are a fine-dining, upscale model, be sure to have a couple entrees that allow anyone to enjoy your restaurant. Making sure that you have a range guarantees that you’re throwing a net at the widest possible audience.
Be Willing to Adjust on the Fly
Obviously, your menu prices will reflect changes in cost from the vendors that supply you. We’ve all seen how this will trend upward over time. However, a willingness to adjust your price points is sometimes necessary to meet your clientele base in the middle.
Many great restaurants have lowered prices in response to dwindling revenue, the flagging economy, or the opportunity to grow. Restaurants that can maintain high quality while publicly adjusting prices downward or offering discounted items can make a strong push to demonstrate value.
Your Concept Creates Your Price Points
So, you have a concept and you have established your price points. In most cases, these are essential steps in executing your vision as a restaurant operator. They’re part of the dream of owning and running a business, and so they are part of your identity. It can be difficult to adjust your identity, especially if you are stubborn, as many restaurant operators tend to be.
But most of us are more loyal to success than we are a restaurant concept. Don’t let an unwillingness to adjust prices to meet guests be all that stands between you and success.
Here is some software that you may wish to check out:
ChefTec Software - Designed by an executive chef and a staff of programmers for food-service professionals. ChefTec lets you customize management reports and print out recipes, organize monthly inventory procedures, generate ordering lists and maintain your par levels. You can instantly analyze recipe and menu costs by portion or yield, update prices and change ingredients in every recipe.
PC-FOOD II is a food costing, inventory and margin management system for use in restaurant, catering and all food service operations. Calculate and maintain food cost and required selling prices based on desired margin. Edit portion sizes and ingredient costs to see the effect on costs and margins. User selectable sorted displays and reports. Unlimited departments, export ingredients to file, up to 30 ingredients per recipe, up to 30 ingredients and/or recipes per menu item. Three levels of recipes (recipes may use other recipes). Also calculates total revenue, food cost and gross profit for a banquet, etc. Available option to change currency symbol. PC-FOOD II also maintains inventory quantity and value. Input your ending balances in the purchase unit and/or pack unit (i.e. 2 cases + 3 #10 cans). PC-FOOD II then calculates the ending value at the latest cost. Inexpensive - $49.00.
CostGuard - A tremendous inventory, recipe, menu, food costing and pricing tool. Software for food service operations: restaurants, hotels, institutions, corporate, B&I, clubs, caterers, retail, and educators.
Offers a 30 day free trial.
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