How To Price Your Menu Items Right

How To Price Your Menu Items Right

Opening a new restaurant can be a very rewarding venture, but it does come with a lot of challenges. One such challenge is determining the price of all of the items on your menu. An ideally priced menu will guarantee any restaurant to have a profit margin and a satisfied customer base. Follow these methods and you will have both of these outcomes.

Food Cost Percentage

One huge variable that should factor into how you price your menu items is the food cost percentage that you choose. Basically, the food cost percentage is the portion of sales that is spent on the food itself. Usually, restaurants will want to lower their food costs because this will turn sales into profit. 

The Ideal Food Cost Pricing Method

One of the most popular methods restaurant owners use to price menu items is to utilize the ideal food cost method. This equation is done by dividing the actual cost of a menu item by the food cost percentage. For example, if a whole chicken that you purchase costs you five dollars and you divide that by 30%, you will end up getting approximately $16.67 in total. From there, you could set a more ideal price. 

The Competition Pricing Method

Another popular method that many restaurants use to price their menu items is to utilize the competition pricing model. This utilizes the pricing of competition in your industry as a baseline for how the native restaurant’s menu is priced. If the menu is priced the same as the competitor’s, it will be effective if the restaurant is competing based on brand.

If you are operating a more casual style of restaurant, then you may want to price your item lower than your competitors. However, if you have a high end restaurant or if you are targeting a specific demographic of dimes looking for quality food, you’ll want to increase your prices marginally.

Maintain Balance

This is also incredibly important when pricing menu items because you will want to find a balance with the higher priced menu items with the lower ones. This will be a more prolonged process that will require you to master the basics of restaurant menu psychology. 

You will have to remain patient, keep food costs accurate and invest in a sale system that will generate accurate reports. Approximately a third of diners are likely to order the first item they see on the menu, and prices can influence what they decide to buy. Therefore, you should be choosing prices wisely. 

Take Advantage of Your Strengths

Most importantly, you will want to take advantage of what your menu does best. Focus on what makes your menu unique and the items that you have on your restaurant that allows you to price things differently. Doing so will give you the freedom to charge a premium price for your absolute best selections.