If you plan to open your restaurant soon, then you are probably overwhelmed with a lot of details. You need to make sure that you have a great advertising and marketing strategy, you need to ensure that your wait staff’s well qualified. You also need to make sure that your building is up to code. However, what many new restaurant owners often struggle with, even until your last minute, is pricing their menu. They have no idea how to determine food costs.
And many make the huge mistake of assuming that they need to price according to how much of a profit they would like to turn each month. They assume that just because they a have nice building or a grade A chef that prices should be on the pricey side. However, this often a dangerous mistake, especially if you want the customers to be satisfied.
Sure, once you have your menu planned you need to spend some time thinking about your menu price points. However, it is very important that while doing so, you remember that you only have one chance to make a lasting impression. And the pricing of your restaurant will be the very taste in your guests’ mouths as they are leaving your establishment. They will have just signed their check and they are going to ask themselves a question, “Was this worth what it cost me?” Not only that, many of them will be reminded of that when their credit card bill arrives and they will again ask themselves, “Was it worth it?”
So you need to keep the value proposition in mind. It’s not necessarily what a customer spends that counts, its what they get for what they spend. Your main goal should be what you should be to ensure that your customer says, “Wow, that was awesome, I would have paid much more for that.” when they pay for their meal. You should do your best to avoid making your customer think about how much they may have overpaid for the experience. It’s important that you think long and hard about your price points.
Think of your costs as being are a part of your relationship with your customers. If you want your relationship to continue then your pricing must make sense, because price points have a huge impact on your business. Here are a few questions to ask yourself if you want to know how to price your menu.
5 things to take into account when pricing your menu
1. Does it fit the environment?
Have you ever visited a restaurant that showcased extravagant linen on the tables and a candle light environment? Were their crystal chandeliers? Was there a violinist are live music group in attendance? If you have dined at a place like, then you know that your dining experience would not be within the same price range as your local fast food restaurant. Even if the food was not the best, you were paying for your surroundings.
People know that when they spend money at a restaurant, they are not just paying for food. They are also paying for an entire wait staff of people, the air conditioning, the utility bill, flowers, printed material and etc. So when customers look at a price on a menu, they wonder if it fits the entire experience that they are getting. They wonder if it matches with the restaurant’s concept, feeling and idea. So first, make a determination about what price points matches your restaurant’s experience.
2. What style of service will I offer?
Not only should you take your surroundings into consideration, you should also think about what type of service you are giving your customers. Do you plan on having a maître d’ escort them to their table or will they be free to seat themselves? Will your wait staff dress in a casual uniform or will they be required to wear tuxedos? Will there be a sommelier to pour your customers’ wine? You need to think about how your food will get to the table. Is it counter service? Will you offer table service? Is it high-level, waiter/captain bus service?
You see all of these factors matter when determining your price points because not only does the taste of the food matter, but how it is delivered matters as well. How your food is delivered helps to determine how much value it has to the guest. Even what you deliver your food on can make a big difference in how it is priced. Will it be delivered on a simple paper plate? If its being delivered on expensive china, then you can charge a bit more.
3. How much does each menu item cost?
Once you have decided how your pricing matches the decor and feel, you need to think about how much and every item on your menu will cost. In most cases, people understand that chicken will be cheaper than beef. Beef will be less expensive than lobster. However, there are a lot of hidden costs that most new restaurant owners would not think to consider.
For instance, its very easy to assume that when you get all of your produce from your area’s local farmers, that it will save you a lot of money, which means it will cost your customers much less. However, you will soon learn that this is not always the case. A lot of owners are surprised to learn that all of the specialty greens that they buy from their local farmer who comes to the market in their area actually costs more than the protein when they finally get it to the plate.
That’s exactly why it’s so important that you do your research. The more you know before you make your final purchases, the less likely you are 
to be taken off guard by these “small” details. It’s very important that you know as much as possible about food costs. Your food cost is a vital part of your financial success. Set up a day to sit down with your team to discuss details. By the end of this meeting, you should have determined how much each plate will cost to both deliver and produce. This will give you a better idea of what you can charge for each dish.
In a lot of these scenarios, restaurant owners will find that they have to make some pretty significant changes in their menu. This is especially the case if you are going over budget and the plate will be too expensive to serve. The more open you are to making changes and deviating from your original idea, the more easily it will be to implement these changes and reach a price point that works for both you and The customer.
4. What is my sales mix?
If you think about your favorite restaurant, then you probably have a certain dish in mind. And you wouldn’t be alone in this way of thinking. A lot of people think about a certain food item when certain restaurants are mentioned. And that’s because what distinguishes a restaurant from another Is their specialty. Some restaurants are known for making certain unique dishes. Not only that, but some are known for making even common dishes better than most.
There are also some cases in which a restaurant will feature a particularly decadent item on its list. This item may be normally purchased on special occasions because it may be more pricey than your other items ondepending onhow much time, skill and money it takes to make it. In these cases, your restaurant will tend to sell less of this particular item thanthe rest.
These scenarios illustrate why it’s extremely important to take into account how often items are purchased. This is referred to as a sales mix. Those who consider their sales mix when planning out their menu understand that not everything will sell in the same quantities. Some items are best sellers. Some will only be sold in limited amounts. You may only sell a certain item for a limited time, only to remove it later. The food that you sell more of have a more bigger impact proportionally on your how much profit you are able to make. So when you’re trying to come up with the pricing, you need to keep your sales mix in mind
Conclusion
As you can see, as a restaurant, there are several things that you need to think about when considering how to calculate food costs. In order to determine your menu prices, you need to do more than think about how much profit you would like to make. You need to consider your value proposition. You need to think about the style of service that you will be offering to your customers. Take into account the amount of money it takes to produce each plate. And finally, keep your sales mix in mind. By taking all of this factors into account, you should be able to arrive at the appropriate prices for your food.
Unfortunately, there isn’t a one size fits all answer. What works for one restaurant may not work for another. Even if a restaurant share the exact same decor as another, they may have a different style of service. Even if they have some of the same kinds of service, their sales mix may be entirely different. Ultimately it’s never a good idea to duplicate The prices of another company’s menu unless your businesses are identical. Even then, you need to do your homework. By taking all of these factors into account, you should be able to arrive at the appropriate prices for your food.
