Restaurant

Factors To Consider Before Determining Restaurant Menu Prices

The most pertinent question when setting up a restaurant business is how to price the menu correctly to make profits but not at the risk of displeasing price-sensitive customers. Determining the restaurant menu prices can be quite challenging and tricky. A restaurant owner might have to reset the cost of items on the menu multiple times over the entire span of their food establishment depending on the changes in the market situation. There are a number of crucial points that one needs to factor in while deciding on the menu and also the prices charged for food.

Determining Cost

It is imperative to price the menu of the restaurant correctly and for doing so one has to determine the cost of the items on the menu. A restaurant owner needs to draw up the entire cost of making a particular dish available to its customers, right from the cost of procuring it from the wholesale or retail grocery or provision market to its cooking charges, involving even a part of the service cost rendered by the chefs in cooking it. It might seem like tedious job to determine the cost of every item n the menu list but this is an important step in determining the exact prices of items on the menu to ensure that you are not underselling them.

Determine a profitable price point

Once you determine the cost entailed in preparing a particular delicacy, you can also decide on the profit point at which you would be selling your food items on the menu. A standard rule followed by most restaurant owners is to first calculate the cost of each dish and then charge double or sometimes even triple the total cost incurred for making it. Selling cost of food can be around 32- 40% and for beverages it is acceptable to keep a profit margin of 25 — 35% in some countries.

Check out menu prices of competitors

Sometimes, it is also necessary to see what other competitors in the restaurant business are charging for the same items as on your menu. It might do more harm than good to your business if you undersell or if you overcharge for menu items than others in your locality. Quick survey of the restaurants around you will help you determine the right prices of the items on your menu. However, if you are selling specialty delicacies and signature dishes, then you can also keep a huge profit markup. It is also better to track the sales and popularity of all the items in your region to quickly and correctly determine the price consumers are willing to pay for particular dishes.

If you decide to enlist expensive and specialty food items on your restaurant menu then it is also a good idea to have the column of that dish carry a detailed description of the items going in for its preparation to give customers an idea as to why you are charging extra for it. This way the customers might be willing to shell out extra for this dish if the description appeals to them and justifies the price on it rather than dismissing them outright.

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