With food costs rising and an impending increase in minimum wage, a lot of you may be wondering—are my menu prices right? Whether you’re a new restaurant owner or you’ve been in the industry for awhile, reviewing your menu and setting prices can be a daunting task. Even as consumers we’ve often wondered, how did they decide on that price? This is how.
The most important factor when pricing your menu—how much does each dish cost to make? This includes the cost of every ingredient, from the protein to the vegetables to the spices. On average, food costs run about 33% of your menu prices, though this can differ (see pricing calculator below). For example, if you’re running a fine-dining establishment you’ll typically see higher food-cost percentages than you’d see at a quick serve establishment. Percentages will also vary from item to item where entrees often have higher cost percentages than soups and appetizers.
When setting prices don’t forget to consider your sales mix, you can often increase prices on lower-cost items to offset the higher-cost ones.
There are a lot of additional costs to consider when setting prices, chief amongst them: labor, overhead and giveaways.
Labor Dishes that require a lot of time, effort and talent merit a higher price point. Not only are the ingredients a factor but you also have to pay and train the staff to prepare the dish properly. Anything that is made from scratch in-house will cost more than something that simply requires heating and serving.
Overhead While these costs aren’t as prevalent, it’s still important to keep in mind. This includes decor, product presentation and marketing efforts that go into not only each dish but keeping your restaurant up and running.
Giveaways Often forgotten about but important to remember, keep in mind any free bread, tortilla chips, salsa, butter, etc., that is given out—be sure to include this cost and add it into your menu prices.
Keeping an eye on what your competition is doing is smart and they’re likely keeping an eye on you! Take a trip and visit a competitor—what are their prices? What are their portion sizes and presentation? Are they busy and during what times? You can learn a lot from seeing what a competitor has to offer and where you can incorporate, and even improve upon, some of their ideas.
What Has Worked, What Hasn’t?
What are your customers loving? It’s always important to answer this question on a regular basis. This helps you to not only understand your customers but it will also help you lower your overall food cost. If there are items you’re not selling, do away with them and save yourself the additional cost of stocking up on the ingredients specific to the dish. For commonly used ingredients, research cost-saving options such as a cheaper vendor or substituting ingredients for similar but more affordable options.
Menu Editing Tool
Decided to raise your prices? If you’re a Breadcrumb user, save time and make changes to your menu on the fly using the menu editing tool!
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