How to Set Restaurant Menu Prices

 In 1. David Scott Peters, Food Costs, Menu, Video Blog

Have you ever wondered how to set restaurant menu prices? Have you ever heard the “three-time markup” or average recommendations? I go nuts when I hear those kinds of blanket suggestions. You’re not average! How do you know if your market can handle such a markup? Watch this video to learn how to set restaurant menu prices.

What are averages good for? NOTHING!

You have to set a budget based on your total cost of goods sold plus total labor costs (prime cost) where you’re going to fall. For a specific range of sales – at least $850,000/year – we aim for 55% prime cost.

How you get to 55% prime cost in your restaurant is based on a variety of things and your food cost doesn’t have to be the same as your neighbor’s. You might have a 30% food cost and a 25% labor cost or vice versa. Any combination is fine as long as you’re hitting 55%.

You have to set a budget to where your food cost should be based on your price point, your product quality, your type of restaurant and so on.

One of the things you have to do is get up-to-date recipe costing cards, what you sell the product for along with how many items you sell of everything (reports in your POS system). This will tell you what your food cost should be if you had no waste, no theft, no spoilage — a perfect restaurant, which does not exist. But this gives you the ideal food cost and the extra point or so for your chef. With this information you can measure success.

Now you can price your menu properly based on your mix – some items you sell the heck out of and you can charge more for a low food cost. Some items don’t sell a lot and could have a high food cost or a good cash contribution, but it doesn’t have too much of an impact.

All of these reports and data help you make the decisions. You’re not guessing – you are using data based on your restaurant to figure out how to set restaurant menu prices.

To learn more about how to set restaurant menu prices, read our free special report, Breaking Away from the Insanity: How to easily take control of your restaurant and make more money. Download it here

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