Tips for Pricing Your Restaurant Menu

Most people who endeavor to open a restaurant are good at creating delicious meals. However, they may not be familiar with food pricing. Fortunately, people who have come before you have it all figured out. As you plan your menu, here are some tips to help you price your selections.

Cost of Goods Sold

How much you pay for your restaurant ingredients is going to help determine how much you need to make back. Know the value of your beginning inventory, any additional inventory you purchased, and then the inventory you end with.

If you start with $5,000 in inventory on Monday, then on Thursday and additional $1000 arrives, you have $6000 in total inventory. By Sunday, you only have $2,800 in inventory, which means you sold $3,200. Keeping track of your inventory, helps you keep costs down with less waste.

Setting Prices

It’s obvious that you want to set your prices higher than your costs. To do this, you have to determine a markup for your profit margin.

Your food costs should make up between 20 and 40 precent of your total sales. Your markups should be around 300 percent. If a bowl of soup is priced at $5.25 on your menu, and uses $1.75 of your inventory, then it’s cost falls in the 33% range, which is where you want to be. If you look at with a markup formula, then it would be 1.75 (COGS) + 3.50 (1.75 x 300%) = $5.25. As you can see, you get the same result.

Other Tings to Keep in Mind

While these basic formulas will ensure you make a profit, things aren’t always so black and white. If you have a popular menu item, you can play with raising the price on that item to increase your profit margin.

It will help to keep your portion sizes consistent so that a different cook doesn’t raise your COGS percentage. Keeping a reference manual in the kitchen is a good idea. It should also outline any condiments that are added on the side.

Make your staff aware of costs so they can also be mindful of waste. Train them in menu pricing as well, as it will help them understand how the business operates for success.

Operating a restaurant can be a rewarding experience, especially when you understand menu pricing and can steer your establishment to success.

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