How to Set Menu Prices for Your Restaurant

Posted on 13 july 2017

Running a successful restaurant takes a lot of work and carefully thought-out actions. One of the biggest things to consider is the earnings it’ll bring in. When designing your menu and setting prices, you want to ensure you’re covering overhead, while also earning a profit. Follow these key factors to set the best prices for your restaurant.

Cost of Ingredients

The first thing you need to know before you start setting menu prices is the cost of each food item going into each dish. By everything, that means even the little things like condiments or extra toppings a customer might use. Start by making a list of all the ingredients going into each dish, then calculate the portions going into each meal. From there, you’ll be able to come up with the prices for your dishes.

Cost of Running Your Restaurant

The next thing you want to do is consider the cost of running your business. This includes everything from labor, rent, cleaning, insurance, and other extras you spend money on. If you see that cost aren’t the same every month, use the highest average cost when coming up with prices.

Calculating Cost Percentage

Once you have an idea of the costs required to cover your expenses, consider the profit percentage you wish to earn. This can be done by multiplying the expense of the dishes by 1.1, 1.2, or 1.3. This will provide a 10%, 20%, or 30% profit, respectively. For best results compare the prices of restaurants around you to price your dishes competitively. Pricing things too low will make you less profit, but pricing them too high might keep customers away. You can make different profit percentages for each item on the menu, if you wish.

How Pricing Affects Your Customer Base

The pricing on your menu is going to determine the type of customers you attract. If you’re aiming to run a classy restaurant that attracts patrons looking for a luxurious experience, you want to round your items to the nearest dollar. While if you are looking to attract middle class families, it’s best to set prices to below the nearest dollar, for example, $9.99 or $9.95.

When considering pricing, think about the type of demographic you want to bring in. For this, keep in mind the type of people who live around in the surrounding area. Also, consider the price barrier. In Canada, meals above $20.00 don’t sell well. Unless you’re catering to a high-income clientele, you want to avoid dishes that can get this high.

A successful restaurant depends on its menu. This doesn’t just mean the items you offer, but the cost of the items as well. You want to sell your items at a price that not only covers the cost of your expense, but also makes you a profit.

How you set your menu items depends on a few factors. The goal is to come up with competitive prices that help drive customers to your business. Researching your competition is something you might want to consider. The profit of your business is something that takes careful consideration when opening your restaurant. 

To learn more about menu design, read our blog post here!

Interested in learning more about setting your menu prices? Contact us today!