Price point

How to Determine Menu Price Point | Restaurant Business

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• published: 30 Jul 2013
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Watch more How to Get into the Restaurant Business videos: http://www.howcast.com/videos/506569-How-to-Determine-Menu-Price-Point-Restaurant-Business Once you have your menu planned, you need to spend some time thinking about the menu price points. It's important to remember that you have only one chance to make a last impression and the pricing of your restaurant will be the last thing, the last taste, in your guests' mouth as they leave. They will have just signed the check and they're going to make a judgment, "Was it worth what it cost me?" And then they're going to be reminded of that, if they paid by credit card, when their credit card bill arrives and they're going to say "Was that worth it?" So you need to remember the value proposition. It's not what you spend, it's what you get for what you spend. What you should have as your goal is that when someone pays for their meal, they say "Wow! That was amazing. I would have even paid more." What you don't want is for them to get the bill and say "Really? That's what I'm paying for what just happened?" They're never coming back. Think long and hard about your price points; they are part of a relationship with your guests that you want to continue. Menu price points have a profound impact on your business. You need to think about first, does it fit my business? People know when they spend money on food in a restaurant, that they're not just buying the food. They're also paying for the entire staff of the restaurant, the air conditioning, the electrical bill, the garbage removal, the flowers, the printed materials; they're paying for all of that. When they look at a price on a menu, they say "Does this fit the entire experience I'm getting? Does it match up with the feeling and idea of this restaurant?" So the first thing you need to determine is "What price points match the experience that you're delivering to your guests?" The next thing that you might want to do is decide "What style of service will I provide in this restaurant?" Is it counter service? Is it table service? Is it very high-level waiter/captain/bus boy service? How something is delivered will determine how much value it has to the guests. Also, what it's delivered on. Are you going to deliver this food on a paper plate? Prices better be very reasonable. If you're going to bring it on beautiful china, you can charge a bit more. Once you've decided how this restaurant menu pricing is going to match your restaurant and how it feels, you also need to consider the cost of each particular item. Now most people understand that chicken will be cheaper than beef, which will be cheaper than lobster; there are some surprises in there that you need to watch. Sometimes those specialty greens that you get from the farmer, who comes to the green market in your area, actually cost a lot more on the plate than the protein. It is very important when you're trying to price a specific dish that you know how much it costs; that's what is called your food cost and your food cost is a vital part of the financial success of your business. So you need to really work with your team to determine exactly how much that plate costs to deliver, to produce, and to put on a plate. Then you know how much you may have to charge for that dish. You also might have to make some difficult decisions and decide that dish is just too expensive to produce. How can we make it a great value? Another important thing to consider in menu planning, in terms of pricing, is what's called the sales mix. You don't sell the same number of every item. Some items are best-sellers, some you sell a moderate amount of, and some you just sell a few of. The things you sell more of, have a more profound impact, proportionally, on your profitability. So when you're thinking about pricing, you have to use it to work with your sales mix so that the entire revenue works for your food costs.