Applying these tips for better restaurant menu pricing can soon put your bank balance on a more pleasing path.
There are many ways to run a business that can help to increase profits. In our industry, the restaurant menu is one of the most powerful marketing tools that we have. It also provides a means to positively influence your bottom line profit by as much as 5%. Here are our tips on how to increase your profits through smart restaurant menu pricing.
To make effective changes to your menu, you need to have a good understanding of what sells well, your costs and margins and about how your customers think. With this information you’re going to engineer your menu so that it’s far more contributory to your profit.
The easiest way to approach this task is to use the following questions to understand more about how effective your menu is in its present condition:
Are my menu items profitable?
It’s critical that every restaurant owner knows how to calculate the food cost for each item on the menu. It’s key to know what both your cost and profit is for every item. Here’s how you go about it, if you haven’t done it before:
- List each ingredient, including oil, herbs, seasonings and any garnishes.
- Calculate the cost for each item used in the dish. You’ll need to work out how much of the item you’d use for each portion. ie one onion might cost £0.50p but it might be enough to go into 5 portions so therefore, the onion cost for that dish is £0.10p.
- Include any other costs such as delivery fees or other expenses involved in purchasing and inventory. This should not include employment costs.
- Now add the cost of the ingredients to the cost of purchasing. The resulting number is your food cost for that dish.
Now that you have established the cost of the food, you can work out the percentage it is of your menu price. For example, if a dish is selling at £16 and your costs are £8 then your answer is 50% with regards to food cost percentage.
How well are my menu items selling?
Track which items are selling the best over the course of one month.
Those that sell particularly well should be highlighted on your menu. There will be some dishes that although they don’t bring in so much profit, they are very popular. For example, you might have a BLT that sells very well, but it’s price is not high and cannot be high. Look at how you can either make the main ingredient cheaper so that you have a higher profit from it. Otherwise, you may decide to improve the appearance of your item, whilst decreasing its size. Keep your restaurant menu pricing in mind at all times and how it can benefit your bottom line, just as long as your customers are also satisfied.
Other items may give you large profits but aren’t so popular. Look into whether your customers like how these items taste. You may need to reinvent them, sometimes just by putting the prices lower, you can increase their popularity and therefore enjoy greater profits. How about making these specials or featuring them on your menu?
Finally, there will be some items that not only are low on the popularity stakes but they also score low on profitability. However, in there might be something that really makes a difference for your customers, so think carefully before culling it. For example, you may have hotdogs for children. You can just put them inside your menu so that they don’t stand out and that other dishes get noticed that are pricier but also appealing to children.
How can I design my menu with these considerations?
If you want to redesign your menu, then you may want to ask your customers what they like and don’t like. You need to know which meals they are coming to your restaurant for. Perhaps they come to your restaurant for the atmosphere and not the food. Do they read the menu thoroughly before ordering?
Here’s how to re-do the design and to add new restaurant menu pricing:
- Feature some menu items. You can put them in a box on the menu, or add asterisk’s or the word ‘chef’s special’ or ‘new’. Don’t add this information all over your menu though, or it will become a mess and it will also cheapen the contents. Ideally, you’ll highlight one entry per category.
- Don’t put your prices in a column. It will make your food about the price. Just put two spaces after the end of the description and then add the price. You might even want to remove the £ sign entirely.
- Descriptions sell food. According to research performed by the students of Cornell University, descriptive menu items sell 25% more than those with regular labels on them. Use copywriting that will get the interest of your guests. You might even want to tell a story behind it.
- Offer two portion sizes. Although customers will see a small portion and a smaller price, you will cost yourself less making it and can therefore enjoy a greater return.
Now that you have your new menu in place, it’s time to understand if it’s working. Run through the food cost analysis that you did at the beginning after a month. Take a good look at the profitability in your point of sale system. is it working for you?
Finally, you’ll also need to train your wait staff on which menu items to promote. They can guide the customers to the dishes that are most profitable.
Although there is always room for improvement on any restaurant menu pricing, by applying these techniques, they provide a way to jump to the next level in profits.