Starting up a food business can be a great venture. It is exciting and it makes you feel enthralled. But there is a lot that needs to be considered.
Poor planning and research can lead to poor profit margin, resulting in business failure. All successful restaurants determine their menus and prices before planning the layout of the cafe itself.
Knowing your business from the inside out is the key to success. And if you are failing to do so, then you are setting yourself up for havoc.
There are various ways to determine the price of your menu. Many restaurant entrepreneurs take help of SWOT analysis while many do market research on their own. But once the research is out of the way; how do you set the menu? What makes it strategically correct? Let’s find out.
How to Price your Restaurant Menu?
As stated above, there are different ways to price a menu for your restaurant. You need to see what works best for you.
The most common practice used by food businesses is to cost each dish separately. The cost of its raw material and how much it would cost you to achieve it fully. This is also known as food costing and requires you to figure out how you have to control the expenses of the restaurant smartly.
You can take a look at Amigos menu prices and other cafe menus to have a rough estimate of how much a dish would cost initially and for how much you would be selling it. This can be a little confusing in the beginning. But once you understand how it works, you will gradually enhance your pricing strategies too.
- Ideal Food Cost:
To begin with, calculate the avengers food cost. This simply refers to the portion of sales that is spent on food. The average ideal food cost for some of the top restaurants is 20-30%. Some of the bigger names lower their food costs which in turn gets them more profit. But this is a time taking process and you shouldn’t rush it.
- Raw Food Cost:
Next, you must calculate the raw food cost of your menu items. For instance, if you are costing a salad, you need to include all the expenses in it, i.e. lettuce, chicken, cheese etc.
- Calculate the Final Price:
Now, using the formula of raw food costs/ideal food cost; you can determine the price of your menu. It will definitely take you some time to understand how it works. But the sooner you get it; the better as it is the key to boosting your profit margin.
As a restaurant owner, you certainly have a lot to manage. Starting off isn’t easy at all. However, you need to utilize the right method to do so. Restaurants that do not cost their menu prices strategically, are more likely to fail.
Always consider your competition, conduct research and then start setting the prices eventually.