Drawing up the menu is the fun part of opening a restaurant; however, deciding what to charge is not always the easiest!
Food costs, portion control, patron demographics and other factors all come in to play here. There is a fine line between a recipe for success and underpricing or overpricing yourself out of the market.
Let’s take a look at what you need to consider:
Table of Contents
Gross profit margin
Your gross profit is what you make after all your expenses are covered. You need to make sure your food returns at least a 20 per cent profit after costs, which needs to be carefully calculated.
This needs to be calculated in full. It is not just the cost of the dish that goes out of the kitchen but also the cost of the staff making it, the electricity and equipment used, the cost of clean cutlery and crockery, and all the other sundry expenses that are required to keep your restaurant running.
This has a major impact on the price you charge, as the size of your portion needs to be equal to the costing. If your portions are too big, you will lose money; if they are too small, you will lose customers. Finding a balance is key and making sure that your staff are diligent in monitoring how much food they send out will help you to keep costs under control.
Whatever dishes you decide to serve at whatever prices, you need to remember that what you make on food is essentially how your restaurant makes money. This means that if you need a new glass door refrigerator from a supplier such as https://www.fridgefreezerdirect.co.uk/glass-door-refrigeration, your food bills must cover it.
Your calculations need to be very cleverly done to ensure you stay in the black at all times.
In a nutshell, if you want to work out the ideal price per dish, break it down into two areas: the food portion and any condiments, and the staff and occupancy costs. Take this figure, then subtract it from your proposed menu price and see how much you are actually making. You need to make a profit in the restaurant industry and the more precise you are with your menu prices, the more money you will make.
Infographic created by Clover, a restaurant POS system company