7 Tips in Determining your Restaurant Menu Content and Prices

There is one question that every restaurant owner has to address when setting up their business, and that is “How do I determine my restaurant menu content and prices?” While there are a number of considerations that can help you in answering this question, you need to be aware of the fact that it is by no means a static question.

In other words, setting the cost of the items on your menu (or resetting the cost of them) is something that will need to be done multiple times over the course of your establishment’s lifespan. But where do you start? The seven tips listed below should help you in getting started.

1) Determining Cost

In order to correctly determine the prices on your menu, it is important to be able to price your menu items properly. To do this it is imperative that you understand how to determine the cost of your products. This includes everything from wholesale product costs to delivery fees (when the item first shows up in your establishment) to cooking costs as well as wages and overhead in order to determine exactly what it costs for you to be able to provide this particular dish. While it may seem like a lot of work to do for every item on your menu, you may well be surprised to find out how much you are underselling. Once you have determined the costs you can then (taking into account your competition of course) determine a profitable price point.

2) It's all about the Price Point

When you are starting out in the restaurant business, a good rule of thumb is to take the cost of each dish (see tip #1) and then double it or triple it (In South Africa, an acceptable cost of sale for food overall should be 32- 40% and beverage 25 – 35% giving an overall cost in the 30 – 37% range- if other costs such as labour and rent are below 10% each, you will still be able to be profitable with a food cost in the 45% region). Of course you will want to take into account what your competitors are charging for the same or similar items. In fact, when it comes to things like specialty desserts and coffees it is not unusual to see a 300% markup. So don’t be afraid to add a little extra. If you track your sales you will quickly be able to determine what the public is willing to pay and can adjust your prices accordingly.

3) Understanding the Price Barrier

There is a point above which most customers will not go. This point is called “The Price Barrier.” While you may find some individuals who will buy the item, the bulk of those who eat with you will not touch it as it is not a good deal for them. While you may be able to get away with a slightly higher price if you specialize and produce something with a little extra (a steak with all the extras for example) most of your middle income customers will stay below this barrier.

4) Knowing where to Display your Prices on the Menu

The art of displaying your menu prices is one that depends a great deal on your individual establishment. While having a standard dish/price column may be expedient for diners to determine whether they can afford a dish, if you’re selling upscale foods you may want to have the price listed below the description of the item to make sure your customers read about the food before dismissing it out of hand.

5) Take Demographics into Consideration

While considering the demographics may seem like something you would expect from a corporation of chain restaurants, know this; being able to determine what the class of diners that your establishment appeals to can help you determine what you should set for prices, and even how your menu should be designed. Upscale clients tend to pay more on the whole and prefer reading about their food before they decide whether or not to order it as opposed to those for whom price is the primary concern.

6) When Food Doesn't Sell

It’s a horrible feeling when your food isn’t selling. However, there are ways to ensure that even the worst failure of a dish brings you some sort of return. One of the best ways to do this is to make the dish a “special” by placing it in a high visibility area of your menu, having your servers bring it to the diner’s attention, and by lowering the price (or even offering 2 for 1 deals) in order to get it moving. You can even take advantage of your Twitter or Facebook page or send out special email runs to regular customers in order to advertise your special. Who knows, you might have a sleeper hit brewing that just needs a little nudge!

7) How Prices Effect Establishment Image

Keep in mind that choosing the price for your menu is a direct reflection on your establishment. It’s true! As much as we might not like to admit it, upscale establishments almost always cost more than middle or lower class establishments. The higher the prices, the fancier your clientele is going to expect your establishment to be. Can you deliver? Do you have the ambiance and the service to back up the high menu prices? If so, then go ahead and raise your prices; however, be prepared to lower them if your clientele decides that there is a point above which they cannot go.

Putting it all together

These seven tips are by no means the only factors to be considered as you determine the pricing of your menu. However, by following the advice listed above, you will most certainly see a change in the profitability of your establishment. In a few short months you will see positive changes that you might never have thought possible. All it takes is a little time and attention to detail.

Do you have an 8th tip to add? Leave a comment below.


Ian Said, is an entrepreneur and founder of Ideal Software, a software development company specializing in Inventory Control and Point of Sale reporting solutions. Follow him on Twitter @costofsale or find him on Facebook https://www.facebook.com/IdealSoftware

Views: 352

Tags: Control, Cost, Food, FoodService, Portion, Restaurant


You need to be a member of FohBoh to add comments!

Join FohBoh

Comment by Ian Said on October 4, 2012 at 8:59am

Thanks very much for the comments, Joe. I fully agree on the need to know the competition and their pricing. Very important point.



Comment by Joe Welsh on October 4, 2012 at 5:23am

On point.... great post! The only thing I might add is to understand your competition and their pricing or LTO Strategy.




Social Wine Club for Craft Wineries


Kids LiveWell atwitter over Twitter party

In its continuing effort to promote more nutritious and flavorful children's menu options, the NRA will hold a Twitter party  -More

Starbucks could become top on-premise wine seller in U.S.

Starbucks is planning to slowly expand its evening sales of wine, beer and small plates to thousands of selected stores throu -More

The evolving nature of snacks

Snacks have shifted from an after-school treat to a meal alternative as meal times become more fragmented.  -More


Posting a job or finding a job starts here at FohBoh. Call us about special $25 posting packages to syndicate across all major jobs boards.

National News

Wahlburgers Announces Expansion Plans Including Franchise Agreement in Philadelphia

Wahlburgers has signed a franchise agreement with Hingham Associates, LLC that will bring five Wahlburgers to the metropolitan Philadelphia area over the next several years. The franchise group is actively looking at sites and is targeting a late 2014-early 2015 opening for its first restaurant.

Chipotle Mexican Grill, Inc. First Quarter 2014 Revenue Up 24.4%

Comparable restaurant sales increased 13.4% - Restaurant level operating margin was 25.9%, a decrease of 40 basis points

Jamba Juice Announces Grand Opening of New St. Louis, MO Location

Jamba Juice Company announced the brand’s continued expansion in the St. Louis market with the opening of a Jamba Juice® store at 11477 Olive Blvd. on April 16, 2014.

Expert in Real Estate Analytics Joins Luna Grill

Luna Grill, the San Diego-based Mediterranean restaurant chain, is welcoming retail real estate industry veteran Greg Thorburn to its leadership team. Thorburn has been brought on board to fill the newly created position of Vice-President of Real Estate.

Rita's Italian Ice Awards Area Development Agreement for Kansas

Rita's Italian Ice has awarded franchise and area development agreements for Kansas and the Kansas City area, which extends to the Missouri side of the city, to franchisees and local residents Jay Miller, Jeff Miller and Pat Reilly.


If you are looking for capital to start or grow your restaurant, create the next 501c3, develop and launch the next app for the restaurant industry,or want to help your peers in some meaningful way, we want to know about it.


TED: Matthew Carter: My life in typefaces - Matthew Carter (2014)

Pick up a book, magazine or screen, and more than likely you'll come across some typography designed by Matthew Carter. In this charming talk, the man behind typefaces such as Verdana, Georgia and Bell Centennial (designed just for phone books -- remember them?), takes us on a spin through a career focused on the very last pixel of each letter of a font.

TED: Jeremy Kasdin: The flower-shaped starshade that might help us detect Earth-like planets - Jeremy Kasdin (2014)

Astronomers believe that every star in the galaxy has a planet, one fifth of which might harbor life. Only we haven't seen any of them -- yet. Jeremy Kasdin and his team are looking to change that with the design and engineering of an extraordinary piece of equipment: a flower petal-shaped "starshade" that allows a telescope to photograph planets from 50,000 kilometers away. It is, he says, the "coolest possible science."

TED: Norman Spack: How I help transgender teens become who they want to be - Norman Spack (2013)

Puberty is an awkward time for just about everybody, but for transgender teens it can be a nightmare, as they grow overnight into bodies they aren't comfortable with. In a heartfelt talk, endocrinologist Norman Spack tells a personal story of how he became one of the few doctors in the US to treat minors with hormone replacement therapy. By staving off the effects of puberty, Spack gives trans teens the time they need. (Filmed at TEDxBeaconStreet.)

TED: Jennifer Senior: For parents, happiness is a very high bar - Jennifer Senior (2014)

The parenting section of the bookstore is overwhelming—it's "a giant, candy-colored monument to our collective panic," as writer Jennifer Senior puts it. Why is parenthood filled with so much anxiety? Because the goal of modern, middle-class parents—to raise happy children—is so elusive. In this honest talk, she offers some kinder and more achievable aims.

© 2014   Created by FohBoh.

Badges  |  Report an Issue  |  Terms of Service