Menu Writing Lesson 3 : Menu Pricing Strategy
Writing menus can be a lot of fun for chefs. It’s very exciting seeing your dishes listed in print: and hugely rewarding. But it’s all too easy to forget that the dishes must have the right price tag in order to enable them to make the best profit margins. Having a well-thought through Menu Pricing Strategy is vital for success. No profit margins means no business.
A successful and sustainable restaurant business is based on sound knowledge of food costs and gross profit percentage targets. Costing and pricing every dish on your menu isn’t an option, it’s a fundamental necessity. Chefs who just multiply the price of their main ingredient in any given dish by four or five times are only in the business of guessing: and they tread a fine line between business success and failure.
Step One: Menu Pricing Strategy
Before you actually price individual dishes on your menu, you need to develop an overall strategy. Here are Kitchen CUT’s simple rules to help you do this:
- Know your market
You need to know who both your existing and potential target customers are. Look at what your product offering is and what customer base it is attracting/going to attract. Ask yourself: are you an everyday dining restaurant or a special occasion restaurant? What will your customers really fork out for each dish? – the latter will vary according to many factors eg whether you’re in the town or the country, how sophisticated and professional your food looks and front-of-house service is, even what your restaurant decor is.
- Know your competitors
It’s vital that you are aware of your real competitors. These are not just the restaurants or hotels in a few miles radius of your own business; rather they are the establishments that are attracting the type of customers you want to entice into your own restaurant. You need to clock what they offer on their menus and how much they are charging. Drawing up a simple competitor matrix to allow you to analyse this in one sheet is a good idea.
- Decide if you need to be more expensive
There is nothing wrong with being more expensive than your competitors, as long as you can justify it. Serve a quality product that is presented well and you can often justify a more expensive price tag than your competitors.
- Be wary of rigid food cost percentages
Not every dish needs to achieve your budgeted food cost percentage. Don’t get caught up with achieving percentage margins rather than profit. When costing your dishes look at how much profit you make on each dish in real money terms. Sometimes higher cost dishes with worse food cost margins deliver the most profit. “You can’t take a percentage to the bank!”. Read our article on Menu Engineering to find out more about how to analyse this.
- Cost EVERY dish
Write a detailed recipe for every dish on your menu and then cost it. This will give you a much better chance of making a profit. This also includes Banqueting and room service if you offer it. The benefit if writing out every dish also means that you have a better chance of achieving a consistent dish, meaning that your customers are likely to return time and time again when a favourite dish is likely to be made to the same standards and recipe each time.
Step Two: Presentation and Selling Strategies
Once your overall strategy has been decided you need to follow this through on the menu and in the business, so menu presentation and selling strategies are extremely important. Here are Kitchen CUT’s golden rules for a menu that delivers to its business potential:
- Be consistent
When pricing your menu, be consistent in how you round-off a dish cost. Either charge the straight pound rate (£4, £6, £12 etc) across the menu: or use 50p or 99p increments it looks neater and surveys have shown that customers prefer it.
- Avoid too many supplements
Try not to have too many add-on charges ie supplement, pa (price on application), or sp (seasonal price) on your menus. Customers will soon get fed up.
- Spread your more expensive dishes across the menu
Avoid bunching all your expensive dishes together – and put some of your cheaper dishes at the top left and right hand sides of the menu, as this is where customers start to read it from. Their decision as to whether or not you are too expensive for them will be made very quickly – either online or outside your restaurant (if you display your menu in the window or on a stand at the entrance).
- Consider set menu prices
Offering a two or three course set price menu – especially for lunch – is a good customer enticement as it enables them to predict their spend (albeit exclusive of extras like wine) before they even step into the restaurant.
- Don’t be too cheap
Do not under price your food just to make the restaurant busy. You don’t want to be a “busy fool” working very hard for no return. Look at all your running costs but remember it’s normal that the food, beverage and payroll costs, added together, can make up 60-70% of restaurant costs.
- Don’t be too expensive
Pricing yourself out of the market is another common mistake. Try to calculate your food cost anywhere between 26%-30% for a restaurant, 18%-25% for banqueting/functions. It’s also useful to ask your teams what they think of the prices before going to print.
- Get front-of-house to up-sell
Dishes that deliver great margins/profit should be up-sold by your service team. They should, if asked, bring the customer’s attention to the dishes, or, enquire if the customer needs any information about the menu and then direct them towards the dishes in question – talking about the produce sourcing or seasonality is a good way to demonstrate this. Suggestive selling works – but it must never be aggressive selling as this will soon lose you customers. Let everyone in the business know what margins and profit you make on each dish so they know which ones to push. Again, Menu Engineering will help you to make calculated decisions about which dishes boost your profits so you can share this insight with the sales team.
Step Three: Customer Feedback
Last but not least, listen to what your customers have to say. Talk to them when they dine with you, train your staff to ask what they thought of their meal. This shouldn’t be an automatic, “did you enjoy your meal?” question, the answer to which most staff pay scant attention; rather it should be a series of questions eg:
- Is this the first time you have eaten here?
- Was there anything that you think we could do to improve our service or food?
- We really appreciate any guest feedback – was there anything you felt we could improve on?
Kitchen CUT is a unique F&B Costing tool which allows you to track, monitor and manage your dish costs and ingredient prices. Sign up now for a free 30 day trial, to see why businesses in over 45 countries are choosing Kitchen CUT.