How to Price Your Restaurant

Writing the menu for your restaurant is the fun part. It's kind of like picking out names for a baby. You can play around with terms and pair different foods together to see what looks good together. However, a menu, just like a new baby, can be rather complicated and hard to understand at times. For example, how do you know what to charge in order to make a profit? Food cost and portion control are two ways to help price your menu correctly, so you make a profit but be careful not to price yourself out of the local market. Another way to ensure a profit is to create a balance of expensive and inexpensive items.

Food Cost
Food cost refers to the menu price of a certain dish in comparison to the cost of the food used to prepare that same dish. In other words, how much you pay for food will determine how much you need to charge for it. Generally, food cost should be around 30-35%. This means that if you pay $1.00 for something, you need to charge minimum of $3.34. It may seem like you are charging a lot more than necessary, but keep in mind that you aren't just paying for the food itself. You are paying someone to prepare the food, serve the food, and clean up after the food. Everything in your restaurant, from payroll to the electric bill needs to be covered by the food you serve.

Lets look at a typical menu item that many restaurants offer: Filet Mignon Dinner.
The initial cost of a filet mignon dinner can be broken down into the following areas:
• The beef filet costs you $6.00 per portion
• The wrap (the potato, vegetable, salad and bread that comes with the filet, as well as any condiments the guest asks for) costs $2.50

Therefore, the entire meal costs you $8.50. If you wrapped the filet in bacon and topped it with herb butter (very tasty) your costs would increase. So, then your prices would increase. Get the picture? Every thing that goes onto the customers plate needs to be accounted for.
So how do you decide on a final menu price? Time to brush up on that high school algebra you swore you'd never use.

The formula for costing goes as follows:
Cost of your product/.35=menu price or $8.50/.35= $24.29

$24.29 is the absolute minimum you need to charge in order to make a profit off the filet mignon dinner. Of course, $24.29 is an awkward looking number, so you might bump it up to $24.99. If you bumped it up to $29.99, your food costs would drop below 30%, which means you make a bigger profit.

Portion Control
One reason that chain restaurants are so successful is that they have a firm handle on portion control. The cooks in those restaurants know exactly how much of each ingredient to put in every dish. For example, shrimp scampi may have a portion control of six shrimp per dish. Therefore, every shrimp scampi that goes out of that kitchen will have six shrimp in it, no more, no less. This is portion control.
In order to practice portion control in your own kitchen, everything should be measured out. Chicken, beef and fish should all be weighed, while shredded cheese can be stored in portion control cups and a measuring cup can dish out mashed potatoes. Once you feel comfortable cooking your menu, you can eyeball the serving amounts (sort of like Rachael Ray) but in the early stages of your restaurant, err on the side of caution and measure everything out. Another way to practice portion control is to purchase pre-portioned items, such as steaks, burger patties, chicken breasts, and pizza dough. They may be more expensive, but can save you money in labor and food waste.

Well Balanced Menu
Food markets fluctuate depending on the season, the weather and the price of gas. One day lettuce may be $10.00 a case and then the following week it has jumped to $30.00 a case. There is little you can do when prices jump, short of changing your entire menu every few weeks, and who has time for that? However, when you balance expensive items, which are prone to price fluctuations, with items that have stable prices, you can help maintain your desired food cost. So, go ahead and have some fresh lobster and beef on your menu, but temper it with some less expensively priced chicken dishes or pasta dishes.

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