How To Calculate Restaurant Menu Prices

You need to know how to set your menu prices right if you are a restaurant owner. Doing it wrongly will cost you a lot. You may lose your customers, chase away others, or even incur huge loses. Therefore, you need to know how to charge for the meals served at your restaurant. This article will let you know how to calculate restaurant menu prices.

  1. List all the ingredients you used to prepare the dishes

You need to include everything no matter how small the amount is. Even if it is a spoonful of mayonnaise or a squirt of ketchup, make sure you list it. Also, account for garnishes, seasonings, and cooking oil as well. To make sure that you do not incur losses due to serving different portions of the same meal at the same price, ensure that portions are controlled.

  1. Calculate the cost of each ingredient

After listing the ingredients used in preparing each dish, calculate how much they cost. For instance, if a tomato yields eight slices and it costs 25 cents, and two slices are used in a dish, then the tomato cost for a dish would be about 6 cents. Do not forget to include other costs that you may run into such as return charges and delivery fees among other costs.

  1. Add the costs

Now that you know how much each ingredient costs, add them together to calculate the price for that dish. Labor costs to prepare or serve the dish should not be included.

  1. Determine if you have priced the dish correctly

You can do this by dividing the menu price by the food cost. You will get the percentage of food cost. You will, therefore, be able to determine if your menu price is right and not overpriced or under-priced.

  1. Calculate overhead cost per meal served

Overheads are the costs you incur from taxes, marketing, rent, labor, and other expenses. Find out your daily overhead costs then divide it by the number of dishes served to get the overhead cost per dish. Also, costs such as food theft and employee allowances should be included in your overhead figures.

  1. Use the overhead costs and selling price to determine the break-even price and set your profit margin

For example, if you sell a dish for $20 and your overhead cost is $14, the cost for preparing the dish should not be more than $6 for you to break even. Now you can set your menu price at $24 if you want to make a profit of $4 or whatever amount you wish. Just remember not to make a killing on the profit as this may scare away customers.

  1. Find out if your food cost can support your business

You can do this by analyzing your sales by item. For instance, in case you notice that the items you sell are low-cost; you may either lower your food costs, or raise the items menu prices for your business to be profitable. To get a complete picture of your food cost without calculating the cost of each item in the menu, divide total food costs per service by total sales.

Correctly priced items will help attract more customers and make you more profits. Therefore, follow these steps to determine your restaurant menu prices.