Menu pricing.pptx

7/28/2019 Menu pricing.pptx

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Menu pricing

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Food Cost Percentagemethod

Step 1

Determine the food cost

Total food cost/total sales=Food costpercentage

Refer to handout given:

Total sales are $100,000 and cost of goodsold (total food cost) is $33,000.

$33,000/$100,000=0.33 or 33%

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Food Cost PercentageStep 2Calculating the food cost

Eg:Steaksteak $3.83Bake potato $.049

Sour cream $0.22Tossed salad $0.52

Dressing $0.41Onion ring $0.39Total $5.86

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Food cost percentage

Step 3

Calculate the menu price

Item food cost food cost percentage=menu price

$5.860.33= $17.76

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Because of food cost percentage

method depends on the cost of the foodand its preparation within the foodserviceoperation, an accurate food costpercentage will be different for each

menu category: appetizer, salad etc.therefore using this method is not logicalsince restaurant will have different foodcost percentage for each menucategory.

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Average check methodOnly can be use by the established

restaurant

In this method the average amount ofmoney spent by the customer is used todetermine a price category.

Then all the price are set to fit into thiscategory.

The average check is determined for aspecific period of time eg month.

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Average check method Basic formulation

total revenue no of customer =average check

This formula require information:Length of time period to use

Total revenue for the specific period

Number of seat in the restaurant

Average turnover of those seatsNumber of days the restaurant is open in thespecific period.

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Average check method

Total revenue

____________________________________

number of seats x average turnoverxnumber of days open

= average check

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Eg: total revenue $100,000

number of seats175

average turnover 1.5 times

open for 30 days in specific month

$100,000

______________________ = $ 12.70175 x 1.5 x 30

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Variation of meal period

Let say the restaurant serve breakfast, lunchand dinner, there will be different averagecheck for each meal period

Then it is necessary to determine therevenue and turnover for each meal

separately.

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Determine the menu price

Once the average check has beendetermined the price range for all menu

item must be determined price of menuitem can be established within theidentified price range.

Previously the average check is $12.70

which can be use to establish the pricerange for the restaurant.. The price rangecould be set from $ 10.00 to $ 15.00/

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Contribution margin methodWork forala carte menu as well as menu itemthat comprise a meal (appitzer to dessert)

Uses a wide data to determine a dollar amountthat need to be added to each major menuitems food cost.In restaurant operation each menu item mustcontribute a dollar amount to the running offoodservice operation. The items price can be

calculated as the cost of the items food plusdollar amount called the items contributionmargin.

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Contribution margin = gross profit in

foodservice. It consist of non food costand profit.

Non food cost + profit + food cost = menuprice.

Usually in foodservice operation does notknow the cost of nonfood factors (rent,utilities, labor, etc) of individual menuitem. Therefore these amount have to

derived from the total nonfood cost andthe total profit of entire operation.

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Food cost +total nonfood +target profit

__________________________Number of customer

= menu price

$5.86 + 60,000 + 7,000

____________________

10,000

5.86 + 6.70 = 12.56

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Straight markup pricingmethod

Set dollar amount markup method

- By adding a fixed dollar amount to thefood cost item.

- Food cost + markup = menu price

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Profit per menu item + labor cost permenu item + operating cost per menuitem = mark up

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Eg restaurant would like 10,000 profit per

month, if the average no of customer is10,000 then the profit required is 1.00.

If labor cost is 34,000, with 10,000customers then labor cost is 3.40.

Operating cost per month 26,000,customer 10,000 so operating cost percustomer is 2.60

The markup sum of three amounts

1.00+3.40+2.60= 7.00So if the food cost item is 5.86,

5.86+7.00= 12.86

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Set percentage increase method

- Percentage that are more general andavoid the problem with adding a fixeddollar amount to each entre food cost.

- Food cost x percentage = markup

- Markup /food cost = percentage- 7.00/5.86=119%

- 119% should be add to food cost to getthe menu price. If menu item is 4.27 the

markup of 119% of 4.27 or 5.08- 4.27+5.08 =9.35.

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Another way by multiplying the food cost

by a total markup percentage.

Food cost x (100% +percentage) =menuprice

4.27 x (100% +119%) = 9.35 4.27 x 219 = 9.35

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Menu pricing.pptx