How to price your restaurant meals effectively
Tips / 02.03.2020
Opening a restaurant could mean the running of a very successful business venture.
If you love serving delicious food and have an entrepreneurial streak running through you, then opening a restaurant is the ideal solution.
Don’t get us wrong.
It will take a lot of work – such as preparing the venue, gathering, training and motivating the staff, and purchasing the decor and accessories – but one of the most crucial questions you need to ask yourself is how will I price my meals so that I make a profit?
In this blog post, we’ll talk you through some of the most important factors you need to take into account when pricing your meals, so that you have a robust turnover and run a successful restaurant business.
Keep reading to find out more!
The setting and theme
There are a plethora of different themed restaurants all around.
Customers are basically spoilt for choice in our cosmopolitan world where different cultures conglomerate and merge.
If you’re living in London and feel like Indian or Spanish, all you have to do is look around and you’ll find what you’re looking for.
Likewise, when starting your restaurant business, you need to take into account what theme and style of dining experience you’ll be offering your customers.
If you’re a simple burger joint, your prices will differ to a restaurant that offers live music with a mini orchestra of violins playing in the background.
This is why it’s important to keep your ultimate theme in mind as this will have an overall effect on the price of your meals.
Your speciality dish
Many restaurants are known for their signature dish.
It might be lobster or something a little more subtle like pasta. Either way, if you have a signature dish, you need to be well prepared to serve it.
This means doing a proper inventory of your ingredients, purchasing stock so that you have a sufficient supply of the food that you’ll serve and ensuring that you don’t run out as this will ultimately affect your business’ reputation amongst your clientele.
The way in which you serve your meals will also be an important factor for you to consider when pricing your meals.
Overhead costs like electricity, gas and water, the rent you pay for the venue, and the salaries of your kitchen and waiting staff will definitely be big elements in your pricing strategy.
Ensure that you know what each expense you’re paying for each month and break this down into weekly and daily expenses.
Once you have your daily expense, you can then work it into your food cost per item which is discussed in more detail in the section below.
Food cost per item
The final and most important consideration for pricing your food is the food cost per item.
What does food cost mean?
Essentially, it means that you take a given meal and calculate the cost of each ingredient that goes into making it.
When you add up the cost of each ingredient, you’ll end up with a sum total of the cost per meal.
Here’s an example of how to calculate your food cost per item. Say you’ve got an Italian restaurant and you serve Pasta Alfredo. It consists of the following food items:
- 350 g pasta
- 150 g ham
- 150 g mushrooms
- 40 ml cream
- 20 g butter
- 15 g oregano spice
- 350 g pasta = £2.50
- 150 g ham = £3.00
- 150 g mushrooms = £0.80
- 40 ml cream = £0.40
- 20 g butter = £0.60
- 15 g oregano spice = £0.20
Total cost per item: £7.50
However, this is not the final price you’ll be charging your customers as you’ll have the abovementioned expenses to factor in as well, so that your revenue and turnover remain high whilst leaving a margin for profit.
This means that you’ll need to factor in your additional expenses (water and lights, salaries, etc.) and add them to the £7.50 amount.
In addition, you’ll want to factor in a percentage for profit, so you might end up adding 30% as profit to your total cost of item which is: £7.50 + expenses.
Once you’ve added all your food costs per item to your expenses, you’ll want to work out your percentage of profit. Here’s how the formula for doing this:
Menu price – Food cost = Profit
Using the example above, your menu price will be £7.50 + expenses.
Add these together and then subtract £7.50 from the total amount.
This formula will give you your profit on the Pasta Alfredo meal.
As a final point, don’t forget the taxman as you’ll need to add a VAT percentage to the final meal cost as this is regulated by the government and makes it your legal obligation as a restaurant owner.
Get ready to serve your best meal yet!
We hope that with these simple tips, you’ll be better positioned to calculate your meals in your restaurant.
A lot of factors go into creating a memorable dining experience, but ultimately you have a business to run and pricing your meals appropriately is a crucial factor.
Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.