If customers aren’t willing to pay what you charge, or are conversely, paying too little for you to generate a sizeable profit, there is a problem! There are many factors that must be considered when configuring menu prices for your awesome food! One Fat Frog is here to help! Let’s take a look at 3 important ones.
- Consumer demographics: WHO THE HECK ARE YOU TARGETTING? If you’re running a sub shop that’s situated in a college town and targets students, it would be insane to charge 10 dollars a sub. That being said, charging 2 dollars a sub would most likely greatly limit potential profit. You have to market menu prices to suit your audience as well as yourself. Finding that happy medium is essential to running a successful restaurant.
- Competition: Let’s focus on the sub shop again. Is there a Subway close by which offers better prices than you? If you’re a new business, people would be more likely to go to Subway because of familiarity and credibility. So how do we make people come to you instead? You should have a more inviting atmosphere, better tasting food and unbeatable prices.
- Food cost percentage: Having a food cost percentage gives you an exact formula to determine what to charge for menu items. You can find your food cost percentage in two simple steps. First, calculate all the raw ingredient costs associated with creating a dish. If you are interested in running a 40% food cost and your dish costs $5.00 to make in ingredients, you would divide the cost by the percentage. For example: $5.00/ .40= 12.50. Having a dish worth $5 in ingredients would generate a $7.50 profit.
Finding the perfect menu prices won’t just magically happen, even when using a food cost percentage. There will be times when you need to adjust your prices simply based on if your dish is selling or not. It’ll take a while to perfect your menu, but no not fret! Once it comes, success is sure to follow! Stay groovy One Fat Froggers.