Why Cost-Based Pricing is Killing Your Restaurant (And How to Fix It)

I could be wrong, but I think it was the SBA where I first read – pricing is a part of your marketing plan. I’ll go one step further – pricing is the majority of your marketing plan. In terms of food, we all learned about plate cost and how it relates to pricing. If you want a food cost of 30%, you take the total cost of ingredients, plus a small cover cost, multiply it by 3.33 and that’s your sale price. Unfortunately, it’s the wrong way to price a menu. It’s disconnected from the market. You could end up too low or too high. Now don’t get me wrong, at the end of the day, the overall average should be 30% or less. However, menu pricing is more so a marketing strategy than it is the sum total of ingredients. I’ve done thousands of menus for different events. Most of them with the person selling the event. I’m always asked the same questions. How much should I charge for the tuna? My answer is always the same – How much can you charge? What price is the client comfortable paying? I can easily design the plate to make it profitable. Now more than ever, the guest wants value, and we want a clientele of repeat customers. Pricing starts and ends with the market. Do a market survey, look at the competition. Your pricing must align with your venue, your product and your style of service. Put yourself in the customer’s shoes. You arrived, sat, were served, drank and ate. You had an experience. You felt the vibe. When you get the bill, do you think – I’m coming back with all of my friends? or do you feel like you just got robbed?