Are you leaving money on the table?

Are you setting menu prices using the formula pricing process? You know the drill. First, the chef determines the menu item's raw cost. Second, the chef multiplies that cost by the desired food cost percentage. And, voila! A menu price.

It's time to leave this old process behind, and start using a more effective and profitable menu pricing strategy called value perception pricing. Menu items with a high perceived value can command a higher price point than the standard menu mark-up, guaranteeing you higher profits.

Examine the price/value relationship of each menu item to see which items will bring higher profits. This relationship is dependent on several things:

  • Your style of service
  • The raw cost of the menu item
  • Portion size and plate presentation
  • The menu description
  • How your prices compare to your competition
  • What your guests are willing to pay

Chefs

  • Motivated by creativity
  • Supply driven
  • Furthest from the guest

Servers

  • Motivated by tips
  • Demand driven
  • Closest to the guest

Chefs and Kitchen Managers should not price menu items alone. To optimize profit, pricing must be a team effort that includes your waitstaff. Why? Because your servers are the closest link you have to your guests. Their livelihood depends on price/value relationships, and they're usually not short on opinions! They know how much guests are willing to pay for a menu item, and how customers respond to menu descriptions and portion size. In fact, they'll be able to tell you more about the value perception of a menu item than you could learn from 1,000 surveys!

An easy and effective way to collect this knowledge from your servers is by using a Menu Feedback Card. Combine feedback with information about your competition and an item's raw cost. You can set menu prices that reflect the value of the food you serve, and realize a higher gross profit.