You’ve opened your restaurant. The ambiance is excellent and the food is even better. It’s in a prime location and the lighting feels luxurious. So, of course, your pricing matches. Unfortunately, customers are only glancing at your menu before leaving. What’s going wrong?
The answer: your menu pricing strategy.
Without the right menu pricing strategy, you could lose customers and damage your reputation. Conversely, a well-thought-out restaurant menu pricing strategy will bring in and retain customer attention.
Fortunately, you can use the following pricing strategy for restaurants to establish your niche, engineer your menu and prices, and grow profits.
What Are Menu Pricing Strategies?
Menu pricing strategies are strategies the restaurant industry uses to determine food prices and influence customers to buy high-profit menu items.
Menu pricing strategies after often overlooked, even though they play a pivotal role in restaurant business success. Your menu pricing goes a long way in forming public opinion on your restaurant and the food you offer.
If you charge too much, you could scare away potential customers, especially if you haven’t established a name for yourself as a fine dining establishment. Charge too little, and people will question the quality and taste of your dishes. You’ll also struggle to cover food costs and damage profit margins.
The actual design of the menu, where the prices go, and the pricing layout, also play a part in menu pricing strategies.
The only way to ensure you make the best choice for your restaurant is to determine your ideal food cost percentage, comfortably cover raw materials expenses and labor costs, and implement smart menu engineering.
14 Top Menu Pricing Strategy Tips for Restaurants
From fine dining restaurants to little mom-and-pop diners, these menu pricing strategies will help you cover all food costs and showcase your menu to perfection.
Determine the Restaurant Type
Before you get into the finer details of restaurant menu pricing, you need to determine your restaurant type and establish your profit percentage.
Fine dining restaurants and chain fast food aren’t going to attract the same clientele or have the same expenses. Therefore, you can’t charge the same profit percentage for both places.
On average, fine-dining restaurant charge between 70 and 80%, casual or sit-down restaurant charge 45 to 60%, and franchise or quick service establishments charge 40 to 50%.
Utilize Cost Plus Pricing
Next, determine food cost prices using the cost-plus pricing method. Use this in conjunction with the above method, but use this formula to get a concrete product price.
To determine the cost plus pricing, collect all your fixed expenses including food costs, labor costs, rent, electricity, etc., and miscellaneous expenses You can use food cost software to simplify the process.
Next, multiply the cost by the profit percentage. This will give you the final product price.
Product production costs ($) x markup profit percentage = final product price.
By using this method, you ensure that you always make more profit than your break-even minimum.
Utilize Charm Pricing
To many business owners, charm pricing, or psychological pricing, is one of the greatest marketing strategies ever. It’s a psychological trick that works on even the consumers that know what’s happening.
Charm pricing is menu pricing that is a little smaller than the largest whole number. For example, instead of charging $10 for a dish, you charge $9.99.
It’s a small difference with a big impact. To our brains, there is a big difference between $10 and $9.99, even if the actual difference is only one cent.
Add charm pricing to your menu pricing strategy. Break whole numbers into smaller digits and watch sales increase. Charm pricing is especially effective with sales or bundle pricing offers.
Describe the Dish Before Adding the Price
A written description before the item price is essential.
First, the description stimulates the taste buds. Nothing is more effective than a menu description that evokes the tastes of the food before the food has been brought out.
Second, putting the description first hooks the consumer. If the description is effective, the price won’t matter. However, if the price is the first thing the client sees, price and not taste will make the choice for them. You want the customer to think with their stomach, not their head.
Don’t Use Currency Symbols
Remember how we said we want the customer to think with their stomach and not their mind? The same rule applies here.
Putting currency signs on menus brings customers back into the real world. When they see the currency sign, they are reminded that they are using their hard-earned money. It can put a damper on even the best mood.
Avoid this by removing currency signs from your menus. Let customer order without having to directly think of the money they are spending.
Keep Market Price Changes in Mind
International conflict, bad weather, and changing suppliers can all have an impact on your food production costs. But as a restaurant, customers, especially regulars, expect you to keep your menu pricing consistent.
Printing new menus every time the market fluctuates also isn’t a viable option for most restaurant owners.
To keep your profit margin safe from the ever-changing markets and to protect against inflation, use high estimates when calculating food costs. This provides some wiggle room in bad times, increases profits during good periods, and keeps your menu pricing consistent.
Add Interesting Ingredients Where Possible
Your restaurant menu pricing strategy is going to change and grow as your restaurant grows. One way to facilitate growth is by adding interesting or exotic ingredients to the menu.
When you add exotic cuisine or ingredients to your menu, you can charge more for the food items. Adding a few expensive dishes, especially ones that aren’t found often in the local restaurant market, will also increase profits.
Limit Food Category Choices
Humans suffer from the paradox of choice, where the more options we have, the more stressful we find it to choose. But to get your clientele to spend, you want them to feel relaxed and comfortable.
One way to do this is to limit food category options. This doesn’t mean you need to have a small menu. Just have cohesive categories that break large chunks of the menu into smaller, bite-sized sections.
Take Advantage of Relative Pricing
Relative pricing is the menu pricing strategy where food items are placed in a way that encourages consumers to buy a specific item and spend more money.
One way to do this in the restaurant industry is to put high-profit but more affordable items next to expensive food items. Most people will shy away from the expensive item and choose the more affordable item, even if the price difference is negligible and you make more profit.
Implement Bundle Pricing
Bundle pricing is when you offer a bundle of food for one price, usually with a special item to incentivize purchase. This increases overall sales and spending and can be an effective strategy for selling new products or menu items that aren’t as popular.
Use Food Size or Portion Pricing
Unless you are a fine dining restaurant, portion pricing is a great way to increase sales and improve your accessibility.
Portion pricing offers customers multiple portion sizes, all at different prices. Small, medium, and large, with small being the most affordable and large the most expensive.
Offering smaller portion options also encourage people to buy more, especially if you have groups that want to share food or try a new dish without committing to a full portion size.
Offer Special Menu Items
Customers are always asking for recommended items. Offering special menu items like a chef’s special or staff recommendation on your menu will free up staff and encourage customers to order something new.
A special menu item is an effective way to market more expensive or high-profit menu items. It’s also a great way to market your signature dish or introduce a new menu item.
Create a Separate Desert Menu
Most people choose either an appetizer or a dessert. But if you withhold the dessert menu and give it to your customer at the end of their meal, they’re more likely to cave in and try a dessert item–even if they’ve already had an appetizer.
Doing this will increase both appetizer and dessert sales. To bag sales, make sure your desserts are mouth-watering and unique.
Create a Clean Menu
Smart menu engineering gets customers to order quickly and to order without considering the price.
Implement these design choices when creating your restaurant menu:
- Use a clear, easy-to-read font.
- Have between 5 and 8 items under every food category.
- Use appetite-stimulating colors like red, orange, and yellow.
- Match the menu with the restaurant atmosphere.
- Don’t make the menu too big.
- Don’t use a lot of photos.
- Use catchy names that humanize the food.
Conclusion
Menu pricing strategies have a great impact on customer satisfaction and food choice but are often overlooked in the restaurant industry. To succeed, you need to implement smart restaurant menu pricing strategies that cover everything from menu engineering to pricing psychology.
Use the above tips to optimize your restaurant menu pricing, improve customer experience, and increase profits.
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