How to Master the Art of Restaurant Menu Pricing

Date: June 20, 2013

Menu pricesCost and Quality Are Key.

"There are lots of factors that go into [menu] pricing and it’s unreasonable to think a small restaurant owner, especially a new one, is going to get it perfect on the first try," says Scott Tyburski, founder of SoftCafe, a Cabin John, Maryland-based maker of menu software for the restaurant and food service industries.

The advice shared by Tyburski and two other experts in the space—John Buchanan, senior vice president of Chicago-based Lettuce Entertain You and president of Lettuce Consulting Group, and Gregg Rapp, a Palm Springs, California-based restaurant consultant and menu engineer—can help restaurateurs of all sizes and shapes get as close to perfection as possible when it comes to this challenging and complicated aspect of the business.

Count the Costs

Above all else, they say, know your costs. "The biggest problem in this industry is that most restaurant owners don’t know the costs associated with their menu items," according to Rapp.

Ask your average restaurateur to tell you what a menu item costs, adds Buchanan, and he or she likely will say, "'The chef handles all of that.' Ask the chef, and he or she will say, 'I pretty much know what it costs,' but won’t be able to give you specifics. Which means they don’t know. It’s a persistent problem within the industry."

That’s unfortunate, because it’s vitally important if you want to properly price your menu items, he says. "I advocate nothing less than knowing to the penny what each dish costs to put on the plate."

Multipliers Aren't Enough

Although shooting for a certain "food cost percentage" can have its place within the restaurant space, Buchanan suggests they shouldn't always be your goal.

"Too many people try to manage to them," echoes Rapp, who adds that "restaurant owners often shoot themselves in the foot by doing just that, because they wind up focusing on selling stuff like pasta, which may have a food-cost percentage of 23 percent, rather than steak, which has a 50 percent food cost but makes them a lot more money."

Give a Glance to Competitors

Watch what your competition’s doing, but only to a point, say the experts. "If everyone else on your street is selling their burgers for $6, and you’re charging $8, how long do you think you’re going to be able to fool people?" asks Buchanan.

"You may think your burger is better than the competition’s, of course, but most people won’t be able to tell the difference," he adds. "The real key to winning at this aspect of the game is charging the same or less than your competition while giving the customer a better product."

Addressing the second part of the aforementioned suggestion, Rapp advises, "you want to know what your competition is doing, of course, but don’t spend all of your time studying them—it’s a waste of time."

Parting Shots

Remember: Menu pricing is an art, not a science. [That’s not what you say in the tag line...]Both Tyburski and Rapp share that recommendation, with the latter saying that restaurateurs should look at, among other things, "the menu item, what it costs, what your competitors are selling it for, and how you can make your menu item different and better from the competition’s."

"When you’ve got a quality product that people want, pricing becomes less of an issue," says Buchanan. "All other things being equal, quality almost always wins out."

Instead of obsessing about the numbers, "focus on making each meal taste as good as it possibly can, each and every time," he says. "That’s what the customer really cares about, and that’s what will elevate your reputation."

READ NEXT: 3 Effective Price Anchoring Strategies

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