Restaurant Menu Pricing Strategies, Tactics & Tips [& The Single Most Profitable Pricing Strategy Smart Operators Use to Drive Profits Through the Roof]

What is menu pricing?

  • Food cost percentage pricing
  • Cost plus markup pricing
  • Value-based pricing
  • Competition-based pricing
  • Choosing the right menu model for your operation
  • Menu engineering your way to healthy profit margins
  • Why [sometimes] you MUST change your pricing
  • Your bag of psychological menu-pricing tricks
  • Experimenting with experiential offers — when & why

4 F&B Menu Pricing Strategies

Not trying to spoil it, but… food cost percentage pricing wins the day.

Food cost percentage pricing wins the day

  1. Decide on your ideal food cost percentage — choose a percentage point that will work for you based on your revenue goals. Stay realistic — if you’re running a string of fine dining restaurants, setting ideal food costs at 25% is frustrating… and unattainable. But, setting them at 32% [as opposed to 35%] gives you something to work towards.
  2. Cost out your menu items — determine the cost of your ingredients for each item on the menu. For example, for a salmon sandwich, you would factor in the salmon cut, bread, dressing, spices, and every other ingredient. Then you’d drill down to that item’s ideal food cost, also called the portion cost.
  3. Calculate prices for menu items — the formula here is simple: PRICE = PORTION PRICE OF AN ITEM / IDEAL FOOD COST PERCENTAGE. For demo purposes, let’s say your ideal food cost target is 31%, and your portion cost is $7.50. The recommended price would come out to $24.20 [Price $24.20 = Portion Cost $7.50 / Ideal Food Cost Percentage 0.31]. An expensive sandwich? Sure. But it’s priced just right.
Food cost percentage pricing puts you in the driver’s seat of your operation.

Cost plus markup pricing

Your profit covers your direct costs with ease.

Value-based pricing

Focus on your customer’s experience without necessarily looking at the cost.

Competition-based pricing…

Fast, simple, and you are sure that your prices are right, but you are missing opportunities.

5 Menu Pricing Tactics You Can Use to Drive Profitability

  1. ‘sell’ those prices to your customer, and
  2. absorb any cost-side turbulence you run into.
Read below how to make full use of these tips.

#1 Pick the right menu model for your operation

#2 Use menu engineering to offset ingredient price fluctuations…

#3 … But don’t be afraid to re-evaluate your pricing as needed

#4 Leverage pricing design psychology

  • Use price anchoring — add a few higher-priced dishes to your menu. Their hefty price will make everything else on there look like a sweet deal in comparison.
  • Nest prices behind each menu item — add an item’s menu price in brackets right after the description. That way, the focus is on the food and the experience. Avoid trailing dash lines because they shift the focus from the food to the price tag.
  • Use the golden triangle placement method — top left, middle, and bottom right are your menu’s sweet spots. It’s where you want to place all your highly profitable items because those are the places where people’s eyes go when they crack open a menu.
  • Limit choices — ever heard of analysis paralysis? It’s that thing most people suffer from when faced with an abundance of choices. Nip it in the bud by focusing your offer and limiting to it 15–20 items. There’s one big caveat to this, though — people expect fast-casual restaurants to have a huge selection, so keep that in mind.
  • ‘Humanise’ your menu items — use dish naming conventions and descriptions to make people feel something… to remember something. Studies show that customers will often go for a slice of ‘Grandma Alice’s Apple Pie’ even if they think it’s not going to be nearly as good as the ‘Tinned Peach Souffle with Ganache Filling’. Tap into that sentimentality

#5 Experiment with experiential offers

Menu Pricing for Ghost Kitchens

  1. Adjust pricing to offset delivery costs — while there’s good value in using food aggregator apps, it’s still true that most of them eat 20 to 30 per cent into your bottom line. Delivery is a service, so you should think about adjusting your base price to absorb some of that additional cost. Around 5 to 10 per cent is a good amount since that is still less than what the customer would tip had they gone out to eat.
  2. Create multiple virtual brands — this makes it easier to compete on price with other venues offering similar items. You can price anchor your sandwiches without that beef Stroganoff looking ridiculous on the list. Another upside of having multiple virtual brands is that you automatically increase your discoverability on apps such as Uber Eats and Deliveroo.
  3. Adopt the ‘good-better-best’ pricing method — unbundle your food menus when listing them. For example, let’s say you offer a sandwich with a side of fries and a soft drink. Your first tier offer is only the sandwich. The next step up is adding the fries for a small surcharge. And the third tier offer is sandwich + fries + drink. This way, the customers can choose the right deal for them… without checking out your competition.

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Whoa, set up a demo below to find out more!

Take menu pricing as seriously as you take cost control.

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Geert Merckaert

Geert Merckaert

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I write about F&B Management Best Practices for Multi-Unit Food Businesses. My goal is to help you keep costs down, quality up and operations running smoothly.